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BIS Reports on Export Control, Enforcement and Penalty Actions for FY 2013

Tuesday, January 14, 2014
Sandler, Travis & Rosenberg Trade Report

The Bureau of Industry and Security recently issued its annual report for fiscal year 2013, which includes information on the administration of export controls, enforcement efforts and penalty actions. Highlights of this report include the following.

Export Controls

 

- BIS processed 24,782 export license applications for transactions, up 6.7% from FY 2012. BIS approved 20,948 license applications (84.5% of the total), returned 3,656 without action (14.8%) and denied 177 (less than one percent). The average processing time was unchanged at 26 days.

- Crude oil continued to be the category of approved license applications with the highest transaction value. The greatest number of license application approvals under a single commodity classification continued to be for chemical manufacturing facilities and equipment (ECCN 2B350), with 3,092 approved applications for exports and reexports worth $671.9 million (up from 2,777 and $348.5 million in FY 2012).

- 312 cases were escalated to the bureau’s Operating Committee (which includes  the departments of Commerce, Defense, Energy and State), which is tasked with resolving interagency disagreement on specific license applications. Of those 312 cases, 27 were further escalated to the assistant secretary-level Advisory Committee on Export Policy for resolution.

- For calendar year 2012, U.S. companies exported $5 billion of licensed items (of which 2.4% were exported under a special comprehensive license) and $21.8 billion of items under a license exception, representing 0.3% and 1.4%, respectively, of overall U.S. exports.

- BIS processed 5,577 classification request applications (down from 6,107 in FY 2012), including encryption requests, in an average of 33.3 days (down from 34.4).

- 1,550 commodity classification requests were processed in FY 2013, up from 1,332 in FY 2012 but down approximately 50% from FY 2010.

- 1,450 encryption registrations were filed, up from 1,273. Many of these registrations are by mobile app developers, both U.S. and foreign.

- BIS approved more than 1,900 licenses for encryption items. The number of licenses has remained steady over the past three years despite increased use of encryption licensing arrangements, which authorize unlimited shipments of encryption products with notification and reporting requirements.

- BIS provided recommendations to the State Department on 1,203 commodity jurisdiction requests (down from 1,292) in an average of 20 days (down from 22).

- BIS conducted two desk audits of holders of SCLs, which are issued to qualified exporters and consignees in place of individual export licenses. BIS also conducted 14 export management and compliance program reviews of corporate written compliance programs (down from 22) and conducted one two-day and four one-day seminars on how to develop an EMCP.

- BIS conducted nine deemed export license on-site compliance reviews (down from 26) to confirm implementation of technology control plans and other conditions associated with those licenses.

- The bureau’s Export Management and Compliance Division conducted 43 desk reviews of exports made under license exception Strategic Trade Authorization (down from 50). Of these exports, 36 were completely compliant with STA requirements and seven involved minor technical errors. Separately, BIS completed two on-site document reviews of STA (down from four), which did not uncover any compliance issues.

- BIS published six rules modifying the list of validated end-users in China and India. Three of these rules qualified an additional four companies as VEUs in China, one rule removed two VEUs as the result of a merger and another added a regulatory requirement for persons shipping under authorization VEU to send written notice of such shipments to the recipient VEU.

- BIS completed 436 enforcement license determinations (down from 442), which are used to support enforcement actions connected with potential violations of the Export Administration Regulations, in an average of 31 days (down from 37). In addition, BIS processed 284 LDs for the Federal Bureau of Investigation (up from 194) and 1,502 LDs for the Department of Homeland Security (up from 452) in support of investigations of potentially unlawful exports.

- Through the publication of five Entity List-related rules, 185 persons in 189 separate entries were added to the Entity List, five were removed, and four modifications were made to existing entries.

Penalties

- BIS investigations resulted in the criminal conviction of 52 individuals and businesses for export violations, up from 27 in FY 2012. The penalties for these convictions came to $2.7 million in criminal fines (down from $4.8 million), more than $18 million in forfeitures (up from $5 million) and more than 881 months of imprisonment (up from 187).

- BIS investigations resulted in the completion of 71 administrative export and antiboycott cases against individuals and businesses (up from 42) and $6.5 million in civil penalties (down from $7.4 million).

Antiboycott Compliance

- Of the 71 actions closed, eight involved antiboycott violations that resulted in total civil penalties of $408,705, compared to 10 cases and $142,600 a year earlier.

- BIS responded to 1,014 requests from companies for guidance on compliance with the antiboycott provisions of the EAR, up from 981 in FY 2012.

Preventive Enforcement

- BIS completed 1,033 end-use checks in 50 countries, up 3.9% from FY 2012 and 21.5% over FY 2013 goals. Of these, 164 were pre-license checks (up from 136), which are conducted to prevent the release of sensitive items to unreliable parties, and 869 were post-shipment verifications (up from 858), which assist the U.S. government in monitoring such transactions to conclusion. Approximately 73% of the checks were conducted by BIS export control officers stationed at U.S. embassies and consulates in Moscow, Beijing, Hong Kong, New Delhi, Abu Dhabi and Singapore (up from 56% a year earlier). The remaining checks were conducted by Office of Export Enforcement special agents and analysts deployed from the U.S. to conduct end-use checks in certain countries or by foreign commercial service officers and support personnel stationed at various U.S. embassies.

- BIS issued 240 warning letters (up from 231), 351 detentions (up from 199) and 84 seizures (up from 48). Two temporary denial order renewals were issued (with one also including the addition of a related person) against eight companies and four individuals (down from 16 and eight). Denial orders were imposed in 46 matters and 33 denial orders were issued under Section 11(h) of the Export Administration Act, which authorizes the denial of export privileges of parties convicted under certain federal statutes.

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