Exporters are being further encouraged to self-report potential export violations, both their own and those of other companies, through recent policy changes from the Bureau of Industry and Security.
In an April 18 memo, Office of Export Enforcement chief Matthew Axelrod said the office’s mission of protecting sensitive U.S. technologies and goods is a core national security priority because rapidly emerging or evolving technologies have the potential to disrupt traditional business and society and alter the world’s future balance of power. He added that effective corporate compliance systems that identify, prevent, and mitigate export control violations help OEE in this task and that disclosures of potential violations of the Export Administration Regulations are an important part of such systems.
In 2022 BIS announced that it would resolve voluntary self-disclosures that involve minor or technical infractions with a warning letter or no-action letter within 60 days. Axelrod indicated that this change has resulted in such matters being resolved more quickly but has not changed the number of VSDs submitted. To make this process even easier OEE is now allowing filers to submit a single submission (rather than multiple VSDs) when they identify multiple minor technical violations close in time.
Now, Axelrod said, OEE is taking steps to further incentivize the submission of VSDs when significant possible EAR violations are uncovered.
Under existing guidelines, a VSD that is timely, comprehensive, and involves full cooperation entitles the reporting entity to a steep and concrete reduction in potential monetary liability. To date, OEE has considered the filing of a VSD to be a mitigating factor in determining the appropriate penalty amount in administrative cases.
Going forward, Axelrod said, BIS will consider it an aggravating factor if a company’s export compliance program reveals a significant possible EAR violation but the company deliberately chooses not to file a VSD. As a result, such companies risk incurring a sharply increased penalty.
OEE is also moving to incentivize individuals, companies, and others to disclose potential export violations by others. Specifically, when a company becomes aware that another’s conduct may have violated the EAR and discloses such conduct to OEE, and that tip results in enforcement action, OEE will consider that disclosure a mitigating factor if a future enforcement action, even for unrelated conduct, is ever brought against the disclosing party. Axelrod noted that when such a disclosure also covers a potential sanctions violation there may be monetary rewards available as well.
For more information on export compliance and the impact of the new BIS policy, please contact attorney Kristine Pirnia at (202) 730-4964 or via email.
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