The head of a federal agency charged with enforcing U.S. export laws and regulations said recently that the U.S. “is now in a new era for export enforcement,” a situation that in light of the current geopolitical environment is “likely to remain true for the foreseeable future.”
Sandler, Travis & Rosenberg’s export professionals have decades of experience both administering and helping companies comply with U.S. export control rules.
During a recent speech in Washington, D.C., Assistant Secretary of Commerce for Export Enforcement Matthew Axelrod asserted that over the past three years the Bureau of Industry and Security has been able to maximize its finite resources by focusing on the following areas.
Prioritized Enforcement
BIS’ “aggressive and prioritized enforcement posture has become business as usual,” Axelrod said, with “significant enforcement announcements [anticipated] in the weeks, months, and years to come.” Specific achievements so far have included the following.
- The Disruptive Technology Strike Force has publicly charged 25 criminal cases in the past two year, a 50 percent increase over the previous such period; imposed substantial administrative penalties; and issued temporary denial orders against nearly 30 entities (including airlines, freight forwarders, defense companies, and others) to cut off their access to controlled U.S. items.
- BIS has increased from 70 percent to more than 85 percent the percentage of its cases that involve a prioritized technology, end-use, or end-user.
- Over the past two years BIS has seen its highest-ever number of convictions, months of imprisonment, TDOs, end-use checks, and post-conviction denial orders.
- Over the past three years nominations from BIS have resulted in more than 900 parties from Russia, China, Iran, and elsewhere being added to the Entity List.
- BIS has strengthened its administrative enforcement efforts by eliminating “no admit, no deny” settlements, increasing penalty amounts for serious violations, ensuring that persons blocked under certain OFAC sanctions programs are automatically subject to BIS controls as well, toughening its voluntary self-disclosure policy, hiring its first chief of corporate enforcement, and enhancing anti-boycott efforts on foreign subsidiaries of U.S. companies.
Enhanced Profile
Axelrod said BIS “can’t succeed by end-use checks and investigations alone” and instead needs “to have industry fully committed to investing in robust compliance programs.” Senior officials have therefore used speeches, interviews, conferences, press releases, and other measures to raise the profile of this issue, emphasizing the importance of export controls, highlighting their national security role, and highlighting sanctions and export enforcement efforts.
Three years later, Axelrod said, “industry and trade practitioners understand that we’re now in a new era for export enforcement. Companies are evaluating their compliance programs to ensure they are robust and effective, lest they face multimillion dollar penalties for violating our rules. Word is out that export violations can no longer be considered just the cost of doing business. Instead, violations now present enterprise risk, which means that investment in compliance is crucial. The enhanced profile, combined with our voluntary self-disclosure policy changes, has led to a sharp rise in the number of significant disclosures we’re receiving – an increase of nearly 70% when comparing the 18 month-period before and after the policy announcement.”
Expanded Partnerships
Axelrod added that BIS is working with interagency partners to pool resources and authorities to bring enforcement actions, with international counterparts to multilateralize its efforts, and with the private sector to help ensure compliance with export rules.
Domestically, related achievements include coordinated enforcement actions (more of which Axelrod expects to see in the near future); joint advisory notes, guidance documents, and alerts covering issues from the applicability of export controls to non-U.S. persons to the need for transportation entities to know their cargo; and the deployment of the Commerce Screening System, which will help increase the number of license applications screened each year from about 800 to the approximately 40,000 BIS receives annually.
Internationally, the U.S. has established three different export enforcement coordination mechanisms involving the G-7 countries, Japan and Korea, and the so-called E5, which includes Australia, Canada, New Zealand, and the United Kingdom. The U.S. has also signed individual bilateral agreements for the first time with the European Union, Australia, Japan, Korea, and Switzerland. There are now 11 export control officers in nine locations abroad, including two newly installed in Taiwan and Finland, and the first-ever enforcement analyst stationed abroad is now in Canada.
Finally, because BIS “would much rather help industry understand and comply with our rules on the front end than pursue violations of them on the back end,” the agency has issued educational materials such as supplier list and red flag letters; BIS-specific recommendations for exporters on Russian evasion typologies, high-priority Harmonized System codes, and evasion red flags; new guidance for freight forwarders on avoiding liability for export violations; and a list of foreign parties that have made boycott requests in the past.
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