Background

A senior federal official said this week that the Bureau of Industry and Security is contemplating a number of changes to its administrative enforcement policies for export control and anti-boycott laws to incentivize compliance and deterrence and increase prevention and transparency. Assistant Secretary of Commerce for Export Enforcement Matthew Axelrod told a meeting of the Society for International Affairs May 16 that these potential policy shifts are designed both to protect the U.S. from growing threats from China, Russia, and other nation-states and to “hold those that don’t play by the rules accountable.”

For more information on export enforcement issues, including how to ensure your company is in compliance, please contact attorney Kristine Pirnia at (202) 730-4964 or via email.

Axelrod said administrative sanctions, whether in combination with criminal penalties or by themselves, “send a powerful message: implement effective compliance programs on the front end or risk penalties on the back end that will hurt both your reputation and your bottom line, either through stiff monetary penalties, or potential denial of export privileges, or both.” While BIS’ administrative enforcement authorities do not result in individuals being sentenced to prison for their misconduct, he said, with respect to companies these authorities can result in “nearly the same punishment that a criminal conviction would bring – they permit us to impose significant monetary penalties, to reach agreements requiring a corporate compliance overhaul, and, in extreme cases, to outright deny a company the ability to export.”

To maintain the deterrent effect of these administrative authorities, BIS is conducting a policy review that could result in changes in the following areas.

Charging letters. Administrative charging letters are not currently made public until after a case resolves, which Axelrod said means that “companies that may be engaging in similar misconduct aren’t fully disincentivized to stop, given that they aren’t being shown a real time example of what happens when you break our rules.” BIS is therefore considering whether to make charging letters public when filed.

Settlements. When BIS has resolved administrative enforcement matters short of trial it has allowed companies to pay a reduced penalty without admitting misconduct. However, Axelrod said, this policy has “two significant downsides:” there is no statement of facts laying out what the company did that got it into trouble, making it more difficult for other companies to learn from their peers’ mistakes; and awarding such companies a significant penalty reduction “may not be sending a deterrent message as strong as we believe warranted when the export laws are violated.” The use of no admit/no deny settlements is therefore being reconsidered.

Penalties. Given the amount of federal resources it takes to gather the evidence necessary to bring an export or antiboycott violation case, and the national security stakes, “penalties must be high enough to both punish and deter those who would violate the law,” Axelrod said. BIS is therefore evaluating whether and how far to raise penalties for violations.

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