BIS: policy changes to include higher penalties but also non-monetary settlements
Speaking at the US Bureau of Industry and Security (‘BIS’) Update conference on 30 June, Assistant Secretary of Commerce for Export Enforcement, Matthew S. Axelrod said that BIS is to make ‘four significant policy changes that will strengthen BIS’s administrative enforcement tools.’
In a wide-ranging speech at the Update event, Axelrod said that the changes would include:
- Higher penalties: ‘We will use all of our existing regulatory and statutory authorities to ensure that the most serious administrative violations trigger commensurately serious penalties. By aggressively and uniformly applying the existing BIS settlement guidelines, we will ensure that all appropriate cases are properly deemed “egregious,” which opens the door to more significant penalties under our regulations. In addition, we will ensure that the existing aggravating penalty factors are applied more uniformly to escalate penalty amounts where appropriate, which parallels how mitigating factors are currently applied to reduce penalty amounts.
‘In short, if you invest in an export compliance program while your competitor flouts the rules to gain an economic advantage, we are going to aggressively impose penalties on your competitor to create a level playing field.’
- Ending ‘no admit, no deny’ settlements: ‘In keeping with our goals of ensuring a level playing field and incentivizing investments in compliance, we are doing away with “no admit, no deny” settlements.
‘We want companies – and industry generally – to have the opportunity to learn from others and avoid making the same mistakes. When we enter a resolution, the settling party gets significant credit, in the form of a reduced penalty. But to earn that reduced penalty, there needs to be an admission that the underlying factual conduct occurred. That way, others will have a clear sense of what the company or individual did that got them into trouble and can modify their own behavior accordingly.’
- Introducing non-monetary settlements: The third measure will ‘help clear through pending administrative cases where the violations do not reflect serious national security harm but do rise above the level of cases warranting a warning letter or no-action letter [but] do not require monetary penalties.
‘Instead, we will seek to resolve cases by focusing on remediation – through the imposition of a suspended denial order with certain conditions, such as training and compliance requirements. Any such resolution will be contingent on the violator’s willingness to accept responsibility, admit to the conduct, and commit to enhanced compliance measures.’
- Fast-track VSDs: For voluntary self-disclosures involving minor or technical infractions, ‘We will resolve them on a “fast-track” with a warning letter or no-action letter within 60 days of receipt of a final submission.’ For those voluntary disclosures ‘that indicate potentially more serious violations…[BIS] will do a deeper dive to determine what type of enforcement action may be warranted, while at the same time adhering to the principle that companies deserve, and will get, significant credit for coming forward voluntarily.’
In the same speech, Axelrod said that the Export Enforcement branch of the BIS’s response to recently enhanced Russia export controls had been ‘swift and powerful’: ‘Our agents have detained or seized over 200 shipments valued at over $88 million. I have signed nine temporary denial orders, or TDOs – including three that I signed last Friday – against Russian and Belarusian airlines; those orders should ground significant numbers of Russian- and Belarusian-operated planes. We’ve also, for the first time ever, published lists of airplanes we believe have violated our controls. We did that to put the world on notice that providing services or parts to those planes will place the providers in violation of General Prohibition 10 of the EAR. And while these TDOs and our General Prohibition10 list have successfully hampered Russian owners’ abilities to fly these aircraft, we’ve also been busy granting case-by-case authorizations to return specific planes to their Western owners, thereby helping to thwart Vladimir Putin’s efforts to steal American and European assets.’
