BIS Issues 2010 Guide on Export Enforcement and Compliance Programs

The guide lists selected companies and individuals that enforcement actions were taken against and their outcomes -- including a description of the violation, the penalty assessed, and what, if any, mitigating circumstances existed.

2010 Guide Similar to 2008 Guide

The 2010 guide is substantively identical to the 2008 version of the guide, except that the lists of named violators and their circumstances has been updated.

Great Mitigation Weight for Effective Export Compliance Programs

BIS continues to state that it weighs a variety of aggravating and mitigating factors in deciding the level of penalties to assess in administrative cases. As set forth in Supplements 1 and 2 to 15 CFR Part 766, an effective compliance program is entitled to great weight mitigation.

9 Principals for an Effective Export Compliance Program

BIS employs the following nine guiding principles when assessing the effectiveness of a company’s export compliance program:

1. Whether the company has performed a meaningful risk analysis, which includes consideration of the types of goods being exported and the destination of those goods;

2. The existence of a written compliance program, that is communicated to others;

3. Whether appropriate senior company officials are responsible for overseeing the export compliance program;

4. Whether adequate training is provided to employees, so they understand what is required of them to remain in compliance;

5. Whether the company adequately screens its customers and transactions;

6. Whether the company meets recordkeeping requirements;

7. The existence of an internal system for reporting export violations, including making Voluntary Self-Disclosures (VSDs);

8. The existence of internal/external reviews or audits to help determine whether company procedures and compliance programs need to be revised; and

9. Whether remedial activity has been taken in response to export violations.

Larger Penalties for Administrative Cases Available Under IEEPA

Like its 2008 Guide, BIS states that under the International Emergency Economic Powers (IEEPA) Enhancement Act, which was signed into law on October 16, 2007, for administrative cases pending or commenced on or after October 16, 2007, a civil penalty amounting to the greater of $250,000 or twice the value of the transaction may be imposed for each violation of IEEPA.¹

(For criminal violations in cases that were commenced on or after October 16, 2007, violators may be fined up to $1,000,000 and/or face up to 20 years of imprisonment.)

Denial of export privileges. In addition, administrative penalties may include the denial of export privileges. A denial of export privileges prohibits a person from participating in any way in any transaction subject to the Export Administration Regulations (EAR). Furthermore, it is a violation of the EAR for anyone to participate in an export transaction subject to the EAR with a denied person. A denial of export privileges may be imposed for up to ten years from the date of a person’s prior conviction under a statute listed in the Export Administration Act (EAA).

Administrative Cases Usually Settled Through Negotiation

The guide continues to state that in most cases, BIS reaches negotiated settlements in its administrative cases prior to a formal administrative hearing.

Charges neither admitted or denied. As a standard provision of BIS settlement agreements, a respondent who enters with a settlement with BIS neither admits nor denies the charges made against him. Therefore, the violations referenced in many of the summaries in this guide have neither been proven in court nor been admitted to by the company or individual.

¹BIS generally will not apply the larger IEEPA penalties to administrative cases involving:

• Voluntary Self-Disclosure notifications submitted prior to October 16, 2007;
• Charging letters filed with an Administrative Law Judge prior to October 16, 2007;
• Settlement offers approved/issued by BIS prior to October 16, 2007;
• Proposed charging letters issued prior to October 16, 2007, if settlement is reached before a charging letter is filed with an Administrative Law Judge; or
• Statute of limitations waivers executed prior to October 16, 2007.

(See ITT’s Online Archives or 10/23/07, 07102325, for BP summary of President signing IEEPA into law.

See ITT’s Online Archives or 11/08/07 news, 07110820, for BP summary of BIS guidance on IEEPA.

See ITT’s Online Archives or 01/15/10 news, 10011520, for BP summary of BIS’ updated freight forwarder guidance.)

2010 guide available by emailing a request to documents@brokerpower.com