2023: The Year of Export Enforcement

In the Chinese zodiac, 2023 is the Year of the Rabbit.  The rabbit symbolizes many different attributes, including cautiousness and self-protection.  During a recent gathering of trade compliance professionals, I heard someone mention that 2023 is “the year of export enforcement.”  I must say that I agree.  These two types of “years” seem to fit well together.

Many U.S. agencies are introducing new and robust enforcement actions not seen before.  This includes the Department of Commerce (DOC), Department of State (DOS), the Department of Defense (DOD), Department of the Treasury (Treasury) and the Department of Justice (DOJ).  Further, 2023 is seeing a formal coordination among these agencies to protect U.S. technologies and hardware.

Where to even begin?  Here’s a breakdown of some of the most notable actions.

Justice and Commerce create Disruptive Technology Strike Force

This strike force will be led by Justice’s National Security Division and Commerce’s Bureau of Industry and Security (BIS).  It will bring together experts from throughout government, including the FBI, Homeland Security Investigations (HIS) and 14 U.S. Attorney’s Offices in 12 metropolitan regions. Their effort is to “target illicit actors, strengthen supply chains and protect critical technological assets from being acquired or used by nation-state adversaries.” The strike force will focus on:

• Investigating and prosecuting criminal violations of export laws;
• Enhancing administrative enforcement of U.S. export controls;
• Fostering partnerships with the private sector;
• Leveraging international partnerships to coordinate law enforcement actions and disruption strategies;
• Utilizing advanced data analytics and all-source intelligence to develop and build investigations;
• Conducting regular trainings for field offices; and
• Strengthening connectivity between the strike force and the intelligence community.

The announcement specifically provides that when advanced technologies are acquired by adversaries such as the People’s Republic of China, Iran, Russia or North Korea, they can be used in “new or novel ways to enhance their military capabilities or support mass surveillance programs that enable human rights abuses.”

“Advances in technology have the potential to alter the world’s balance of power,” said Assistant Secretary for Export Enforcement Matthew S. Axelrod. “This strike force is designed to protect U.S. national security by preventing those sensitive technologies from being used for malign purposes.”

New task force for sanctions enforcement

Commerce, Treasury, and Justice have announced a task force in support of “cracking down on third-party intermediaries used to evade Russia-related sanctions and export controls.” Over the past year, the U.S. government has imposed sanctions and control on Russia to degrade their ability to wage its unjust war and to prevent it from taking military action elsewhere. Justice has matched Commerce and Treasury’s controls and sanctions with “unprecedented enforcement efforts to aggressively prosecute those who violate U.S. sanctions and export controls laws.” In their announcement, exporters are reminded that effective compliance programs will help attain compliance and ensure that our business partners are not evading the sanctions. In this announcement, the three agencies have provided exporters with red flags that should be incorporated into your business practices when vetting customers and suppliers.

Justice hires 25 new attorneys to support new division

In remarks by Deputy Attorney General Lisa Monaco at the American Bar Association National Institute on White Collar Crime, it was announced that Justice will be “adding more than 25 new prosecutors who will investigate and prosecute sanctions evasion, export control violations and similar economic crimes.”  Monaco stated that “in today’s world, sanctions are the new FCPA and across the globe, we are handling corporate investigations that involve sanctions evasion – in industries as varied as transportation, fin tech, banking, defense and agriculture.” The addition of these resources to the National Security Division will increase their capacity to investigate and prosecute sanctions and other export control violations.

Office of Export Enforcement (OEE) outreach

OEE continues industry outreach to assist exporters in understanding the complex export regulations and prevent violations.  OEE works with U.S. exporters but is also instrumental in vetting and evaluating foreign end users.  More information about OEE outreach efforts can be found here.

Targeting areas of enforcement focus

Although all areas of sanctions and export controls are getting more attention these days, the United States is specifically targeting certain sectors and technologies.

Advanced Computing and Semiconductor Manufacturing

The Department of Commerce’s Bureau of Industry and Security (BIS) is implementing a series of targeted updates to its export controls as part of BIS’s ongoing efforts to protect U.S. national security and foreign policy interests. These updates will restrict the People’s Republic of China’s (PRC’s) ability to both purchase and manufacture certain high-end chips used in military applications and build on prior policies, company-specific actions, and less public regulatory, legal, and enforcement actions taken by BIS.

Russia/Ukraine/Belarus Regulatory Activity

AES Filings

Various agencies will continue to monitor the Electronic Export Information (EEI) filed by forwarders and exporters in the Automated Export System (AES).  Census, Customs and Border Protection, DOC and DOS use information from AES to conduct compliance reviews to include inspections, outreach, review of license exceptions, etc.  In addition, the last few years there have been changes to reporting requirements for exports to China for items that have an ECCN.  Now more than ever it is important for exporters to have their information accurate and filed correctly in AES.

OEE Priorities

OEE will prioritize its enforcement efforts to target:  

• WMD Proliferation
• Terrorism/Terrorist Support
• Unauthorized Military/Government End Use (latest restrictions for Russia/Belarus)

What should companies do?

With these unprecedented enforcement actions on the rise, what should companies do?  It’s important to remember that compliance with U.S. export regulations is the law.  Even foreign companies with U.S. subsidiaries or U.S. technology are not out of reach for these laws and regulations.  Further, exporting is a privilege (not a right).

The U.S. government takes the rules very seriously, and the penalties for non-compliance can be steep and ruinous.  Not only can a company’s actions threaten the U.S. national and economic security, but the penalties for noncompliance can include fines, debarment, personal fines and/or imprisonment.  (Not to mention the negative publicity that comes when violations are made public.)

Here are some helpful tips for any company that is exporting or dealing with U.S. technology or U.S.-origin goods:

1. Review your compliance program and procedures. Are they sufficient?  Have they been updated to reflect new changes to the rules?  If you haven’t touched your compliance program in years, it’s probably a good time now.
2. Review past export shipments to ensure that they were filed correctly.
3. Confirm that you are not exporting to countries that are prohibited.
4. Confirm your customers are not sanctioned or restricted.
5. Confirm that you are not exporting products for prohibited end uses.
6. This is an ever-evolving and fast-changing landscape. Consider engaging with a trade compliance consultant to help you navigate these complex rules.

Rabbits are quick and have even been known to fight.  However, their best defense is to hide and not become targets for predators.  In this new landscape of export enforcement, companies would do well to strengthen their compliance programs, training and due diligence.

Or to quote Kenny Rogers:  “You can’t outrun the long arm of the law.”