The enforcement changes you can’t ignore

What does your export compliance program look like?  When was the last time you looked at it?  Let’s back up further.  Do you even have a compliance program?

Answers to these questions are going to play a critical role for many companies this year.  That’s because 2024 is shaping up to be a year of increased enforcement.  Are you ready for it?  Let’s look at what BIS is doing, and what your company can do.

What is BIS doing with enforcement?

The Bureau of Industry and Security (BIS) is responsible for administering and enforcing the Export Administration Regulations (EAR).  Last year, BIS imposed record fines against some companies – including a $300 million fine against Seagate Technologies.  So far this year, BIS has continued their increase in penalties for serious violations, while also preparing to announce more “significant” export penalties. They also continue to partner with the Department of Justice (DOJ) on multiple export control-related offenses.

The agency is in the process of refining and enhancing enforcement policies across the board.  This includes antiboycott compliance and new guidance for freight forwarders. In case you missed it at the end of 2023, BIS published an advisory asking forwarders to better know their cargo – making it clear they have a “responsibility” and can be held liable for an illegal export.

They also recently expanded their university outreach program – assigning a dedicated officer to schools that have a higher risk of being targeted by foreign governments for technology theft.

Finally, BIS made enhancements to the Voluntary Self-Disclosure process.

All these actions lead to one conclusion:  BIS is on a mission to get more funding and to hire more agents and analysts for enforcement.

Revisiting Voluntary Self-Disclosures

BIS strongly encourages businesses to submit VSDs electronically for “minor infractions.”  What is considered a minor infraction?  The agency describes these as “good faith misinterpretations” of the regulations and/or other administrative errors.  Their goal is to fast-track these types of VSDs and have them resolved within 60 days.

The good news is, for these minor cases, an abbreviated narrative can be submitted, and it doesn’t need to include all the accompanying documents that are outlined in Section 764.5(c)(4), unless they are specifically requested. Also, businesses don’t need to do the full five-year lookback for the submission, unless it is specifically requested by the Office of Export Enforcement (OEE).

To submit the abbreviated VSD for the minor infractions, it must contain the following information:

1. The kind of violations involved;
2. When and how the violations occurred;
3. The full identities and addresses of all parties involved in the activities giving rise to the violations;
4. License numbers;
5. Description, quantity, value in USD, and ECCN or other classification of the commodities involved; and
6. An explanation as to the existence of any mitigating circumstances.

The new enhancements also permit a business/organization to disclose multiple minor violations in the context of a single VSD, provided the events “occurred close in time.”

One important thing to note here:  If your company has violations that involve aggravating factors, it’s important to disclose these before OEE notifies you of those errors.  What are these aggravating factors?  You can find a full list in 15 C.F.R. Part 766, Supp. No. 1 § III(A).  They include:

• Willful or Reckless Violation of Law
  • Willfulness
  • Recklessness/gross negligence
  • Concealment
  • Pattern of Conduct
  • Prior Notice
  • Management Involvement
• Awareness of Conduct at Issue: The awareness of the conduct giving rise to the apparent violation
  • Actual Knowledge
  • Reason to Know
  • Management involvement
• Harm to Regulatory Program Objectives
  • Implications for U.S. National Security
  • Implications for U.S. Foreign Policy

The critical role of your compliance program

So, what does all this mean for you and your export compliance program?  Well, according to BIS, if you only have minor infractions, you might just get a no-action/warning letter.  However, your company could still receive an administrative penalty if it is “deemed necessary.”

One of the general factors that will be looked at is the existence of a compliance program. If you don’t have one and you export anything – even to Canada, for example – you’ll want to make sure you have a written program that is understood by all employees and is being followed throughout the organization.

If you do have an export compliance program in place, that’s great.  You’re one step ahead of many other companies.  Some questions to consider:  Is your program up to date?  Is it actually being followed or just collecting dust?  When was the last time someone looked at your export compliance program to identify any gaps or deficiencies?  (If it’s been more than a year, you should seriously consider an assessment or gap analysis.)

This year, it’s no longer manufacturers who need to worry about export compliance.  BIS and other agencies are looking at freight forwarders, universities, service providers, banking institutions and many other types of organizations.  All these entities will likely need some type of compliance program to address the export rules and regulations.

With the ever-changing world and all the events happening, people, businesses and organizations are constantly being added to the sanctions list.  Is your company doing everything possible to stay compliant?  In the long run, it’s cheaper to pay for a compliance program than to fork over the substantial penalties like those dealt to 3M or daVinci.

Need help?  For more than 15 years, Export Solutions has worked with companies of all sizes to improve their compliance … including 140 organizations last year alone!  Don’t wait for the charging letter to arrive in your inbox.  Schedule a no-charge consultation with our team of experts today.