By: Lindsay Simmons
Last week, the Department of Commerce Bureau of Industrial Security (BIS) issued a final rule amending the Export Administration Regulations (EAR) to update its Guidance on Charging and Penalty Determinations in Settlement of Administrative Enforcement Cases (the ‘‘BIS Guidelines’’).
The new rule rewrites the BIS Guidelines, which are found in Supplement No. 1 to part 766 of the EAR and identify the factors that the Office of Export Enforcement (OEE) considers when setting penalties in settlements of administrative enforcement cases and when deciding whether to pursue administrative charges or settle allegations of EAR violations. The changes to the BIS Guidelines are intended to make administrative penalty determinations under the EAR more predictable to the public and to align the factors with those promulgated by the Treasury Department’s Office of Foreign Assets Control (OFAC).
Under the revised BIS Guidelines, the base penalty will depend on whether the EAR violation is egregious or non-egregious and whether or not the case resulted from a qualifying voluntary self-disclosure. Once the base penalty amount has been determined, a number of specific factors will be applied to determine whether this amount should be adjusted downward or upward.
Voluntary self-disclosures (VSDs) are no longer listed as mitigating factors in and of themselves. However, to encourage the submission of VSDs, BIS will accord a 50 percent mitigation up front if a case is based on a VSD. BIS notes that the majority of cases brought to its attention through VSDs result in the issuance of warning letters and that over the past several years an average of only three percent of VSDs submitted have resulted in a civil penalty. Further, BIS does not expect that adoption of these guidelines will increase the number of cases that are charged administratively rather than closed with a warning letter.
The rule and the updated BIS Guidelines do not apply to alleged violations of regulations concerning restrictive trade practices and boycotts, which will continue to be subject to Supplement No. 2 to part 766. This rule also will not apply to pending matters where, as of July 22, 2016 there are ongoing settlement negotiations and a charging letter has not been filed.
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