U.S. Department of Commerce Wants Exporters to Voluntarily Disclose Their Violations and the Violations of Others
The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) released a memo on April 18, 2023, clarifying its policy regarding the importance of both voluntary self-disclosures of violations of the Export Administration Regulations (EAR) and disclosures of EAR violations committed by others. The memo issued to all export enforcement employees highlights technology protection as a “core national security priority” and a “shared endeavor” between the government and industry.
BIS encourages the submission of voluntary disclosures to the Office of Export Enforcement (OEE) by those who believe they have violated the EAR, or any order, license, or authorization issued under the EAR. As soon as possible after the discovery of a violation, a party can initiate a voluntary disclosure by notifying OEE and then conducting a thorough investigation of all export-related transactions of suspected violations. After receipt and review of the disclosure, OEE acts as it deems appropriate, with actions that range from taking no action or issuing a warning letter to referring the matter to the Department of Justice for prosecution.
The April 18 memo explains that BIS seeks to incentivize the use of voluntary self-disclosures for possible violations. Timely, comprehensive, and cooperative voluntary disclosures of violations reduce applicable civil penalties under the base penalty matrix and may entitle the company to additional mitigation. When a company deliberately decides not to disclose violations, however, BIS will consider the decision as an aggravating factor under the guidelines.
BIS highlights the reporting of “significant” violations and desires to increase submissions of “the types of violations that reflect potential national security harm.” As for minor and technical self-disclosures, BIS urges companies to streamline the process by providing overarching submissions for multiple minor violations that occur close in time rather than increasing the number of disclosures. OEE resolves disclosures of minor or technical infractions on a “fast-track.” This prioritization will allow BIS to conserve resources and focus on more serious and impactful violations.
The memo then addresses incentives for companies willing to come forward when they become aware of others who violate the EAR—part of the “shared endeavor.” Companies can avail themselves of a confidential reporting form and, when a tip about another company results in an enforcement action, BIS will consider it “exceptional cooperation” by the disclosing party. If BIS brings a future enforcement action against the disclosing party—even for unrelated conduct—it will consider previous exceptional cooperation as a mitigating factor.
Reported conduct resulting in a successful enforcement action that also includes a potential sanctions violation may also be considered for monetary awards through the Financial Crimes Enforcement Network (FinCEN). Under certain circumstances, awards may also be paid on Export Control Reform Act penalties.
BIS’s clarification seeks to incentivize a strong culture of compliance and encourage reporting significant violations from one’s own company or others.