United States: Patriot Act Renewal Increases Penalties for Export Violations

President George W. Bush recently signed the conference report on House Resolution 3199 (HR 3199), the USA PATRIOT Improvement and Reauthorization Act of 2005 (the Act), effectively reauthorizing the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the USA PATRIOT Act or the PATRIOT Act) that was first signed into law in 2001.

The reauthorization, on March 9, 2006, includes many intended actions relating to increased law enforcement powers, but also has some collateral effects. Consistent with the U.S. government’s recognition that export controls belong in the national security portfolio, the Act increases the penalties for willful civil violations from $10,000 to $50,000, and increases the penalties for criminal conduct from a maximum of 10 years imprisonment to 20 years imprisonment. Criminal conduct can be punished by both a fine and imprisonment.

The original statutory framework for regulating the export of dual-use commodities from the United States was contained within the Export Administration Act of 1979, as amended (EAA)¹, which contained a sunset provision.² Although renewed sporadically over the last 17 years, the EAA is currently not in effect. Rather, its authorities have been maintained through the President’s use of the International Emergency Economic Powers Act (IEEPA).³Until now, however, the penalties, remained at relatively low levels. Under IEEPA, the President has the authority to deal with "unusual and extraordinary threat[s]" which arise outside the United States, and that challenge the "national security, foreign policy, or economy of the United States," by declaring a national emergency "with respect to such threat."

The New Penalties

After March 9, 2006, Section 402 of the Act amended IEEPA by increasing the penalties for both civil and criminal violations. Now, each willful violation of a license, order, or regulation issued under IEEPA carries with it a possible maximum civil penalty of $50,000, up from the previous level of $10,000.

In addition, the knowing violation of IEEPA by any person, including officers, directors, or agents of any corporation, may also be punished by the imposition of the new maximum criminal fines and penalties of $50,000 and 20 years imprisonment, up from $10,000 and 10 years respectively. The government has had success in defending intentional violations based on evidence that a company consciously disregarded or was willfully blind to warnings that a violation was likely to occur.

Certain cases that deal with sensitive national security issues can carry up to $1 million per criminal violation and $120,000 in administrative penalties.

Even Tougher Penalties Are on the Horizon

This may not be the end of such increases in penalties. The changes to IEEPA are still minimal in comparison to those on the table in connection with the Export Administration Renewal Act (EARA) (H.R. 4572), introduced last December by House International Relations Committee Chairman Henry Hyde (R-Ill).

As currently drafted, the EARA proposes to set per violation civil penalties for exports to a maximum of $500,000 and criminal penalties for individuals at 10 years and/or 10 times the value of the export, up to $1 million, whichever is greater. Corporations could face even stiffer criminal penalties of up to 10 times the value of the export, up to $5 million, whichever is greater.

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