The cost of violating the Export Administration Regulations (EAR) and most U.S. trade sanctions programs just got a lot higher. As part of the recent extension of the USA Patriot Act, Congress increased fines for civil violations of the International Emergency Economic Powers Act (IEEPA) from $11,000 to $50,000. Penalties for willful violations of the Act also got stiffer, increasing from 10 to 20 years imprisonment.
IEEPA is the statutory authority under which the EAR have continued in force. It also provides the statutory basis for most of the regulations administered by the Office of Foreign Assets Control (OFAC), including the embargoes on Iran and Sudan and the terrorism and drug trafficking regulations. U.S. sanctions against Cuba are based upon the Trading With the Enemy Act (TWEA); violations of those regulations remain unchanged at $65,000 per transaction. Penalties for violations of the International Traffic in Arms Regulations (ITAR) also remain unchanged at $500,000 per transaction.
The impact of the increased penalties under IEEPA is more substantial than would first appear. Each unlawful shipment counts as a separate violation. Furthermore, the Commerce Department regularly charges multiple counts for each unauthorized transaction: one count for the export, a second for failing to file a Shipper’s Export Declaration (SED) or other necessary export document (or filing inaccurate documentation), a third for failing to keep appropriate internal records and a fourth for exporting with the knowledge that a license was required. Thus, each unlawful transaction could easily result in a fine of up to $200,000.
The government has gradually beefed up its export enforcement efforts in the aftermath of 9/11 and has focused more attention on exports to terrorist-supporting organizations and countries, such as Iran, Sudan and Syria. The increased fines are in addition to other severe penalties, including denial of export privileges and debarment from federal contracting. Companies with significant EAR exposure should re-evaluate the level of resources committed to export control compliance in light of this five-fold increase in fines.
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