United States: BIS Revises Penalty And Settlement Guidance

On June 22, 2016, the Bureau of Industry and Security ("BIS") revised its guidance regarding administrative enforcement cases for violations of the Export Administration Regulations ("EAR"), other than those related to restrictive trade practices and boycotts. The rule, effective July 22, 2016, rewrites Supplement 1 to Part 766 of the EAR and sets forth factors the Office of Export Enforcement ("OEE") will consider when determining penalties in the settlement of administrative enforcement cases and when deciding whether to pursue charges or settle claims of EAR violations. The new guidelines are based on those used by the U.S. Office of Foreign Assets Control ("OFAC") in the enforcement of U.S. trade and financial sanctions and embargoes and are intended to increase predictability and transparency for civil penalty determinations.

The EAR may be enforced both criminally and civilly. Maximum criminal penalties are 20 years in jail, a $1 million fine, or both. Maximum civil penalties are the greater of $250,000 or twice the value of the transaction, per violation. BIS can also deny export privileges and exclude persons from practicing before the agency.

Civil Penalties

BIS' starting point in calculating the civil penalty it wishes to assess will be to determine a base penalty amount. The first step in that process will be assessing whether the suspected violations are egregious or not egregious. BIS will make such a determination based on a variety of factors, as described below.

In non-egregious cases resulting from a voluntary self-disclosure ("VSD"), the base penalty is one-half of the transaction value, capped at the statutory maximum penalty ($125,000). In non-egregious cases resulting from anything other than a VSD, the base penalty is taken from a schedule, capped at a maximum amount of $250,000. Schedule amounts are incremental (beginning from $1,000) and are based on the transaction value.

The base penalty amount for an egregious case resulting from a VSD is up to one-half of the statutory maximum penalty ($125,000). The base penalty amount for an egregious case resulting from anything other than a VSD is up to the statutory maximum penalty ($250,000).

In addition to the reductions set forth above for VSDs, in cases involving exceptional cooperation with OEE where no VSD was filed, the base penalty amount generally will be reduced between 25 and 40 percent. Exceptional cooperation in cases involving VSDs may also be considered as a further mitigating factor. In cases involving a respondent's first violation, the base penalty amount generally will be reduced by up to 25 percent. An apparent violation generally will be considered a ''first violation'' if the respondent has not been convicted of an export-related criminal violation or been subject to a BIS final order in the five years preceding the date of the transaction giving rise to the apparent violation. Multiple violations arising out of the same act do not necessarily constitute egregiousness. BIS has assured the public that it will continue to consider inadvertent, compounded clerical errors as related and not separate violations.

Transaction Value

The transaction value used for penalty calculation purposes is based on the value of the subject transaction. The value listed on export transaction documents (e.g., Automated Export System filings, commercial invoices, and bills of lading) may be the appropriate transaction value, but BIS is also free to consider the market value of the items in the transaction or the economic benefit derived by the respondent. Thus, transaction value is not necessarily determined in the same way that transaction value is determined for customs import purposes.

Aggravating, Mitigating, and General Factors

Base penalty amounts can be adjusted either upward or downward based on the existence of aggravating, mitigating, and general factors. They are divided into several categories. Substantial weight is given to factors A, B, C, and D, and particular emphasis is afforded to factors A, B, and C.

A. Willful or reckless violation of law

B. Respondent's awareness of conduct at issue giving rise to the apparent violation

C. Actual or potential harm to regulatory program objectives

D. Individual characteristics of a respondent

E. Existence, nature, and adequacy of respondent's risk-based compliance program

F. Respondent's remedial response to apparent violations

G. Nature and extent of respondent's cooperation with BIS

H. Likelihood that license would be approved or availability of license exception

I. Existence of related violations

J. Multiple unrelated violations

K. Other enforcement action

L. Impact on promoting future compliance

M. Other relevant factors

Where the analysis of these factors reflects that a particularly serious violation of the law has occurred, the case will be considered egregious. So these factors are really used twice—once to determine whether the case is egregious, and again to determine the adjustment to the base penalty amount. The two determinations, while related, are separate and distinct.

The guidance also identifies which individual characteristics should be considered in determining appropriate penalty amounts. Those are (i) the respondent's commercial sophistication, (ii) the size and sophistication of its operations, (iii) the volume and value of the apparent violations relative to all transactions, (iv) its regulatory history, (v) any other illegal conduct in connection with the export, and (vi) prior criminal convictions. Notably missing from this list are past violations of an acquired entity when an acquirer has taken reasonable action to discover, correct, and disclose violations.

BIS has also sought to benefit those companies that have previously provided information of value to the government in other instances. Mitigating Factor G asks whether the respondent has previously made substantial voluntary efforts to provide information (such as providing tips that led to enforcement actions against other parties) to federal law enforcement authorities in support of the enforcement of U.S. export control laws.

Determinations and Responses

BIS has several options in responding to apparent violations. It may issue a "no action" letter, issue a warning letter, institute an administrative enforcement case, issue a civil monetary penalty, make a criminal referral, or take other administrative sanctions or actions. A "no action" letter is just that—BIS will take no action when there is insufficient evidence to conclude that a violation has taken place. Historically, most cases resulting from VSDs result in the issuance of a warning letter with a finding that an apparent violation may have taken place. When it appears that a violation has occurred, but pursuing a civil penalty is inappropriate under the circumstances, BIS will issue a warning letter.

"No action" letters and warning letters constitute final disposition of the matter, but do not constitute final agency action with respect to an EAR violation. This means that BIS may reopen an investigation or inquiry based on the discovery of new, relevant information.

In addition to the imposition of a civil monetary penalty or a criminal referral, BIS may take other administrative actions. These may include training or audit requirements and license revision, suspension, or revocation. In addition, any person acting as an attorney, accountant, consultant, freight forwarder, or in any other representative capacity may be excluded from practicing before BIS.


BIS addressed several concerns within the industry in response to its proposed guidance, but it left some issues open. BIS previously considered some factors that are not included in this guidance—for instance, the timing of settlement. The guidance increases consistency with OFAC, but does not adopt OFAC's separate approach to recordkeeping and reporting obligations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.