United States: Whatcha Gonna Do When They Come For You? Export Control Agency Visits

Last Updated: July 18 2017
Article by Olga Torres and Derrick Kyle

Many exporters are at least vaguely familiar with the "company visits" or "outreach visits" conducted by the export control agencies, but most have very little idea what these visits actually entail, how a company is selected for a visit, or the potential consequences of such a visit. Exporters, freight forwarders, non-exporting manufacturers of defense articles, and companies that share controlled technology with foreign persons, resulting in "deemed exports" should thoroughly prepare for these visits if they are ever "lucky enough" to be selected.

This article will constitute the first part of a two-part series and will introduce the reader to the types of visits conducted by the two major export control agencies: the Department of Commerce's Bureau of Industry and Security ("BIS") and the Department of State's Directorate of Defense Trade Controls ("DDTC"). Additionally, this article will discuss some of the potential outcomes and consequences of these visits. In the forthcoming second part of the article, we will summarize our recommendations to prepare for and make the best of such a visit.

DDTC Company Visit Program

The DDTC administers the International Traffic in Arms Regulations ("ITAR") and maintains the U.S. Munitions List ("USML") of controlled defense articles. Generally, the DDTC regulates exports of defense items, develops and enforces defense trade export control laws and regulations, and maintains registration requirements for manufacturers, exporters, and brokers of defense articles and defense services. DDTC also operates a Company Visit Program ("CVP"), which consists of visits by DDTC officials to entities registered with the DDTC, as well as other entities involved in ITAR-related activities.

In its current form, DDTC's CVP supports two types of visits: CVP-Outreach, called "CVP-O" and CVP-Compliance ("CVP-C").1 CVP-O is referred to by DDTC as an extension of DDTC's outreach activities. According to DDTC, CVP-O visits are intended to be learning exercises for both the selected company and DDTC. During a CVP-O visit, a company has the opportunity to discuss the compliance challenges it faces with actual DDTC personnel. For their part, the DDTC team has the opportunity to see first-hand how members of industry are adapting to changes to the ITAR and other compliance changes. The CVP-O team can also provide suggestions for best practices and answer any questions the visited company may have. DDTC claims that CVP-O site visits are unrelated to any specific compliance matters and has stated that CVP-O visits are more educational in nature and are not conducted to evaluate compliance failures or violations.

DDTC also engages in CVP-C visits, which are conducted by the Office of Defense Trade Controls Compliance ("DTCC") to verify company compliance. For example, if a company has entered into a consent agreement after the discovery of ITAR violations, the company should expect a CVP-C visit in the future. CVP-C visits may also occur in the context of the adjudication of a voluntary self-disclosure ("VSD"), directed disclosure, or other compliance matter. CVP-C visits will include a more in-depth look at a company's compliance program and procedures.

Typically, DDTC aims to conduct between two and four CVP visits (of either type) per quarter. From May 2015 to April 2016, DDTC conducted fifteen CVP visits, and six of those were CVP-C visits pursuant to consent agreement monitoring. Six of the fifteen CVP visits were conducted in foreign countries.2 DDTC addresses how a company is selected for a CVP visit, but specific details are sparse. According to its website, DDTC "selects companies based on its CVP goals" and considers multiple factors when selecting a company. These factors include "proximity to other activities DDTC is participating in, registration status, volume of licensed activity, experience conducting ITAR activities, nature of business, type and sensitivity of technology, geographic location, monitoring of an existing consent agreement, and value to ongoing work within DDTC."3

BIS Outreach Visits

BIS administers the Export Administration Regulations ("EAR") and its Commerce Control List of sensitive "dual-use" goods and technology. Like DDTC, BIS also conducts on-site "outreach" visits. Unlike the ITAR, though, the EAR has no requirement for exporting or manufacturing entities to register with BIS. Thus, unlike DDTC-registered companies which by virtue of their registration are within the pool of companies that should be prepared for a CVP visit, the lack of an EAR registration requirement means that companies subject to BIS' jurisdiction may not be explicitly aware of their potential to be selected for a visit from BIS.

BIS conducts two different types of visits, but whereas both types of DDTC visits are administered within the same CVP framework, the two types of BIS visits are conducted by two completely separate divisions within BIS. The first, and far more common, type of visit is an "outreach visit" conducted by BIS' Office of Export Enforcement ("OEE"). Technically speaking, the OEE creates a distinction between situations where a company requests OEE to come, called a "visit," and where OEE arrives uninvited, called an "inquiry." For simplicity's sake, we'll refer to all situations where OEE comes to a company as an "outreach visit."

OEE outreach visits are conducted by OEE officers, the "guns and badges" branch of BIS, through the division's Outreach Program. OEE has informed the public that companies that could be selected for visits include, but are not limited to, manufacturers, exporters, and freight forwarders. It is not entirely clear how OEE selects companies for outreach visits. However, exporters that have recently submitted an export license application without having previously applied for any licenses in the past have been targeted for outreach visits. In fiscal year 2016, OEE conducted more than 743 outreach visits to individuals and companies within the export community.4

BIS' Office of Exporter Services Export Management and Compliance Division ("EMCD") has also begun to conduct company visits over the past couple of years. These visits are much less frequent than OEE outreach visits; only 40 on-site EMCD visits were conducted during fiscal year 2016.5 EMCD selects entities for a company visit based on filing errors found within the Automated Export System ("AES"). BIS explains that EMCD meets with these entities "to better understand the specific reasons that errors occurred, determine what export compliance procedures they [have] in place, and offer export counseling assistance."6

Consequences of Visits

Typically, the only consequence of receiving a company visit from either DDTC or BIS is becoming more familiar with the agencies' expectations for compliance. However, in some cases there certainly can be negative consequences. One area of concern is that it is unclear how either agency handles violations discovered during a visit. Per the DDTC website, if the DDTC visit team discovers a violation during their visit, DDTC will instruct the company to review the issue and submit a disclosure, if necessary.7 Importantly, DDTC does not specify whether the disclosure would be a VSD or a directed disclosure. The distinction is important because the submission of a VSD is considered a mitigating factor in the levying of any potential penalties, while a directed disclosure does not provide for any mitigation. BIS has provided no official guidance as to how it handles the discovery of violations during visits.

Additionally, in some cases BIS has imputed "knowledge" on a violating company based on evidence that the company participated in outreach visits in the past. For example, the charging documents in a recent $27 million settlement with an exporter detail several instances where BIS and other government agencies conducted outreach visits with the charged party. These visits were explicitly referenced to establish "knowledge" i.e., the exporter knew of its compliance obligations and violated the regulations anyway.8 Knowledge of the illegality of actions is an important piece of building an administrative case against an exporter, as well as providing an important component for recommending a case to the Department of Justice for criminal prosecution.

It is clear that, although potentially helpful and informative, visits by the export control agencies may not, and often are not, entirely positive experiences. With critical factors at stake like the mitigation of penalties or referral to the Department of Justice, visits from DDTC or BIS should be treated with the respect they deserve. The forthcoming second part of this article will discuss how to best prepare for a visit from one of the above referenced export control agencies and provide recommendations for navigating a visit with optimum results.

If you have been selected for a company visit by an export agency and wish to share your experience, or simply seek more information about these visits, we encourage you to contact us.

Footnotes

1. On April 19, 2017, DDTC published recommendations for improvements to the CVP that were proposed by the Defense Trade Advisory Group ("DTAG"). The DTAG is made up of U.S. private sector defense exporters and defense trade specialists that act as a formal channel for consultation and coordination with DDTC on issues involving U.S. laws, policies, and regulations related to defense exports. At this point, it is unknown whether any of DTAG's recommendations will be adopted by DDTC. The PowerPoint presentation providing the recommendations, called "Company Visit Program Guidelines," is available at DDTC's website at http://pmddtc.state.gov/DTAG/index.html, under the heading for April 19, 2017. Torres Law Managing Member, Olga Torres, is a member of DTAG.

2. Defense Trade Controls Compliance Company Visit Program (CVP), DDTC, 10 (July 2016), available at https://www.pmddtc.state.gov/compliance/documents/CVP_Overview.pdf.

3. Company Visit Program (CVP), DDTC (Sept. 21, 2016), https://www.pmddtc.state.gov/compliance/cvp.html.

4. Annual Report to Congress for Fiscal Year 2016, Department of Commerce, Bureau of Industry and Security, 16 (Oct. 7,2016), available at https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/1629-bis-report-to-congress-fy-2016/file.

5. Id. at 10.

6. Id.

7. Company Visit Program (CVP), DDTC (Sept. 21, 2016), https://www.pmddtc.state.gov/compliance/cvp.html.

8. In the Matter Of Access USA Shipping, LLC, Settlement Agreement, Department of Commerce, Bureau of Industry and Security, 4 (Feb. 7, 2017), available at https://www.bis.doc.gov/index.php/forms-documents/about-bis/newsroom/1661-access-usa-shipping-final-order/file.

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.

Authors
Olga Torres
Derrick Kyle
Events from this Firm
22 Oct 2017, Conference, Texas, United States

What to Expect

  • Three Tracks –Import, Export, General
  • International Trade Compliance Hot Topics
  • Valuation Seminar 10/25/17 9:00am-3:00pm
23 Oct 2017, Seminar, Texas, United States

Olga Torres to speak on “Top 10 Export Errors to Avoid”

 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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.

Disclaimer

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.

Registration

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.

Cookies

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.

Links

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.

Mail-A-Friend

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.

Security

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.