Late last year, the penalties for export violations increased substantially. Although the new penalties have not yet been applied by the Department of Commerce, Bureau of Industry and Security (BIS), BIS has indicated that it will look closely at the effectiveness of the violators compliance program. Thus, companies are well advised to assess and strengthen their export compliance programs in 2008.
The new penalties were established under the International Emergency Economic Powers Enhancement Act (IEEPA Enhancement Act), Public Law No. 110-96, amending Section 206 of the International Emergency Economic Powers Act (IEEPA). The IEEPA Enhancement Act applies to violations of the antiboycott and export control regulations in the Export Administration Regulations (EAR) administered by BIS and most of the economic sanctions programs administered by the Department of the Treasurys Office of Foreign Assets Control (OFAC).
The IEEPA Enhancement Act increases administrative and criminal penalties that can be imposed under the IEEPA as follows:
- Civil penalties: The greater of US$250,000 per violation
or twice the value of the transaction that is the basis of
the violation (an increase from US$50,000) (enhanced
penalties).
- Criminal penalties: Up to US$1 million per violation
and/or up to 20 years in prison (the prison term remains
unchanged in the IEEPA).
The IEEPA Enhancement Act also amends the IEEPA to clarify when civil and criminal penalties may be assessed for certain unlawful acts. The new civil penalties apply to administrative (civil) enforcement actions pending or commenced on or after October 16, 2007. Further, the new criminal penalties apply to criminal enforcement actions commenced on or after October 16, 2007.
BIS has indicated that it would not generally pursue the enhanced penalties provided under the IEEPA Enhancement Act in the following circumstances:
- Violations with respect to which a valid Voluntary
Self-Disclosure (VSD) initial notification was submitted to
BIS in accordance with Part 764.5(c)(2) (export control
violations) or Part 764.8(c)(2) (antiboycott violations) of
the EAR prior to October 16, 2007;
- Violations where BIS filed charging letters with an
administrative law judge prior to October 16, 2007;
- Violations where BIS has approved settlement offers or
issued settlement offers prior to October 16, 2007, if
settlement is reached prior to BIS filing a charging letter
with an administrative law judge;
- Violations with respect to which BIS issued proposed
charging letters prior to October 16, 2007, if settlement is
reached prior to BIS filing a charging letter with an
administrative law judge; and
- Violations where the parties have executed a statute of
limitations waiver prior to October 16, 2007, whether or not
a proposed charging letter has been issued, and settlement is
reached prior to BIS filing a charging letter with an
administrative law judge.
Faced with significant increased penalties, what can companies do to mitigate their risks under the IEEPA Enhancement Act? BIS advises that it will afford "great weight mitigation of up to a 25 percent reduction of the amount of penalties to be assessed for the existence of an effective export compliance program in place before the violation and later upgraded." See BIS Fact Sheet dated November 1, 2007. Therefore, it is very important for companies exporting products or technical data to assess the effectiveness of, and strengthen, their export compliance program in 2008.
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.
