BIS recently issued a final rule to amend the Export Administration Regulations (EAR), making several changes to their Voluntary Self Disclosure (VSD) policies, as well as updates to guidance on penalty determinations.

The rule codifies previously announced policy changes through several Policy Memoranda including an April 2023 memorandum on voluntary-self disclosures, and a June 2022 memorandum on strengthening administrative enforcement.

Revisions to Voluntary Self-Disclosures

The rule makes both substantive and procedural changes to the VSD policies:

  1. Addition of non-disclosure as an aggravating factor – the new rule makes clear that BIS will consider a deliberate decision to not disclose a violation as an aggravated factor when determining what administrative sanctions will be imposed.
  2. New dual track for processing VSDs – one track for minor or technical violations, the other for significant violations.
  3. Authorizes any person (not just the party submitting a VSD) to notify the Director of BIS’s Office of Export Enforcement (OEE) that a violation has occurred and to request permission to engage in corrective activities.

Revisions to Penalty Guidelines

This rule makes several changes to the BIS Penalty Guidelines, including:

  1. Changes the base penalty caps:
    1. Non-egregious VSD cases: was $125,000, now one-half of the transaction value.
    2. Non-egregious cases that are not initiated by a VSD: was $250,000, now the full transaction value.
  2. Permits BIS to use  non-monetary penalties to resolve cases that are not egregious and have not resulted in national security harm, but rise above the level of cases warranting a warning letter.
  3. Removes from the BIS Penalty Guidelines all specific percentage ranges for potential penalty reduction.
  4. Amends aggravating factors to include the enabling of human rights abuses as a specific consideration when BIS assesses the potential impact of an apparent violation on U.S. foreign policy objectives.
  5. Adds a new aggravating factor for failure to disclose a significant apparent violation.
  6. Expands the scope of past criminal convictions that OEE may consider in an enforcement response.
  7. Clarifies that disclosure of conduct by others that leads to an enforcement action counts as “exceptional cooperation.”

Takeaways for Exporters

The changes in this revised rule reflect BIS’s continued commitment to enforcing compliance with export controls and the agency’s willingness to impose more significant penalties for non-compliance.

Exporters should familiarize themselves with the changes in this rule and adjust compliance programs as necessary. Need assistance developing or revising your export compliance program? Diaz Trade Law can help.

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