Timing, content, and execution matter. Here’s what you need to know before you self‑disclose. 

Timing 

A VSD must be submitted before the government learns of the same potential violation through other channels: 

1) Its own investigation of the same conduct 

2) Receipt of information from another source (i.e., whistleblower, competitor, etc.) 

Important: Requests for advice made by a person seeking advice from the OAC via telephone or email about antiboycott regulations is generally not receipt of information from another source, but also does not constitute an initial notification or VSD. However, if that person reveals non-anonymized, transaction-specific information in their conversation with OAC, this could be deemed receipt of information from another source. 

If you’ve already triggered another form of disclosure or inquiry, you may lose eligibility for the benefits of a VSD. 

A VSD will not be accepted if the individual making the disclosure did so without the full knowledge and authorization of the firm’s senior management or a person with authority to make such disclosures.  

Procedure 

Step 1: Initial Notification 

While you might be alarmed that you’ve received a reportable request, don’t write to the Office of Export Enforcement (OEE) before conducting a thorough review of all transactions within the past five years from either the date the company receives the boycott-related request or requirement, or the date of the initial notification – whichever captures the broadest look-back. Once your review is complete, the company must submit the initial notification in writing (mailed or e-mailed) to the contact provided by OEE. This notification should include the name of the person making the disclosure and a brief description of the suspected violations. The notification should also describe the general nature and extent of the violations. However, to avoid inadvertently submitting a completed disclosure when you only intended to file an initial notification, refrain from sharing the complete narrative account, explained below, during this first notification. Where it is not practical to make an initial notification in writing, the person making the notification should confirm the oral notification in writing as soon as possible. 

Step 2: Full Narrative 

A strong VSD is more than a confession—it’s a structured, persuasive submission that shows your company takes compliance seriously. Each VSD must contain, 1) the written narrative, 2) the requisite documentation, and 3) a certification. The full narrative account must be received by OEE within 180 days of the initial notification date, absent an extension from the Director of the OEE. Failure to furnishthe full narrative to the OEE in a timely manner can reduce or eliminate the mitigating impact of the voluntary disclosure. 

The Narrative 

Every written narrative must identify how the boycott request was received, clearly and chronologically; explain how the company responded (or failed to respond) and outline all corrective actions that were taken or will be taken. The narrative must also comprehensively identify individuals and organizations (i.e., names, complete addresses, etc.) of the individuals and organizations – foreign or domestic – involved in the activities that gave rise to the violations. Finally, the narrative allows you to describe other mitigating factors in your favor (i.e., no prior violations, novice exporter, etc).  

Requisite Documentation 

OAC expects supporting materials related to the violation(s), which may include: 

• Copies of the boycott request, certifications, or declarations 

• Emails, contracts, or other correspondence 

• Internal reports or compliance assessments 

• Policies or training materials relevant to the incident 

• Other evidence of written or oral communications and negotiations 

• Purchase orders, invoices, bid requests, letters of credit and brochures 

Certification 

A senior official must sign and certify that all of the representations made in connection with the voluntary self-disclosure are true and correct to the best of that person’s knowledge and belief. 

Oral Presentations (Rarely Needed) 

While OAC may allow oral presentations, they are almost never required and rarely recommended unless the facts are unusually complex or sensitive. Most cases are resolved entirely on the written record. 

When OAC Takes Action & What Happens After You File 

Once OAC receives your VSD, it evaluates the submission under the criteria in Supplement No. 2 to Part 766 of the EAR. During this process, OAC transmits all contents of the VSD to the Bureau of Industry and Security (BIS), which is the agency that ultimately makes penalty determinations in the settlement of administrative enforcement cases. The factors influencing BIS’ decisions include: i) the nature and degree of seriousness of the violation; ii) whether the violation was intentional, iii) the company’s compliance history; iv) the quality and completeness of the VSD; and v) whether remedial actions taken.  

Typically, in cases that do not involve knowing violations, BIS will seek a settlement for payment of a civil penalty (unless the matter is resolved with a warning letter – explained below). However, in cases involving knowing violations, conscious disregard of the antiboycott provisions, or other such serious violations, BIS is more likely to seek a denial of export privileges or an exclusion from practice, and/or a greater monetary penalty, as BIS considers such violations particularly egregious.  

While the “seriousness” of the violation is staggered into three categories – A (the most serious), B, and C – BIS is not obligated to follow the penalties respective to each. Meaning, BIS could determinethat the violation was only a Category B offense, but impose Category A penalties (i.e., large monetary penalties, or revocation of export privileges) because the company failed to adequately mitigate past offenses or prevent future incidents. 

Mitigation Impact: Why a VSD Matters 

A properly filed VSD can significantly reduce penalties. In many cases, a VSD can mean the difference between a civil penalty and a warning—or even no action at all. 

BIS also recognizes other non-VSD actions as mitigating factors to a boycott-related penalty: an effective compliance program, limited business with or within boycotted or boycotting countries, history of compliance with the antiboycott provisions, cooperation with the investigation, clarity of request to furnish prohibited information, passive refusal to do business in connection with the agreement, and isolated occurrence of violations.  

Possible Outcomes 

While OAC does not publish comprehensive statistics, historical enforcement trends provide insight into the range of outcomes: 

1. No Action 

• Occurs when the violation is minor, unintentional, and fully remediated. 

• More likely when the VSD is thorough and timely; rarely occurs when alleged violating party does not meet the definition of “US Person.” 

2. Warning Letter 

• Common for first‑time or low‑severity violations. 

• Signals that OAC expects improved compliance but imposes no penalty. 

3. Charging Letter + No Penalty / Settlement 

• OAC may issue a charging letter but agree to settle with no monetary penalty. 

• Often reflects strong cooperation and corrective action. 

4. Charging Letter + Settlement with Penalty 

• Monetary penalties may be imposed, though often significantly mitigated. 

• Penalties can vary widely depending on the severity and number of violations. 

5. Referral to DOJ for Criminal Prosecution 

• Reserved for knowing and willful violations. 

• Extremely rare in the boycott context but possible in egregious cases. 

Final Thoughts: Don’t Navigate This Alone 

A boycott request can put your company at risk for reputational and severe financial harm, even if you never intended to violate U.S. law. The VSD process is a powerful tool—but only when used correctly, strategically, and promptly. 

At Diaz Trade Law, we have extensive experience in helping companies  

• Assess whether a VSD is appropriate 

• Prepare complete, persuasive disclosures 

• Communicate effectively with OAC, and 

• Strengthen compliance programs to prevent future issues 

If you’ve received a boycott request—or think you may have—contact us today before taking action. The earlier you act, the more options you have. 

As recommended by BIS, U.S. companies are encouraged to diligently review transaction documents from all sources, especially those involving these listed parties, to identify possible boycott-related language and to determine whether their recipients have a reporting requirement to BIS.   

If you are unsure whether the language of your contracts must be reported to the OAC or concerned about doing business in jurisdictions where listed entities have been identified, contact Diaz Trade Law today at info@diaztradelaw.com or 305-456-3830.  

Want more information on OAC compliance? Read more here. 

The Advisory follows President Trump’s Executive Order on June 30, 2025, formally removing U.S. sanctions on Syria and directing agencies to take additional measures to encourage U.S. private sector and foreign partner reengagement in Syria.

New Opportunities & Remaining Restrictions

The Advisory outlines what business with Syria is now permissible as well as what restrictions remain.

Permissible Business:

• The United States no longer imposes comprehensive sanctions on Syria. 
• The Caesar Act is suspended, except for sanctionable transactions with Russia and Iran.
• The transfer of most basic civilian use U.S.-origin goods, as well as software and technology, to or within Syria is permitted without a license. 

Remaining Restrictions:

• Sanctions remain on “the worst of the worst:” Bashar al-Assad and his associates, human rights abusers, drug traffickers, and other destabilizing regional actors.
• The U.S. Government continues to review Syria’s State Sponsor of Terrorism (SST) designation. 
• Most Commerce Control List items going to Syria still require a U.S. export license.

What Exporters Should Do

The removal of Syria sanctions and the easing of export-control requirements open up new opportunities for exporters who have avoided the market to comply with U.S. law. However, exporters should proceed with caution and ensure they conduct thorough due diligence before engaging in any business in Syria. 

While sanctions have largely been lifted, certain sanctions remain in effect for individuals and entities related to Bashar al-Assad and his affiliates. Exporters should also be mindful of the historic links between Syrian entities and Iran. Due diligence should address potential sanctions issues with indirect relationships with Iran or Iranian entities. 

Before conducting business with Syria, exporters should consult legal counsel to ensure proper due diligence is conducted. Violations of export control laws carry hefty civil and criminal penalties. Exporters can face steep penalties, lose their export privileges, and even be imprisoned for violating U.S. export control laws. 

A key foundation of proactive and effective export compliance requires the development of an export compliance plan, which establishes procedures for your organization, including how to identify violations and what to do when violations occur. 

Diaz Trade Law helps exporters create export compliance manuals, audit existing compliance plans, and conduct internal compliance training. Get in touch with us today to learn more about how this Advisory may impact your business. 305-456-3830 or info@diaztradelaw.com

Learn more:

• Bloomberg Law: Building & Maintaining an Effective Export Compliance Plan
• Bloomberg Law: Export Licensing Under EAR
• Bloomberg Law: Submitting a Voluntary Self-Disclosure to OFAC
• Webinar: Introduction to Export Controls
• The Importance of Regular Export Compliance Training for Your Business
• ICYMI: President Trump Lifts Syria Sanctions

Heavy-Duty Vehicles and Vehicle Parts

On September 25, 2025, President Trump, via Truth Social, announced his intention to impose a 25% tariff on heavy trucks. On October 17, 2025, he issued a Presidential Proclamation formalizing and clarifying these tariffs. The proclamation imposes a 25% tariff on imports of medium- and heavy-duty trucks and truck parts. This includes Class 3 to Class 8 vehicles, like large pick-up trucks, moving trucks, cargo trucks, dump trucks, and tractors for eighteen-wheelers. 

The Proclamation also imposes a 10% tariff on imports of buses, including school buses, transit buses, and motor coaches. The tariffs are set to take effect on November 1, 2025.

President Trump is imposing the new tariffs under section 232 of the Trade Expansion Act of 1962, citing national security concerns.

If medium and heavy-duty vehicles qualify for USMCA treatment, the importer may submit documentation to identify the amount of U.S. content, and, after the Department of Commerce’s approval, the 25% Section 232 Tariff will only apply to non-U.S. content.  

Timber & Lumber

On September 29, 2025, President Trump issued a proclamation imposing a Section 232 Tariff on timber and lumber and their derivative products. Effective October 14, 2025, timber and lumber are subject to a 10% duty, upholstered wooden products are subject to a 25% duty, and kitchen cabinets and vanities are subject to a 25% duty. 

If no agreement can be reached between the U.S. and foreign governments, beginning January 1, 2026, the duty for upholstered wooden products and kitchen cabinets and vanities will increase to  30% and 50%, respectively.  

The proclamation specifically included that goods subject to (1) IEEPA reciprocal tariffs, (2) IEEPA additional tariff on Brazil, and (3) IEEPA Russian oil tariff are not subject to this Section 232 Tariff. Unlike the other Section 232 Tariffs, duty drawback is available for this tariff.  

232 Exclusions – Steel & Aluminum

On October 7, the Bureau of Industry and Security  (BIS) of the U.S. Department of Commerce released 95 inclusion requests for the Section 232 Tariff on Steel and Aluminum and their Derivative Products. Interested parties filed the inclusion requests in response to BIS’s Notice of the Opening of the Section 232 Inclusions Process published on September 17, 2025. 

The release of the 95 inclusion requests started a two-week comment period for the potential inclusions that closed October 21, 2025. BIS will now consider the comments filed and make a final determination in the coming weeks. During the last inclusion process, BIS added 407 of the 467 requested HTS to the Section 232 Tariff on Steel and Aluminum.  

Vessel Fees

On October 3, 2025, CBP published guidance implementing the Section 301 Investigation of China’s Targeting the Maritime, Logistics, and Shipbuilding Sectors, which was published on April 12, 2025, and amended on June 12, 2025. This Section 301 Investigation imposes new fees for vessels owned, operated, or built in China and for all foreign-built vehicle carrier vessels. 

Service fees on Chinese vessel operators and owners began on October 14, 2025, at $50 per net ton. There will be three subsequent fee increases: $80 beginning April 17, 2026; $110 beginning April 17, 2027; and $140 beginning April 17, 2028.

The fee will be charged up to five times per year, per vessel. 

CBP noted that the determination of whether the new fees apply to a vessel relies on the operator, not CBP.  

Tariffs and import, and export regulations are changing overnight, literally! Diaz Trade Law can help you keep up. For assistance in understanding how these tariffs may impact your business, get in touch with us today at 305-456-3830 or info@diaztradelaw.com.

Learn more:

• Courts Say Trump Tariffs are Unlawful, Now What?
• Bloomberg Law: Tariff Classification Basics
• ICYMI: Trump Administration Imposes 25% Steel and Aluminum Tariff
• ICYMI: President Trump Signs America First Trade Policy
• Trump Administration Announces Plan for Reciprocal Tariffs
• New Tariffs on Mexico, Canada, and China: Key Updates for Importers
• Navigating Tariff Increases: Strategies to Minimize Tariff Costs Under the Trump Administration
• Webinar: Navigating Tariff Challenges: Mitigation Tools & Tactics
• Breaking Trade News: 10% Tariff, NTE Report, CIT Settlement
• Trump Administration Announces Reciprocal Tariffs
• The Latest on Tariffs, Key Information for Importers – Automobile and Venezuela Oil Update

On September 30, 2025, the Bureau of Industry and Security (BIS) released an interim rule regarding “Affiliates.” Under the rule, any entity that is at least 50% owned by one or more entities on the Entity List or the Military End-User (MEU) List will itself automatically be subject to Entity List/MEU restrictions. This is a significant change from the current standard, which excludes entities that are not specifically included on the Entity List or MEU List, regardless of any affiliation with Entity List or MEU List organizations. 

This rule is effective September 29, 2025.

Entity, MEU List Background

The Entity List identifies persons (including businesses, research institutions, government and private organizations, individuals, and other types of legal persons) reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States. These persons are subject to specific license requirements for the export, reexport, and/or transfer (in-country) of specified items.  

BIS first published the Entity List in 1997. Since its initial publication, grounds for inclusion on the Entity List have expanded to activities sanctioned by the State Department and activities contrary to U.S. national security and/or foreign policy interests.

The current Entity List can be found in Supplement No. 4 to Part 744 of the Export Administration Regulations (EAR) here.

Military End-User List is a list of foreign entities, including military services, intelligence organizations, and other entities supporting military uses, for which a license is required to export, reexport, or transfer U.S. goods and technology.

The current MEU list can be found in Supplement No. 7 to Part 744 of the EAR here.

The New Affiliates Rule

The new rule aims to crack down on listed parties acquiring U.S. goods through unlisted subsidiaries. The rule follows the same parameters as the Office of Foreign Assets Control’s (OFAC) 50% rule. Both direct and indirect ownership count toward the 50% threshold. In addition, the threshold applies in the aggregate; if an entity has multiple parent companies on the Entity List or MEU List, the ownership stakes will be added together. 

Red Flag 29

In addition to establishing the 50% affiliate threshold, the rule also establishes a new red flag. Going forward, if an exporter knows that a foreign entity is owned in part by listed parties, they must determine the ownership percentage. Where ownership cannot be verified, exporters have an affirmative duty to secure a BIS license before moving forward with a transaction.

Impact

According to a recent analysis by Kharon, the rule will cover thousands of additional subsidiaries. Russia and China account for the majority of these new subsidiaries. However, entities in the EU, UK, Singapore, Australia, and India will also be impacted. 

Exporters will face immediate restrictions or licensing as a result of this rule and have significant new due diligence and compliance obligations. 

In the notice, BIS emphasized that the new rule creates an “affirmative duty” to determine the ownership of parties in a transaction. Many exporters will need to develop new ownership screening to comply with this requirement.

A key foundation of proactive and effective export compliance requires the development of an export compliance plan. Diaz Trade Law can help exporters develop and refine their compliance plans to minimize the risk of violations. We assist with export compliance training, transaction vetting, requesting licensing, voluntary self-disclosures, and more. Get in touch with us today to learn more about how these new requirements may impact your business – 305-456-3830 or info@diaztradelaw.com.

Read more:

• Webinar: Introduction to Export Controls 
• The Importance of Regular Export Compliance Training for Your Business
• Bloomberg Law: Submitting Voluntary Self-Disclosures to Bureau of Industry & Security
• Bloomberg Law: Building & Maintaining an Export Compliance Plan
• Bloomberg Law: Export Licensing Under EAR
• Bloomberg Law: Introduction to U.S. Export Controls

As part of the plea agreement, Cadence will pay criminal penalties of nearly $118 million. 

In addition to the charges, the Department of Commerce’s Bureau of Industry and Security (BIS) also announced the resolution of a civil enforcement action against the company in which Cadence agreed to pay over $95 million in civil penalties. 

The DoJ and BIS have coordinated the resolution of the parallel investigation, and each agreed to a partial credit against their fine for payments made to satisfy the other agency’s fine. Under the coordinated agreement, Cadence will pay criminal and civil penalties of more than $140 million.

Cadence committed criminal violations of the export control laws by selling hardware, software, and semiconductor design intellectual property to the National University of Defense Technology (NUDT) in China. NUDT was added to the Department of Commerce’s Entity List in February 2015. The university was involved in the development of supercomputers with applications for military and nuclear explosive simulations. 

Cadence and its Chinese subsidiary engaged in a conspiracy to commit export control violations by exporting this technology to NUDT without obtaining the requisite licenses from BIS. 

Court documents reveal that Cadence continued exporting software even after acknowledging via email that NUDT had been added to the Entity List.

In negotiating the plea agreement, the DoJ considered that Cadence was cooperative when the investigation commenced, but also noted the company’s failure to voluntarily disclose the misconduct to NSD. Accordingly, the amount of the monetary penalty reflects a 20% reduction of the statutory maximum fine.

​​This case demonstrates the government’s priority in enforcing export controls and the importance of prioritizing compliance programs.

Diaz Trade Law can help create a new export compliance plan for your business or review and update an existing one. To learn more about how we can help, contact us at info@diaztradelaw.com or call us at 305-456-3830.

Read more:

• The Importance of Regular Export Compliance Training for Your Business
• Building a Strong Export Compliance Plan
• Building & Maintaining an Effective Export Compliance Plan
• Introduction to Export Controls
• ICYMI: State Department Reaches $200M Settlement with RTX Corporation for Export Violations

The Federal register notices are available here (UAS) and here (polysilicon).

BIS is specifically interested in the following information:

1. The current and projected demand for these products and the extent to which domestic production can meet this demand
2. The role of foreign supply chains, particularly of major exporters, in meeting United States demand 
3. The concentration of U.S. imports from a small number of suppliers and the associated risks
4. The impact of foreign government subsidies and predatory trade practices 
5. The economic impact of artificially suppressed prices due to foreign unfair trade practices and state-sponsored overproduction
6. The potential for export restrictions by foreign nations
7. The feasibility of increasing domestic capacity to reduce import reliance
8. The impact of current trade policies on domestic production and whether additional measures, including tariffs or quotas, are necessary to protect national security

The deadline to submit comments is August 6, 2025.

The investigations could result in new trade restrictions, including tariffs. If you import products covered under these investigations, make your voice heard by filing a comment.

Contact Diaz Trade Law for assistance in drafting comments and for help in determining how these investigations may impact your business. 

Learn more:

• BIS Releases New Edition of “Don’t Let This Happen to You”
• BIS Issues Final Rule on VSD Policies and Penalty Guidelines
• BIS Issues Guidance to Financial Institutions on Best Practices for Compliance with the Export Administration Regulations
• ICYMI: BIS Updates Boycott Requester List

What Are the U.S. Antiboycott Laws?

“Anti-boycott” refers to U.S. laws and regulations that discourage and, in certain cases, prohibit U.S. persons from participating in unsanctioned foreign boycotts, particularly those targeting countries friendly to the United States.

BIS is charged with administering and enforcing this policy under the Anti-Boycott Act of 2018, the Export Control Reform Act of 2018, and the Export Administration Regulations.

The antiboycott laws aim to prevent U.S. persons from advancing foreign policies of other nations that run counter to U.S. policy.

Prohibited Antiboycott Activities Under the EAR

Part 760 of the EAR specifies prohibited antiboycott activities including:

• Refusals or agreements to refuse to do business with or in a boycotted country or with blacklisted companies.
• Discrimination or agreements to discriminate against a U.S. person based on race, religion, sex, or national origin.
• Furnishing information or agreements to furnish information about business relationships with or in a boycotted country or with blacklisted companies.
• Furnishing information or agreements to furnish information about the race, religion, sex, or national origin of a U.S. person.
• Implementation of letters of credit containing prohibited boycott terms or conditions.
• Taking actions with the intent to evade Part 760 of the EAR.

Required Reporting        

Section 760.5 of the EAR requires U.S. persons to report receipts of boycott requests and requests they have received to take certain actions to comply with, further, or support an unsanctioned foreign boycott. Reports may be filed electronically or by mail, but they must be postmarked or electronically date-stamped by the last day of the month following the calendar quarter in which the underlying request was received.

Boycott Requestor List

BIS regularly updates and publishes a Boycott Requester List to assist U.S. persons in fulfilling the reporting requirements of the antiboycott regulations. The list also aims to raise awareness regarding certain sources of boycott-related requests. Entities on the list have been reported to BIS on a boycott request report form as having made a boycott-related request in connection with a transaction in the interstate or foreign commerce of the United States. The list is updated quarterly.

A party’s inclusion on the Requester List does not mean that U.S. persons are restricted from dealing with the listed party. Rather, U.S. persons are on notice that the listed party is more likely to make reportable boycott-related requests.

Getting Removed from the Boycott Requestor List

Exporters and other businesses rely on the Boycott Requestor list to inform their compliance efforts. Thus, any company that ends up on the list is likely to have its operations severely impacted. Since BIS relies on reports to maintain the list, inadvertent inclusion can and does happen.

To date, BIS has not established a formal process for list removal and routinely removes entities from the list. BIS directs entities who believe they have been included in error to contact the Office of Antiboycott Compliance (OAC) directly. While entities should conduct an internal investigation to determine what conduct may have resulted in a report, in some cases, entities may need to file a Freedom of Information Request to uncover the reason for the report.

Penalties

The Export Control Reform Act specifies both criminal and administrative penalties for violations of the Anti-Boycott Act of 2018.

BIS may impose the following administrative penalties:

• A monetary penalty in the amount of the greater of approximately $300,000 per violation or twice the value of the underlying transaction;
• Denial of export privileges; and/or
• Revocation of any BIS export licenses.

For violations that occurred prior to August 13, 2018, penalties may be imposed under the International Emergency Economic Powers Act (IEEPA). The maximum monetary penalty under IEEPA for each violation is the greater of $307,922 per violation or twice the value of the transaction that forms the basis of the violation.

The U.S. Government may impose the following criminal penalties:

• Up to $1 million on individuals or companies for a criminal antiboycott violation.
• Individuals may additionally (or alternatively) face up to 20 years of imprisonment.

Voluntary Self-Disclosures

BIS encourages U.S. persons to file a voluntary self-disclosure (VSD) if they believe they may have violated the antiboycott laws. Section 764.8 of the EAR sets out procedures for filing a disclosure including the timing of filing, the contents of the initial notification of a VSD, the subsequent narrative account of the violation(s), and certification of any representations made in connection with the VSD. The provision also describes supporting documentation that should accompany a VSD filing.

After receipt and review of the disclosure, OAC will inform the filing party of any action it intends to take. Before filing a VSD it is critical to seek legal counsel to ensure filing is the best course of action and that your disclosure properly captures the nature of the violation(s).

Looking Ahead: BIS Enforcement

laIn late 2022 the agency announced a renewed focus on enforcement that includes higher penalties. Since then, BIS has issued several updates to its antiboycott enforcement policies and procedures including the establishment of the Boycott Requestor List and a July 2023 memo strengthening antiboycott reporting measures.

Companies of all sizes should ensure they have compliance processes in place to detect boycott requests and avoid any activity that furthers a boycott.

Questions about antiboycott compliance? Diaz Trade Law can help. Call 305-456-3830 or email info@diaztradelaw.com

Learn more:

• Submitting Voluntary Self-Disclosures to Bureau of Industry & Security
• ICYMI: BIS Updates Boycott Requester List
• BIS Releases New Edition of “Don’t Let This Happen to You”
• BIS Issues Final Rule on VSD Policies and Penalty Guidelines

The guidance provides recommendations on steps financial institutions can take to minimize the likelihood of EAR violations. The recommendations focus on three key areas: due diligence best practices, reviewing transactions for red flags, and real-time screening.

Due Diligence Best Practices

The guidance recommends that financial institutions incorporate EAR related due diligence into their compliance and risk management and compliance processes. Due diligence should be conducted both before onboarding a new customer and as part of regular due diligence thereafter.

Specifically, BIS recommends that financial institutions:

• Review customers against lists of persons subject to BIS’s end-user restrictions
• Review customers – and, where appropriate, customers’ customers – against lists of entities that have shipped Common High Priority List (CHPL) items to Russia since 2023
• Ask a customer to certify that it has controls in place to comply with the EAR if the customer is engaged in the export, reexport or transfer of items subject to the EAR and is on a restricted-party list

Review Transactions for Red Flags

The guidance recommends that financial institutions review transactions on an ongoing basis for red flags:

• Purchases under a letter of credit that are consigned to the issuing bank, not to the actual end user.
• Transactions involving entities with little to no web presence, such as a website or a domain based email account.
• A customer lacks or refuses to provide details to banks, shippers, or third parties.
• Transactions involving customers with phone numbers with country codes that do not match the destination country.
• The item does not fit the purchaser’s line of business.

See the full list of red flags here.

BIS recommends that in addition to monitoring for red flags, financial institutions should have processes in place to take action to prevent violations of the EAR before proceeding with any transactions involving the customer.

Real-Time Screening

While BIS does not expect financial institutions to engage in real-time screening of all transactions, BIS recommends real-time screening against certain BIS-administered restricted party lists in certain circumstances to avoid potential violations.

BIS recommends real-time screening against the names and addresses on the following lists:

• The BIS Denied Persons List
• Certain persons designated on the Entity List (ex. Entities subject to the Entity List Foreign Direct Product (FDP) rule)
• Other persons included on the Entity List and subject to the license review policy set forth in 15 CFR 744 (nuclear end uses, rocket systems, unmanned aerial vehicles, and chemical and biological weapons end-uses)

In circumstances where there is a match to a party on one of the lists set forth above, BIS recommends that financial institutions decline to proceed with a transaction until the institution can confirm that the underlying export, reexport, or transfer is authorized under the EAR or not subject to the EAR.

Incorporate these Guidelines Into Your Export Compliance Plan

Violations of the EAR carry hefty civil and criminal penalties. Exporters can pay hundreds of thousands of dollars in penalties, lose export privileges, and even be imprisoned. Fortunately, there is a lot you can do to be proactive about your export compliance. Diaz Trade Law can provide assistance with a number of EAR-related matters including developing a compliance plan, export compliance training, transaction vetting, voluntary self-disclosures, and more.

Learn more:

• Bloomberg Law: Submitting Voluntary Self-Disclosures to Bureau of Industry & Security
• Bloomberg Law: Building & Maintaining an Export Compliance Plan
• Bloomberg Law: Export Licensing Under EAR
• Bloomberg Law: Bloomberg Law – Introduction to U.S. Export Controls
• Webinar: Building and Maintaining an Effective Export Compliance Plan
• Webinar: Introduction to Export Controls

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.

Learn more:

• Bloomberg Law: BIS Regulatory Updates: 2023 Significant Changes
• Bloomberg Law: Significant Updates to BIS Enforcement Policies in 2022
• Bloomberg Law: Voluntary Self-Disclosures: Recent Guidance From BIS, OFAC & DOJ
• Bloomberg Law: Submitting Voluntary Self-Disclosures to Bureau of Industry & Security
• Webinar: Building and Maintaining an Effective Export Compliance Plan
• Webinar: ACE: Auditing Your Export History
• Webinar: Introduction to Export Controls