BRI and OEE Set New Export Law Enforcement Guidelines – There’s a New Sheriff in Town – International Law
After six years, the Bureau of Industry and Security (BIS) has a Senate-confirmed Assistant Secretary for Export Enforcement, Matthew S. Axelrod. In a recent fireside chat hosted by the Silverado Policy Accelerator, Mr. Axelrod shared extensive insights into the direction of the Bureau of Industry and Security (BIS) priorities and what trade can expect from the Office of Export Enforcement (OEE) in the years to come. year. Of particular interest is a planned review of the administrative application and self-disclosure program. The last time a review took place was in 2016, which brought BIS procedures more closely into line with those of the Department of Justice (DOJ), Axelrod’s former agency.
The BRI carries out all export transactions of dual-use goods abroad, which totaled 32 million last year. Its 400-member team is divided into two offices – OEE with 170 employees and Office of Export Administration (OEA) with 230 employees. Given the disparity between staff size and trading volume, a strategic approach to enforcement is imperative.
Driven by this strategic focus, Mr. Axelrod described the OEE’s main priorities in terms of the three Ps – profile, partnerships and priority implementation. Let’s take a look at each of them and their potential impact on the global trading community.
Mr Axelrod described the work of the OEE “as the secret weapon of national security”, but he wishes it weren’t so secret. By raising the visibility of the agencies’ global profile, he believes the work of staff can “have a powerful deterrent effect”.
The planned review includes an analysis of the resolution structure of the administrative enforcement process that includes settlements without admission or denial. Tighter limits on the use of these no-entry regulations are thought to discourage bad behavior and increase accountability for wrongdoing. The BIS is not the only government agency to reassess the value of no-entry agreements. For example, the Securities and Exchange Commission (SEC) announced in October 2021 that it planned to make it harder for companies and individuals to settle allegations of wrongdoing without an admission of guilt. While the spectacle of a public admission may deter some violations, opponents suggest it could increase the number of cases going to court because admitting wrongdoing would make the settlement less palatable to many, especially those named separate from their society. Currently, the BIS press release announcing a settlement agreement includes a full description of the alleged violations and links to the full agreement and proposed or actual charge letter. According to Axelrod, there have been 22 administrative settlements since the start of the Biden administration.
With 170 people in the OEE, force multiplication becomes particularly important, leading to key strategic partnerships. Mr. Axelrod highlighted a few key groups with which the OEE partners, including industry, academia and foreign law enforcement counterparts. However, partners such as the Federal Bureau of Investigation (FBI), Homeland Security Investigations (HSI), Customs and Border Protection (CBP), Alcohol, Tobacco, Firearms, and Explosives (ATFE), and the Department of Justice (DOJ). In addition to increasing the OEE’s reach, these partnerships can help focus the organization’s law enforcement efforts. A second area slated for internal review is the use of administrative resolutions in conjunction with criminal resolutions by the DOJ. While many violations are handled through the OEE’s administrative resolution process, export violations carry civil and criminal penalties and involve multiple agencies. For example, in 2017, ZTE Corporation settled a series of export violations with the BIS and the Office of Foreign Asset Control (OFAC). The overall settlement involved pleading guilty to three criminal charges, including a fine of more than $286 million and criminal forfeiture of more than $143 million. His civil settlement with the BIS and OFAC amounted to $761 million. Although some of the conditions and fines were suspended, ZTE was subject to continued conditions to retain export privileges.
The third area of focus in the coming year is priority enforcement. Mr. Axelrod has shared more than once that the primary function of BIS is to keep American technology out of the wrong hands. Axelrod’s interview took place on February 24, 2022, coinciding with the day Russia invaded Ukraine, making Russia an “obvious” priority. The agency continues to focus on Chinese companies. A third area of review in support of this priority is how the OEE calculates penalties for items that would harm national security, even if they are of low value, with a view to expanding those penalties. . Low-value shipments have traditionally received less scrutiny, opening up the possibility for national security-regulated items to fly under the radar. With this announcement, Mr. Axelrod shares the agency’s recognition that national security threats, regardless of their value, warrant closer scrutiny and a higher level of enforcement.
Finally, to partner with industry and free up resources, the agency will consider ways to streamline the voluntary self-disclosure process. Mr. Axelrod shared that last year BIS had 400 voluntary self-disclosures. Of these, only three had some type of administrative sanction and none were criminal. When companies voluntarily self-disclose, they relieve the BRI of the task of finding and investigating violations. They further demonstrate their intent to comply with regulations by creating opportunities for positive, less costly and less visible resolution. One of the objectives of this mechanism is to deal with minor technical errors and focus on the most serious shortcomings while encouraging companies to self-report more quickly.
In summary, Mr. Axelrod said: “We have not yet defined how we are going to proceed [the administrative reviews]. I don’t have the actual policy to deploy. But I think it’s important for the industry and for the bar to know that these are things that we’re looking at. And so, you know, the way things have worked in the past is not necessarily how they’re going to work in the future when we do the reviews.”
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