On April 18, the Bureau of Industry and Security (BIS) clarified two enforcement policies in a further attempt to incentivize voluntary self-disclosures and disclosures about others’ possible violations of the Export Administration Regulations (EAR). The announcement follows changes announced last June to strengthen BIS’s administrative enforcement of the EAR.
Failing to self-disclose significant possible violations will now be an aggravating factor
BIS’s existing settlement guidelines already incentivize companies to voluntary self-disclose possible violations of the EAR by substantially reducing the potential civil penalty. Moving forward, BIS will also consider “deliberate non-disclosure of significant possible violations”—not just minor or technical violations—to be an aggravating factor when assessing potential penalties. The new policy is intended to impact companies’ risk calculus when determining whether to submit a voluntary disclosure.
Disclosing others’ possible violations can benefit a company in the future
To incentivize companies to come forward when they are aware of others who may be violating the EAR, BIS clarified that tips leading to enforcement actions will be considered “exceptional cooperation” (a mitigating factor) if the reporting party is later involved in an enforcement action. The future enforcement action against the reporting party does not need to be related to the tip for the company to receive mitigation credit. There also does not appear to be a requirement that the tip and future enforcement action occur close in time.