BIS Ramps Up Antiboycott Enforcement Efforts
Alexander J. Cotoia currently serves as the Regulatory Compliance Manager at The Volkov Law Group, where he regularly advises the firm and its clients on the latest developments implicating trade compliance concerns. He may be reached at [email protected].
On November 3, 2023, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) announced that a settlement had been reached with Forta —a domestic synthetic fiber manufacturer—for its conduct in agreeing to a boycott of the State of Israel.
According to a BIS press release, Forta was fined approximately $45,000 after that entity violated anti-boycott regulations on several occasions in 2019, when it certified that “no labor, capital, parts or raw material of Israeli origin [were] used in the printing, publishing or manufacture of [the] goods” being transported to the United Arab Emirates (“UAE”). At the crux of the Forta case was a commercial invoice and packing slip, which contained the illegal stipulation in question. The BIS press release further indicated that the goods were under transport to the UAE for display at a trade show in Abu Dhabi at the time the violations occurred. In addition to agreeing to the boycott terms, Forta wholly failed to disclose that it had received a request to agree to the terms at issue, when such reporting is mandated by current anti-boycott regulations.
While the monetary penalty assessed in this instance was de minimis, it is notable that Forta agreed that it had violated the regulations at issue in the administrative enforcement action. While companies may have been able to avoid such stipulations in the past, current enforcement guidelines promulgated by BIS’s Office of Enforcement under the leadership of Matthew Axelrod definitively preclude the possibility that “no admit, no-deny” settlements can be reached. Thus, to even qualify for the leniency often implicated in administrative settlements of this nature, entities like Forta must now concede that the violations actually occurred and accept responsibility for those violations.
The fine assessed by BIS against Forta must be paid within thirty days from November 3, 2023. Should Forta fail to tender the pecuniary penalty in question, it faces the possibility of having its export privileges revoked for a period of one year. Since a substantial portion of Forta’s commercial activity is predicated on such export privileges being maintained, it is very likely that Forta would suffer substantial losses during the one-year suspension period.
As we have noted extensively in the context of prior blog posts, companies must take their anti-boycott responsibilities seriously. In the wake of the attack on Israeli civilians by Hamas, we expect to see violations of anti-boycott regulations being even more vigorously pursued. To adapt to this reality, companies are expected to account for boycott risks by integrating such considerations into the very fabric of their export compliance programs. Accompanying such efforts is also requirement that companies engage in continuous training of personnel most likely to encounter such requests in the first instance (e.g., front-line personnel engaged in sales and logistics activity). In addition to accounting for boycott risks, individuals responsible for the administration of a company’s export compliance program should acquaint themselves with BIS’s reporting requirement. Finally, it goes without saying that any violations discovered by a company must be reported to BIS under the voluntary self-disclosure framework. While companies may not be able to avoid the assessment of monetary penalties—as was the case with Forta—prompt disclosure and remediation efforts are likely to serve as mitigating factors that will substantially reduce the amount ultimately owed.