BIS Announces Further Enhancements to Voluntary Self-Disclosure Process
By: Alexander Cotoia (Regulatory Compliance Manager) and Daniela Melendez (Associate) of The Volkov Law Group
On January 16, 2024, the U.S Department of Commerce’s Bureau of Industry and Security (“BIS”) released a series of enhancements to its existing voluntary self disclosure (“VSD”) program, pursuant to which organizations culpable of only technical violations of the Export Administration Regulations (“EAR”) are entitled to access a proverbial “fast track” for administrative processing purposes. The new enhancements—announced by Assistant Secretary for Export Enforcement Matthew S. Axelrod during an appearance at NYU School of Law’s Program on Corporate Compliance and Enforcement—are primarily intended to assist both industry and BIS in focusing on the most serious export violations, while providing organizations with a convenient means of disposing of less serious offenses.
As a preliminary matter, the new policy enhancements strongly encourage organizations to avail themselves of the opportunity to submit voluntary self disclosures (“VSDs”) electronically utilizing BIS’s VSD intake email address of [email protected]. For VSDs that implicate only “minor infractions” of the EAR—including but not limited to, violations that involve “good faith misinterpretation” of the underlying regulations and/or administrative errors such as the failure to check the appropriate box on a form—an organization may now leverage BIS’s abbreviated disclosure protocol.
Under this protocol, an organization that is aware of minor infractions only—that is, violations that do not involve the disclosure of aggravating factors—are entitled to submit an abbreviated form of disclosure to the Office of Export Enforcement (“OEE”) that contains the following information: (1) the kind of violation(s) involved; (2) when and how the violation(s) occurred; (3) the full identities and addresses of all parties involved in the activities giving rise to the violation(s); (4) license numbers; (5) description, quantity, value in USD, and ECCN or other classification of the commodities involved; and (6) an explanation as to the existence of any mitigating circumstances. Crucially, the new enhancements also permit an entity to disclose multiple minor violations in the context of a single VSD, provided the events “occurred close in time.” Conspicuously absent from the abbreviated disclosure requirements is the submission of supporting documentation as required by 15 CFR § 764.5(c)(4). Finally, the enhancements make clear that parties submitting an abbreviated disclosure involving minor EAR infractions only are not required to conduct a five-year lookback into all relevant export transactions. BIS has committed to processing all abbreviated disclosures within sixty (60) days of receipt.
In addition, the policy enhancements clarify and simplify the manner in which BIS handles requests to take “corrective action” for commodities that have been unlawfully exported in the first instance. In recognition of the fact that entities seeking to take corrective action are motivated by compliance with export regulations, BIS has now authorized parties seeking special permission to engage in otherwise prohibited activities to make both a formal submission to the Office of Exporter Services (“OES”) and to supplement that submission with notice to OEE. The policy enhancements make it clear that OEE and OES will expedite the review and analysis of the request to ensure that illegally exported commodities are promptly “placed back into the lawful stream of commerce.” Additionally, the policy enhancements entitle any party—not just the entity responsible for making a VSD—to notify the OEE director that a violation has occurred and to request special permission from OES to engage in otherwise prohibited export activities. Finally, under BIS’s new approach to corrective action requests, a party seeking to return an unlawfully exported item to the United States is entitled to a presumption that BIS will grant that request.
The latest policy changes come as BIS grapples with an influx of VSDs stemming from a more aggressive enforcement posture that accompanied Assistant Secretary Axelrod’s arrival at the Commerce Department in late 2021. Collectively, these new policy enhancements are designed to encourage industry to continue making disclosures liberally, while prioritizing the most significant disclosures for investigation and administrative action. Accordingly, organizations involved in the export of any EAR-controlled commodities abroad should continue to make VSDs where any doubt exists as to whether a violation actually occurred—safe in the knowledge that all such disclosures ultimately benefit the organization from a compliance perspective.