Export Control Agency Enforcement and Agency .Export Control Agency Enforcement and Agency Visits

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  • Export Control Agency

    Enforcement and

    Agency Visits

    August 7, 2017

    Olga Torres, Managing Member

    Torres Law, PLLC

  • Agenda

    Overview of Export Agencies

    Enforcement After ECR

    Enforcement Penalties, Trends & Cases

    Outreach Visits

    Visit Preparation

  • Export Control Agency Overview

  • Export Agency Enforcement BIS: Office of Export Enforcement (OEE)

    Works with DOJ and BIS Chief Counsel to prosecute criminal and

    administrative cases

    DDTC

    No formal enforcement branch similar to BIS OEE

    Office of Defense Trade Controls Compliance (DTCC)

    adjudicates administrative enforcement cases

    ICE: Homeland Security Investigations (HSI)

    Enforces domestic and international criminal violations of the EAR

    and ITAR

    OFAC

    No formal enforcement branch

    Coordinates with various other agencies, including FBI, CBP, HSI,

    OEE and others

  • Challenges of Export

    Enforcement

  • ECR: A Mixed-Bag for

    Enforcement

    oClearer, more positive

    lists usually simplify the

    jurisdiction determination

    process

    oBetter coordination

    between different export

    agencies (E2C2)

    oConsolidated screening

    list

    oNew definition of

    specially designed

    oIncreased responsibility

    without equivalent

    increase in resources

    oMultiple regulatory

    revisions to keep up with

  • E2C2 As part of ECR, the Obama administration established

    the Export Enforcement Coordination Center, also called

    E2C2.

    Promotes collaboration between the different government

    agencies

    Housed within ICEs Homeland Security Investigations (HSI).

    Representation from eight U.S. departments and 15 federal

    agencies

    About 52% of cases handled by E2C2 were found to have

    existing cases or information residing with another agency.

  • DDTC & ECR

    Since 2013, disclosures to DDTC have decreased each

    year. A driving factor of this decrease has been the

    removal of thousands of items from DDTC jurisdiction.

  • BIS & ECR While DDTCs jurisdiction has

    decreased, BIS has seen an

    increased workload since the

    beginning of the ECR initiative.

    Preliminary findings indicate that

    BIS staff levels are not in line with

    growth in export license applications

    and enforcement activities. Despite

    the extraordinary commitment and

    tireless effort of our employees, we

    have reached the tipping point.

    Penny Pritzker, former

    Secretary of Commerce

  • ECR & Enforcement

    Even if your items have shifted from control under the

    ITAR to EAR-control, you should not assume that BIS is

    more lenient, or forgiving than the DDTC.

    Historically, BIS is more likely than DDTC to penalize

    exporters, even in voluntary self-disclosure (VSD)

    situations. Although BIS offers significant mitigation from

    VSDs, disclosures can take months to resolve and are

    more likely than DDTC disclosures to result in a

    monetary fine.

  • Penalties for Export Violations

  • BIS & DDTC Civil Enforcement

  • VSDs

  • DOJ Guidance

    On October 2, 2016 the

    Department of Justice published

    its Guidance Regarding

    Voluntary Self-Disclosures

    The Guidance states that a top

    priority of the DOJ will be to

    pursue willful export control

    and sanctions violations by

    corporate entities and their

    employees

    Explicitly implements the 2015

    Yates Memo, which

    emphasizes enforcement

    against corporate individuals

  • Mitigating/Aggravating

  • Increased Cooperation Between

    Agencies

    ZTE Settlement (BIS/OFAC/DOJ)

    March 7, 2017

    Chinese telecom company sold

    equipment containing American

    technology/hardware to sanctioned

    countries (Iran & North Korea)

    BIS Settlement: $661 million ($300

    million suspended during 7-year

    probation)

    OFAC Settlement: $100,871,266

    DOJ Fines & Forfeiture:

    $460,488,798

  • Government Visits

    We now know how the enforcement

    agencies generally operate, but what if they

    show up at your business

  • OEE Visits Visit v. Inquiry

    When you ask OEE to your office its a

    visit

    When OEE arrives at your door its an

    inquiry

    Selection Criteria

    Recent focus on companies that have not

    previously submitted applications for

    actual or deemed export licenses

    Document Requests

    OEE may make requests for documents,

    including internal audits or freight

    forwarder, shipper and ultimate consignee

    records

    743 OEE outreach visits in FY 2016

  • Negative Consequences

    Knowledge component

    Sometimes the fact that a

    company has received an

    OEE outreach visit can be

    used as evidence of

    knowledge of the

    unlawfulness of activity

    subject to an administrative

    or criminal case

    Discovery of violations

    Not always clear how BIS

    addresses violations

    discovered during OEE visits

  • EMCD Visits

    BIS Office of Exporter Services

    Export Management and Compliance

    Division (EMCD) has also conducted

    visits for the past 1-2 years

    Selection Criteria:

    1. EMCD initiates reviews of Automated

    Export System (AES) records to

    confirm compliance with export

    requirements

    2. EMCD meets with parties with AES filing

    errors and others of interest, without

    giving an explanation of what would

    make an exporter of interest

    40 EMCD visits in FY 2016

  • DDTC Company Visit Program

    (CVP) Two Types of visits:

    CVP-Compliance (CVP-C)

    CVP-Outreach (CVP-O)

    Visits to entities registered with DDTC Defense article manufacturers

    Exporters of defense articles and defense

    services

    Brokers under ITAR 129

    Foreign Military Sales (FMS) freight

    forwarders

    Administered by Defense Trade

    Controls Compliance (DTCC)

  • CVP-Compliance Visits

    CVP-C visits are designed for

    oversight activities, especially as a

    manner of monitoring Consent

    Agreements.

    Also review compliance programs in

    the context of:

    Adjudication of voluntary self-disclosure,

    Adjudication of directed disclosure, or

    Other compliance matters.

    More in-depth look at companys

    compliance program than CVP-

    Outreach visits.

  • CVP-Outreach Visits

    CVP-O visits provide

    opportunity for:

    Discussing challenges,

    Learning how industry is adapting

    to Export Control Reform and

    other compliance changes, and

    Offering suggestions or best

    practices.

    CVP-O visits are unrelated to

    specific compliance matters.

  • Visit Summary 2015-2016

  • CVP Selection Criteria

    A variety of factors are taken into account when DDTC

    selects a company to be visited, including:

    1. Type and sensitivity of technology

    2. Nature of business

    3. Volume of licensed/regulated activity

    4. Experience conducting ITAR activities

    5. Geographic location (and other DDTC travel requirements)

    6. Recommendations from DTCP and DTCL

    7. Follow-up to a disclosure of an ITAR violation (for CVP-C)

    8. Monitoring of a consent agreement (for CVP-C)

  • DTAG Recommendations

    Defense Trade Advisory Group (DTAG)

    Approached by DDTC to provide recommendations re:

    CVP

    Summary:

    Rename/Distinguish CVP-O

    Consider In-Reach instead

    Market benefits received by visited companies

    Include Licensing and Policy

    Offer collaborative events at DDTC or via web

    Enhance predictability and transparency (e.g., schedule,

    risk)

  • Visit Preparation: Pre-Visit

  • Visit Preparation: During Visit

  • Visit Preparation: Post-Visit

  • General Compliance Tips

  • General Compliance Tips

  • Questions?

    Olga Torres, Managing Member

    Torres Law, PLLC

    Dallas, Philadelphia

    olga@torrestradelaw.com

    www.torrestradelaw.com

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