BIS Deepening End-Use Checks, Reviewing More Self-Disclosures as Export Control Reform Rolls On
Export control reform has allowed Bureau of Industry and Security officials to intensify enforcement efforts, including through increased end-use checks, reviewing 61 percent more voluntary self-disclosures in 2015, and greater examination of the use of the BIS “Strategic Trade Authorization” (STA) license exception, BIS officials said Nov. 1 during their agency’s Update 2016 Conference on Export Controls and Policy. The transfer of former U.S. Munitions List (USML) items to the Commerce Control List (CCL) “600 Series” is at least partly responsible for the uptick in 2015 disclosures over the preceding five-year average, BIS Assistant Secretary for Export Enforcement David Mills said during the conference. “If you’re a corporate counsel or an outside counsel, you should know that you’re going to see a lot more activity in this area,” BIS Office of Export Enforcement Director Douglas Hassebrock said during the conference. BIS is issuing more warning letters in response to disclosures, Hassebrock said. “We’re seeing more and more items that are foot fouls,” probably as a result export control reform-related transfers from the USML to the CCL, he said.
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About 99 percent of the 286 disclosure reviews BIS completed in 2015 ended with no assessment of administrative penalties, Mills said. The vast majority of “600 Series” or STA violations resulted not from information in self-disclosures but from leads gained by U.S. enforcement agents, he said, including through joint work with the State Department on the Blue Lantern program, which entails end-use monitoring performed by State and U.S. embassy personnel. The Information Triage Unit, headed by BIS’ Office of Enforcement Analysis, is working with the State Department’s Directorate of Defense Trade Controls (DDTC) to identify DDTC and BIS export licenses and establish consistency during license evaluations, especially on CCL “600 Series” items, Mills said. Export control reform hasn’t seen any increases in anyone trying to intentionally misuse the STA license exception to export unapproved goods, Mills said during an Oct. 31 media roundtable (see 1610310022).
About 10 percent of the end-use checks BIS performs are done pre-license, about 25 percent of which end in license denials, BIS Office of Enforcement Analysis Director Kevin Kurland said during the conference. “Quite frankly, from [exporters’] perspective, [it] is a good thing, because we were able to identify that there was a proliferation risk and protect your company and its products from getting into the hands of those that are seeking to do us harm,” Kurland said.
Overall, prison time associated with violations of BIS licensing policies rose by 81 percent in fiscal year 2016, and administrative fines spiked by $8 million, a 53 percent increase, despite a roughly 25 percent reduction in the closing of administrative cases, Hassebrock said. In line with fiscal 2015 numbers, administrative forfeitures totaled $80 million worth of goods in fiscal 2016, a significant uptick over the fiscal 2011-2014 average, he said. In fiscal 2016, shipments destined for Iran accounted for 55 percent of criminal convictions associated with export violations, notwithstanding the January implementation of the Joint Comprehensive Plan of Action (JCPOA), Mills said. “We are vigorously monitoring shipments through our end-use check program to prevent diversions, investigating unauthorized procurements, and alerting our international partners about controls that remain on the re-export of U.S.-origin items to Iran,” he said. Hassebrock said he expects exports to accrue fewer violations as JCPOA implementation moves forward.
BIS in fiscal 2016 saw fewer criminal convictions involving illicit shipments to China than in years past, and a downturn in transshipments of concern routed through the United Arab Emirates, Hassebrock said. But he said that criminal shipments destined for countries like China, Iran and Russia will likely garner longer prison sentences for violators, because those countries are often viewed as more sensitive from a national security perspective than other countries. He advised conference attendees to keep track of due diligence they performed with regard to the JCPOA and Russia sanctions initiated in 2014.