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November 02, 2007 

BIS Update 2007, Day 2, Plenary Session: Export Enforcement

In his opening remarks during the Export Enforcement Plenary Session at the 2007 BIS Update, Darryl Jackson, Assistant Secretary for Export Enforcement introduced the three office directors of BIS's enforcement team, including Kevin Delli-Colli, the new Director of the Office of Export Enforcement, Glenn Krizay, the new Director of the Office of Export Analysis and Ned Weant, the Director of the Office of Antiboycott Compliance.

In keeping with the theme of Update 2007, Assistant Secretary Jackson took a look at the past, present and future of export enforcement. He noted that more than 75% of all of BIS's past enforcement cases fell within BIS’s three priority areas of weapons of mass destruction (WMD), terrorism and unauthorized diversion/transshipment. He also noted that BIS does not take lightly false statements made by exporters on SEDs and AES records and that pre-license checks are an important part of the BIS enforcement strategy.

With respect to the present, Assistant Secretary Jackson noted that the Justice Department’s recent export enforcement initiative is an important part of the increased emphasis on export enforcement and that the Justice Department intends to train more law enforcement personnel to understand and focus on export control-related issues.

In addition, Assistant Secretary Jackson discussed the recent increase in maximum penalties for export violations made by the IEEPA Enhancement Act that would raise penalties to $250,000 or twice the value of the export. He also announced that BIS will generally not pursue enhanced penalties in the five circumstances set forth in BIS's announcement issued on November 1, which includes prior disclosures submitted by October 16, 2007, settlement offers made by October 16, 2007, violations where proposed charging letters were issued and cases where statute of limitations waivers have been made. (See related post published on November 1, 2007). He also noted that BIS will continue to apply revised PATRIOT act provisions in accordance with previous guidelines.

He noted that when it comes to issuing penalties for export violations, more serious penalties call for increased penalties. He also noted that voluntary disclosures will be considered to a "great weight" mitigating factor, leading to at least a 50% reduction in the penalty amount. With respect to the future of export enforcement, Assistant Secretary Jackson said it is still BIS’s priority to pass the renewal of the Export Enhancement Act. He also noted that is necessary to have cooperation among nations and he recognized that nearly 75 countries were represented at Update 2007.

Next, Kevin Delli-Colli, the newly appointed director of BIS's Office of Export Enforcement discussed his experience in export control issues during his long career in law enforcement. He then summarized the FY 2007 enforcement statistics, which included:

  • 25 criminal arrests for export control violations
  • 16 cases led to convictions
  • 65 administrative cases were settled, resulting in approximately $5.8 million in civil penalties

With respect to BIS’s three priority areas of WMD, terrorism and unauthorized diversions/transshipment, Mr. Delli Colli noted that transshipments create a special dynamic in conducting investigations. The most prevalent countries involving prohibited transshipments of controlled U.S. goods are Singapore, UAE and Hong Kong, which also happen to be the three largest transshipment points of legitimate commerce too. This allows bad actors to operate as a needle in a haystack. He noted, however, that transhipments, can occur from any country, and this past year there were enforcement cases involving transshipments from UK, Netherlands and Spain. China, Iran, Pakistan and India are the most common transshipment destinations. BIS is working many countries in an effort to control and reduce anauthorized transshipments. Mr. Delli-Colli also warned that U.S. domestic transactions are also a source of concern for diversion., as individual may attempt to smuggle items out of U.S. and into another country.

In his various travels, Mr. Delli-Colli recognized the prominent role the Internet plays in export transactions. Criminals are just as capable to use the Internet and other emerging technologies. Exporters are at risk when they receive a request for quotation over the Internet. Danger exists when exporters do not speak to their customers to verify their identity and Mr. Delli-Colli stressed the importance of knowing your customer. The onus is on exporters to use the technology to research and verify the names and addresses of their Internet customers. A delivery to a post office box , of course, should raise suspicion.

Other frequent enforcement actions involve exporters submitting false information on SEDs and AES records. Frequently, this involves the misrepresentation of the value of shipped items on the SED or AES record at the customer's request in order to reduced customs duties.

He also noted that most investigations are conducted with the assistance of other agencies. BIS applauds the DOJ’s efforts, particularly their recent export enforcement initiative. The agency continues to encourage the filing of voluntary self-disclosures for violations. Not only are voluntary disclosures potentially advantageous to the exporter, but they provide the agency reliable intelligence with respect to bad actors.

The next member of the export enforcement plenary panel was Glenn Krizay, the newly appointed director of the Office of Export Analysis. Mr. Krizay discussed the objective of his office, which is to support BIS's enforcement efforts and is handled by tracking illegal transfers through end-use checks and providing in-depth research and analysis to support compliance and enforcement investigators.

End-use checks occur in the form of a pre-license checks or as post-shipment verifications. Pre-license checks are performed on unknown entities and exporters of sensitive products. Post-shipment verifications are a way to perform a check to develop a level of confidence in the end-user and licensee. In FY 2007, he noted that BIS conducted 854 end-use checks, 36% of which were pre-license checks and 64% were post-shipment verifications. Of the end-use checks performed, 11% were unfavorable.

The last speaker was Ned Weant, Director of BIS's Office of Antiboycott Compliance. He noted that as a result of his office's efforts over the past years antiboycott laws are now widely known among U.S. exporters. When reviewing the statistics from 20 years ago, he noted that in 1988, OAC settled 54 antiboycott cases and imposed $3.4 million in penalties. By contrast, in FY 2007 BIS settled only 10 cases and imposed $20,000 in penalties and issued 2 warning letters. In FY 2007, BIS also received 109 boycott reports and more than 1,100 calls to the antiboycott advice line.

Mr. Weant noted that outreach and awareness is also decreasing boycott activity. For, example, he noted that
BIS is making outreach visits to business located in and governments of boycotting countries. He also stated that BIS has visited all of the Gulf Cooperation Council countries.

In other news, Mr. Weant reported on the following trends in boycott activity:

  • The United Arab Emirates continues to be the biggest problem in terms of the number of boycott requests issued. BIS received 74 reports relating to boycott requests received from the UAE in 2006, and BIS received 53 in the first six months of 2007.
  • Saudi Arabia appears to be backing away from boycott practices, as the number of reports fell from 10 in 2006 down to 2 this year.
  • Syria has also decreased its unsanctioned boycott activities from 48 in 2006, to 28 this year.
  • Many exporters are receiving boycott requests from Iraq.
  • In Libya, there were 18 prohibited requests in 2006 and 9 in 2007 to date.




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