BIS Reports Only 3% of Voluntary Self-Disclosure Cases Result in Penalties, Etc.

The Bureau of Industry and Security’s Regulations and Procedures Technical Advisory Committee (RPTAC) held a partially open meeting on March 6, 2012 to discuss, among other things, the importance of voluntary self-disclosure as a mitigating factor in enforcement decisions, and steps taken to expedite procedures when no enforcement action is taken.

Warning or No Action Letters Sent Out in 95% of VSD Cases

According to BIS, it is continuing to consider voluntary self-disclosure (VSD) as a primary mitigating factor. BIS reports that, in the first quarter of fiscal year 2012, fully 95% of VSD cases resulted in either a warning letter or a no action letter. Specifically, 82% of VSD cases resulted in warning letters, 13% in no action letters, and only 3% of VSD cases resulted in a penalty in Q1 of FY 2012. In FY 2011, 82% of VSD cases resulted in either a warning letter or a no action letter. Furthermore, according to BIS, in cases where a penalty is applied, VSDs typically result in a 50% reduction in potential penalties.

BIS also stated that, when making VSDs, it is very important that action has been taken within a company’s compliance program to address the issue and prevent recurrence of the violation.

(VSD is one of two mitigating factors, along with an effective export compliance program, designated in the EAR as having “great weight” as compared to the other seven mitigating factors in the EAR. See Supplement 1 to Part 766 of the EAR (15 CFR Part 766) for more information, which is available here.)

Attempts to Accelerate Enforcement Decision Process

BIS reported that the Assistant Secretary of Export Enforcement, concerned with speeding up the decision process of sending out warning letters and effectively managing resources, has created an “Induction Committee” chaired by a Senior Advisor to the Assistant Secretary. According to BIS, when a field office has found a violation and reached a decision on whether to issue a warning or a charging letter, that decision is submitted to the Senior Advisor. If the Senior Advisor is in agreement, then the Induction Committee decides in about a week on whether to accept the decision.

If the Committee agrees that a warning letter is warranted, then the field office is instructed to send the letter. If, however, a decision is reached to send a charging letter, then the case is sent to the Office of Chief Counsel for review.

(See ITT’s Online Archives 10090822 for summary of BIS’ more stringent approach to export enforcement. See also ITT’s Online Archives 11111610 for summary of BIS webinar listing the five root causes of civil enforcement cases. See ITT’s Online Archives 12022149 for summary of announcement of March 6, 2012 RPTAC meeting)