Exporters Shouldn’t Have to Conduct 5-Year Review for Minor Disclosures, BIS Official Says

The Bureau of Industry and Security is considering tweaking regulatory language that calls on exporters to conduct a five-year review of activities that preceded their voluntary self-disclosures. The change could make it so the language only applies to more serious disclosures, said the top BIS export enforcement official, Maththew Axelrod, and would represent another step in the agency’s effort to draw more BIS and industry resources toward addressing significant violations as opposed to minor or technical ones.

Axelrod, speaking June 21 during the annual conference hosted by the American Association of Exporters and Importers, said the agency hasn’t yet decided how to address the five-year “look back” language in the Export Administration Regulations, but it may require an amendment to the EAR. The agency also could publish another policy memo similar to the memos Axelrod has issued in the last year that outlined other changes and clarifications to the agency’s administrative enforcement policies (see 2304180071 and 2206300069).

The change would help BIS make sure it isn’t “wasting your resources or our resources on doing too much work on the more minor and technical” export violations, Axelrod said. He expects BIS to “do something hopefully more definitive in the coming months on that.”

Under the EAR, exporters that submit an initial notification of voluntary disclosure must conduct a “thorough review” of “all export-related transactions where possible violations are suspected.” The regulations say that the BIS Office of Export Enforcement “recommends that the review cover a period of five years prior to the date of the initial notification.”

But Axelrod said that may not make sense in every case. “Do we need to do a five-year look back on something that we think is minor or technical?” he said. “I want the answer to that to be no, eventually.”

Instead of using the five-year look back as the default, BIS may decide to instead inform the disclosing exporter -- after the disclosure has been submitted -- whether the agency wants the exporter to conduct the five-year review. “The truth is, for a lot of these, we're not going to need you to go back five years,” Axelrod said.

The “trick” will be determining “which ones require the full monty and which ones don't,” Axelrod said. “We have finite resources, you have finite resources. We want to make sure that we're using our resources and yours as effectively as possible, which means we want them more focused on the bigger, more significant stuff.”

Asked about how exporters can determine whether their potential violations qualify as minor, Axelrod pointed to BIS’ “Don’t Let This Happen to You” guidance, which outlines some of the most significant export penalties issued by the agency. “You can scroll through that to see what kind of conduct does get you in trouble,” he said. “If it's something not like any of those fact patterns, then it's more likely in the minor/technical area.” But Axelrod also said a document that lists examples of minor and technical violations “would be useful, and so we'll figure out how to try to do that.”

He also suggested the five-year look back would still apply in cases where a disclosure would likely result in a penalty. “It's something we’re discussing internally because, again, we don't want you going back five years on something minor,” he said. “And so we’re just figuring out what’s the best way to communicate that.”

Axelrod also stressed the importance of compliance, saying risks for “not paying attention to export controls” are higher than at any point in recent memory. “Our regulations, our policies are being updated more frequently than ever,” he said. “I'm sure I don't have to tell you that the pace is higher than in the past, and frankly the scope and reach of them is more expensive than it's been in the past.”

He said “enhancing our enforcement posture” is a “top priority, not just for us. but also for our partners at DOJ.” BIS and DOJ are working together to bring more export control indictments, and Axelrod recently said a series of export control indictments announced in May were “just the beginning” (see 2305170033).

“That means when companies don't invest in compliance upfront,” Axelrod said, “they're likely to pay the price on the back end, with large fines and reputational consequences.”