Expect More 'Significant' Corporate Penalties This Year, BIS Official Says

The Bureau of Industry and Security is preparing to announce more “significant” export penalties and corporate resolutions this year, said Matthew Axelrod, the agency’s top export enforcement official. He also said exporters should see more export-related indictments as part of a joint effort with DOJ, and he continued to pitch a BIS funding boost, which would help it hire more export enforcement agents.

Axelrod, speaking during a virtual conference last week hosted by the Massachusetts Export Center, said it’s sometimes a “hard sell” to convince companies to spend more money on compliance. But it helps when “the consequences of getting it wrong are appropriately significant,” he said.

“I think you are likely to see more, additional significant corporate resolutions in 2024."

Although BIS doesn’t impose penalties “just to drive a deterrence message,” Axelrod said public fines can help deter illegal exports. “That allows people to realize that it makes better business sense to invest in compliance on the front end rather than to get in trouble with us.”

Axelrod over the last two years has announced several changes and clarifications to the agency’s administrative enforcement policies, including one change in 2022 aimed at raising penalties for more serious violations (see 2206300069). That included a record $300 million fine against Seagate last year for violating U.S. export controls against Huawei (see 2304190071).

BIS has also partnered with DOJ on multiple export control-related indictments over the last year as part of the Disruptive Technology Strike Force launched in February 2023 (see 2302160019). Axelrod said he expects more cases this year.

“As everyone knows, it takes time once a thing gets established for it to get fully ramped up and running,” he said. “I think we're there now.”

He also said BIS will continue to refine its enforcement policies in 2024 -- specifically mentioning the agency’s antiboycott work -- and plans to soon publish new guidance for freight forwarders. Axelrod last year asked forwarders to be more proactive in export compliance even though they may not always be viewed as having the primary compliance responsibility (see 2309120031), and a December advisory issued by BIS, DOJ and other agencies asked forwarders to better know their cargo (see 2312110060).

“Stay tuned for some freight forwarder guidance,” he said. “We're gonna get that out this year.”

He also said BIS recently expanded its university outreach program, an effort under which BIS assigns a dedicated officer to schools that have a higher risk of being targeted by foreign governments, including China, for technology theft (see 2303100021). That program has expanded from 20 schools in 2022 to 29 now, Axelrod said, adding that the agency “wants to work with as many academic institutions that want to work with us.”

Axelrod also continued to push for more BIS resources. Earlier this month he said Homeland Security Investigations at DHS has more agents stationed in Tampa, Florida, than BIS has across the country (see 2401170059).

“I would love to hire more special agents,” he said. “We haven't gotten a budget increase that would justify doing more.”

He said Commerce Secretary Gina Raimondo has been “tremendous” in drawing attention to the issue (see 2312070074 and 2312040041), adding that the BIS Office of Export Enforcement is “trying to squeeze every ounce we can out of” its current funding.

“I'm optimistic that -- or hopeful, I guess, maybe more than optimistic -- that we can get there and get more funds to hire more agents and more analysts and more advanced technology tools to help us do our work,” he said.