Industry News

BIS New Deal 2.0 – Has Exporters Grappling with Compliance

Nov. 1, 2022
By: Marvin E. McPherson

The Bureau of Industry and Security of the Department of Commerce (“BIS”) is currently experiencing a “New Deal 2.0” as the United States sees Export Controls as an increasing viable way of addressing perceived dangers in the world. This perception has allowed BIS to expand its impact and capabilities, which affects exporters grappling with compliance.

Export Administration and Export Enforcement funding has doubled in the last five years. BIS’s impact has grown along with this funding. BIS FY 2021 spending totaled $137.664 million and 448 additional positions were requested to meet mission goals of advancing U.S. national security, foreign policy, and economic objectives. The 2021 budget represents a $10.012 million increase over the FY 2020. BIS in FY 2022 requested $142.410 million and an additional $2.107 million to support enforcement activities. Within the last two years BIS has increased its budget by $12 million.

With the increase in budget BIS has been able to promulgate more than 35 new rules and notices in the Federal Register to date. This contrasts with 2019 when BIS published only 15 rules and notices. Some of the rules include BIS’ recent New Export Controls on Advanced Computing and Semiconductor, BIS Announces Controls on Emerging and Foundational Technologies, and Commerce Department Expands Russian/Belarusian Export Controls.

The expansion has also afforded BIS the ability to increase enforcement actions. BIS was aware that there was “undercompliance” with some of the rules it implemented and has taken steps to address this undercompliance. Most notably, BIS has focused on foreign parties that, when dealing with U.S. goods, are subject to the same rules as U.S. companies. As an example, most recently Seagate Technology Holdings, a Dublin company with operations in California, received a proposed charging letter (“PCL”) from BIS alleging violations of the U.S. Export Administration Regulations (“EAR”). The storage company stands accused of supplying hard drives to a customer and its affiliates listed on the BIS Entity List.

The uptick in enforcement corresponds with changes BIS made earlier this year to the EAR to adjust Penalties for Export Violations. Those adjustments include higher penalties for violations, non-monetary resolutions for less serious violations, elimination of no admission of wrongdoing in settlement cases, and the addition of a “fast-track” module for voluntary self-disclosures for more effective processing and faster turnaround of enforcement actions. An interesting development is that BIS is now able to disclose charges against offending companies as they are happening to serve as a warning to other companies conducting similar practices that there will be consequences for their actions.

All exporters are responsible for compliance with all exporting regulation relating to compliance with licensing requirements and any other controls. With the BIS’s expanded operations, exporters should review their transactions and review whether items are in scope of the EAR. Heed the warning from BIS in its enforcement actions because BIS now has the budget and enforcement ability to get ahead of industry.

If you have any questions regarding export compliance generally or EAR compliance in specific, do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.