The Bureau of Industry and Security (BIS) in the United States Department of Commerce has experienced a surge in recognition and importance over the past year. This Bureau, and particularly the Office of Export Enforcement (OEE) within it, is responsible for enforcing international trade treaties and U.S. import and export law. This means that it is on the front lines of enforcing the trade sanctions that have been imposed on Russia’s oligarchs and the inner circle of Russian leadership after the country’s invasion of Ukraine.
Dr. Nick Oberheiden is the founding partner of the national law firm Oberheiden P.C. With his legal guidance, numerous international companies, as well as domestic companies that rely heavily on importing and exporting goods, have navigated the complicated waters of BIS enforcement actions.
The BIS, Its Office of Export Enforcement, and the Enforcement of American Import and Export Law
The BIS and its OEE (Office of Export Enforcement) are tasked with enforcing international treaties and the executive branch’s Export Administration Regulations (EARs). According to the BIS, the goal of these regulations is to protect American interests and ensure that the country’s technological advantage is kept intact. To do this, the EARs regulate or prohibit transactions with countries, or with corporations that operate within those countries, that threaten American interests abroad, commit human rights abuses or condone terrorism, or imperil regional stability.
When the BIS or the Office of Export Enforcement gets an indication that a company is violating an EAR or international trade treaty, the agencies will initiate an investigation to monitor the potentially unlawful business activity. If evidence is gathered that shows that there is something going on, a BIS charging letter will be sent to the company under investigation.
The charging letter itself is a formal notification that the company is under investigation for an apparent violation of import and export laws. The proposed charging letter specifies the conduct at issue and the EAR that is allegedly being violated.
The issuance of a BIS charging letter is a significant escalation in the process. It means that the case has progressed beyond just a mere suspicion of misconduct. It means that the BIS thinks that it has enough evidence to warrant notifying the targeted company of the investigation and that a violation occurred and to demand an explanation for its conduct.
BIS Letters Can Now Be Made Public in Early Stages of Investigations
Typically, a BIS charging letter was sent to the company under investigation in secret – the only parties aware of the investigation were the BIS and the company, itself. This gave the company time to take corrective action. In many cases, the alleged misconduct was unknowingly done and could quickly be fixed. Because so many of these violations are accidental and the result of recent developments or shifts in global politics, the BIS kept the charging letter confidential until there had been a final administrative disposition of the case – something that only came about after a thorough investigation and a full understanding of the facts and the context surrounding the case.
Recent developments in 2022 have upended this policy.
In the aftermath of Russia’s invasion of Ukraine early in 2022, the BIS amended the Export Administration Regulations to reflect the strict economic sanctions that the United States was imposing on President Putin’s inner circle of oligarchs. However, the final rule, which was published by the BIS on June 6, 2022, went further than this: It also allowed a BIS charging letter to be made available to the public before the final administrative disposition. In theory, these charging letters could be released to public view at the same time as they are served on companies and individuals suspected of violating an EAR or trade sanction.
Already, the BIS has published several of its charging letters to its website.
The Penalties for Import or Export Violations Just Got Heavier
The penalties that can come with a finding of liability for violating import or export laws vary widely depending on the particular violation and its severity. While criminal cases are possible, with the executives responsible for skirting around trade laws and sanctions facing the potential for prison time, most of the cases are civil administrative enforcement cases. Companies can receive administrative sanctions and face fines and be forced to disgorge their profits, and are frequently barred from international trade, losing their export privileges, for a period of time.
While even these administrative sanctions can be crippling, one of the collateral consequences that corporations face during an investigation is often much worse: The reputational blow that comes with an accusation that the company is doing business with international pariahs. In some cases, this is a taint on the business’ brand that does not come off.
Now that the BIS is publishing its charging letters before the administrative resolution of a case, those consequences can come earlier and with insufficient evidence to support the allegations that they contain.
FAQ: What Happens When There are Alleged Violations of Export Administration Regulations?
Export Administration Regulations exist and are enforced by federal law enforcement authorities to protect existing trade relations, foreign policy, and national security. Alleged violations of the Export Administration Regulations would result in the offender receiving a charging letter, instituting administrative enforcement proceedings which can result in hearings run by an administrative law judge. The result of the administrative enforcement proceeding and subsequent hearing would be administrative sanctions, which could be a civil penalty (such as a civil monetary penalty), or for a particularly serious violation or multiple recurring violations, criminal prosecution.
BIS Compliance is More Important Now Than Ever Before
Given the serious problems that businesses can face if a BIS administrative enforcement action against them gets leaked to the public, the new timeline for the publication of the BIS charging letter means that companies have to try even harder to avoid the mere perception that they are out of compliance with the law and the Export Administration Regulations.
Unfortunately, this is made more difficult by the recent upheaval in global politics and regional conflicts that are in the open or are simmering behind the scenes.
