Apparently the National Security Division at DOJ had a bunch of interns this summer with nothing to do, because this is the only conceivable explanation for the mostly risible “Guidance Regarding Voluntary Disclosures” which the NSD released on October 2. To set the tone for a further discussion of the substance of this Guidance, let’s start with a howler in the Guidance itself. Even if this guidance was written in large part, as it must have been, by eager interns, one would think that a grown-up lawyer would have reviewed this for substance. And, presumably, that grown-up lawyer whose job is to send real people to real jails would understand the laws that he or she is enforcing, right? So how do you explain this statement in the Guidance?

U.S. sanctions regimes and the Department of Commerce’s Export Administration Regulations are currently enforced through IEEPA.

Apparently, no one in the NSD has ever heard of the Trading with the Enemies Act which, as most of this blog’s faithful readers will know, is the statutory basis for the Cuba sanctions and their enforcement.  This is pretty embarrassing mistake about pretty elementary facts.

The thrust of the Guidance is an interagency power grab by which DOJ wants to take away the first responsibility for review of voluntary disclosures from OFAC, DDTC and BIS. The guidance states that voluntary disclosures should be made to the Counterintelligence and Export Section of NSD when the exporter learns that a violation “may have been willful.” Specifically, the Guidance says:

Ordinarily, when an organization voluntarily self-discloses violations of U.S. export controls and sanctions, it presents its VSD to the appropriate regulatory agency under the procedures set forth in the agency’s regulations. … It is not the purpose of this Guidance to alter that practice. However, as discussed further below, when an organization, including its counsel, becomes aware that the violations may have been willful, it should within a reasonably prompt time also submit a VSD to CES.

Actually the purpose is precisely to alter that practice. Remember that the criminal violations involved are violations of the agency regulations themselves. That gives the relevant agencies, and not the DOJ, the principal expertise in determining if a violation has occurred and if it was willful.

The practice until now has been to disclose violations to the relevant agency or agencies with the understanding that the agencies could, if warranted, refer the matter to the DOJ. Once the referral was made,  the prior agency disclosure and continued cooperation with the DOJ investigation would be the basis for credit by the DOJ. No longer. A separate disclosure to DOJ must be made without regard to an agency referral and, if not, the agency disclosure becomes irrelevant to the exercise of prosecutorial discretion if a subsequent referral occurs.

One of the hypotheticals discussed in the Guidance provides ample reason as to why DOJ, which clearly does not understand many of the basics of export control law, should not be usurping the primary role of OFAC, BIS, and DDTC, in export enforcement. In that hypothetical a foreign subsidiary of a U.S. corporation exports U.S. origin items in violation of BIS regulations. Without any suggestion of U.S. participation, the Guidance suggests that the parent would be offered an NPA by DOJ premised on payment of a criminal fine.

However, BIS rules, which have to be the basis of any prosecution in such a case, do not support a theory of vicarious liability by parent corporations. If the parent company did not export the items it could only be held liable, under section 764.2, for causing, aiding or abetting the export. That’s why in the recent Alcon Laboratories case, BIS held the U.S. parent liable for its exports to Iran but not for the exports of its Swiss subsidiary; those exports served only as a basis for a penalty against the Swiss subsidiary.

One last knee-slapper from the Guidance deserves mention. In another hypothetical, the Guidance says this:

Alert customs officers notice a bulky package within a container on a ship at a U.S. port bound to leave on a lengthy voyage overseas. The package contains ITAR-controlled commodities …

Because, you see, all bulky packages are suspicious and probably contain export controlled items. Just remember that when you send a birthday present to your aunt in Slovenia — make sure its just a small package in order to avoid scrutiny by CBP on the way out.


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