BIS is proposing a rule that would require that the final, comprehensive narrative account required in voluntary self-disclosures (VSDs) of violations of the Export Administration Regulations (EAR) be submitted to the Office of Export Enforcement within 180 days of the initial VSD notification, and is presently accepting public comment on the proposal.
The Bureau of Industry and Security (BIS), Office of Export Enforcement (OEE), is charged with investigating possible violations of the Export Administration Regulations (EAR). These investigations can result in allegations of violations that may be settled, adjudicated in an administrative enforcement proceeding, or referred to the Department of Justice for possible criminal prosecution.
Section 764.5 of the EAR allows potential violators to voluntarily disclose the facts of the potential violations to OEE, and these disclosures can have a significant mitigating effect on the ultimate sanctions imposed. Section 764.5 requires an initial notification, which needs only to set forth a description of the general nature and extent of the suspected violations. The initial notification must then be followed at a later date by a detailed review and narrative account of the suspected violations, including all relevant supporting documentation.
If the person making the initial notification subsequently completes the disclosure, including the narrative account, the disclosure is deemed to have been submitted to OEE on the date of the initial notification. This retroactivity can be critical in cases where the OEE is able to develop the facts of the alleged violation from another source prior to the perfection of the disclosure.
Presently there is no specific time limit for submitting the narrative account to perfect the disclosure. Citing the fact that too often initial notifications are not promptly followed by comprehensive narrative accounts causing excessive administrative burdens and delays, BIS is proposing to set a 180 day extendable deadline for persons to complete the final narrative portion of a disclosure once the initial notification has been submitted.
Failure to meet the 180-day deadline would not constitute an additional violation of the EAR, however that failure may serve to disallow the crediting of information contained in the subsequent narrative account as being considered a voluntary disclosure as of the date of the initial notification.
The Director of OEE could extend this 180-day time deadline at his or her discretion if “U.S. Government interests would be served” by an extension or upon a showing by the party making the disclosure that more time is reasonably necessary to complete the narrative account. Some examples set forth of circumstances qualifying for an extension include situations where records must be gathered from multiple entities or jurisdictions, bankruptcy or major reorganization of the disclosing company, or when a Government determination such as a commodity jurisdiction or classification request is pending. Also conditions could be placed on an extension such as the party agreeing to toll the statute of limitations if a tolling agreement has not already been obtained.
Please click here (PDF) for the full text of the BIS proposal, which also includes proposed changes to the way notice of the issuance of a charging letter may be provided and changes to certain language relating to determining the date of service of notice of a charging letter’s issuance. Interested parties may submit comments on the proposed rulemaking no later than January 7, 2013.
Clearly the submission of a voluntary disclosure is an effective way to mitigate potential sanctions that might result from violations of the EAR, and the proposed changes heighten the need to perform all necessary internal reviews and submit the narrative account in a timely manner. It is also important to remember that there is no substitute for having a sound, comprehensive compliance program in place that will not only serve as an additional mitigating factor in the event of a potential violation, but will also help assure that exporters understand and properly execute their compliance responsibilities in the first place.