On November 7, 2012, the US Department of Commerce, Bureau of Industry Security (BIS) published a proposed rule, at 77 Fed. Reg. 66777, which would require that the final narrative account in a voluntary self-disclosure (VSD) related to violations of the Export Administration Regulations (EAR) be submitted to the Office of Export Enforcement (OEE) within 180 days of the initial VSD notification.
Section 764.5 of the EAR provides the procedure for the voluntary self-disclosure of potential violations and provides that parties may submit an initial notification, which contains a general description of the suspected violations, followed by a thorough narrative account of the nature and extent of the perceived violations. Once a party completes its VSD by filing the more fulsome narrative account, the date of the disclosure is deemed to be the date of the initial notification.
Currently, the EAR do not include a specific time limit within which the narrative account must be submitted after a party has filed its initial notification. To promote a more expeditious resolution of VSDs, BIS has proposed a 180-day deadline for persons who have submitted an initial notification to complete and submit a final narrative report to OEE.
BIS notes that the Director of OEE will have the discretion to extend the 180-day deadline if the party submitting the VSD demonstrates that additional time is reasonably necessary to complete its narrative account. The proposed rule contains examples of circumstances where more time might be warranted, including where:
- Records or information from multiple entities and/or jurisdictions are needed to complete the narrative account
- Material changes occur in the business (e.g., bankruptcy, corporate acquisition, etc.) which present difficulties in accessing or analyzing information needed to complete the narrative account
- There is a pending US Government determination (such as a commodity jurisdiction determination or a classification request) which is needed to complete the narrative account
BIS cautions, however, that it believes that 180 days is “ample time” to complete the narrative account, such that requests for extensions will normally not be necessary or justified. BIS’s 180-day time frame is more generous than the one mandated by the US Department of State’s Directorate of Defense Trade Controls (DDTC) in the International Traffic in Arms Regulations (ITAR). DDTC’s deadline under the ITAR is 60 days from the initial VSD. DDTC does routinely grant extensions for a variety of reasons similar to those provided by BIS in the examples above, though the length of the extensions varies significantly depending on the reason the extension is requested and DDTC’s assessment of how much time is legitimately needed to complete the final disclosure report. BIS appears to have adopted this more flexible approach from the outset.
Failure to meet the proposed deadline will not be an additional violation of the EAR. BIS notes, however, that disclosures that meet the requirements of § 764.5 typically are afforded “great weight” mitigation by BIS, and that failure to meet the proposed 180-day deadline could reduce or eliminate the mitigating impact of the voluntary disclosure.
In addition to implementing a time limit for completion of VSDs, the proposed rule would make two additional changes to the EAR. First, it would authorize the use of delivery services other than registered or certified mail for providing notice of the issuance of a charging letter instituting an administrative enforcement proceeding under the EAR. Relatedly, it would remove the phrase “if delivery is refused” from a provision governing the determination of the date of service of notice of a charging letter’s issuance in order to account for carriers with electronic tracking capabilities.
BIS is accepting public comments regarding the proposed rule until January 7, 2013.