On Oct. 16, 2007, President George W. Bush signed into law the International Emergency Economic Powers Enhancement Act (“Act”), S.R. 1612, to increase the deterrent of export controls violations. The Act amends the International Emergency Economic Powers Act (“IEEPA”) (50 U.S.C. § 1705 et seq.) to increase civil and criminal penalties for persons or entities that violate export control regulations. The Act increases civil penalties from $50,000 to either $250,000 per violation or an amount that is twice the amount of the violating transaction. The Act caps fines at the greater of these two amounts. Also, the Act increases potential criminal penalties to $1 million per violation, although maximum prison terms of up to 20 years remain unchanged.
The new civil penalties apply to violations “with respect to which enforcement action is pending or commenced on or after the date of enactment,” which was Oct. 16, 2007. (Emphasis added.) The new criminal penalties apply to violations “with respect to which enforcement action is commenced on or after the date of enactment.” (Emphasis added.)
Prior to the enactment of the Act, many Members of Congress were concerned that the government would not take into account unintentional, accidental, or inadvertent violations. Therefore, the Departments of Commerce and Treasury assured Congress in writing that they will not abuse the new authority conferred by the Act. Kevin I. Fromer, Assistant Treasury Secretary for Legislative Affairs, in a letter to Congressman Lantos dated Sept. 25, 2007, addressed the Office of Foreign Asset Control’s (“OFAC”) implementation of the new penalties. “In a great number of instances, OFAC does not impose the maximum penalty per count, and it will continue to apply its authorities in a judicious and responsible manner under an increased penalty system.” Mr. Fromer also indicated that “OFAC’s goal is to use its penalty authorities to increase sanctions compliance and foster remediation.” OFAC’s enforcement guidelines are currently being updated to provide businesses and individuals greater guidance for compliance.
Mario Mancuso, Undersecretary of Commerce for Industry and Security, in a letter to Congressman Manzullo dated Sept. 26, 2007, reinforced that the Bureau of Industry and Security (“BIS”) strives to have the penalty be appropriate to the violation. “Our intent is not to punish any business unfairly for minor, accidental violations.” Also, Undersecretary Mancuso assured the Congressman that small businesses will not be hindered inappropriately because of the new penalties. He indicated that recently issued BIS Penalty Guidelines “allow BIS to take into account company size and the nature of the specific violations in a way that would warrant smaller penalty amounts.”
The Act also makes it unlawful for a person “to violate, attempt to violate, conspire to violate, or cause a violation of any license, order, regulation, or prohibition issued under this title.” This amendment clarifies that violations of the Export Administration Regulations (“EAR”) and OFAC based on IEEPA can include conspiracy, which was placed in legal jeopardy by the 2005 decision of the U.S. District Court for the District of Columbia in U.S. v. Quinn, in which the court concluded “that, even if the bulk of the EAR remained in effect by virtue of Executive Order 13,222, the conspiracy provisions of the EAR were rendered inoperative by the lapse of the EAA and could not be repromulgated by executive order under the general powers that IEEPA vests in the President.”
Information for this Report was provided by The White House at www.whitehouse. gov.