On January 16, 2024, the United States Department of Commerce’s Bureau of Industry and Security (“BIS”) announced further enhancements to its voluntary self-disclosure (“VSD”) policy under the Export Administration Regulations (15 C.F.R Parts 730–774, the “EAR”). These enhancements build upon previous VSD developments announced on June 30, 2022 and April 18, 2023, in order to increase the efficiency and effectiveness of the VSD process. Our blog posts on these previous VSD developments are available here and here.
Assistant Secretary for Export Enforcement, Matthew S. Axelrod discussed the success of these prior changes during a speech to the NYU School of Law’s Program on Corporate Compliance and Enforcement on January 16, 2024. First, BIS has seen an increase in VSDs with potentially serious violations. Second, BIS is processing VSDs with minor or technical violations faster. Lastly, BIS has seen an increase in VSDs about misconduct by others. On January 30, 2024, Assistant Secretary Axelrod will continue to share his insights on export enforcement during a fireside chat organized by Baker McKenzie and ICPA. Registration is available here.
The four new enhancements to the VSD policy include:
- Manner of Submission
BIS strongly encourages the submission of VSDs electronically to BIS_VSD_INTAKE@bis.doc.gov, including initial notifications, extension requests, and narrative accounts. Submissions can also be signed electronically. Although BIS will continue to accept hard-copy, written paper VSD submission, the BIS webpage has been updated to encourage parties to provide an email address in any hard-copy submissions for quicker responses.
- Abbreviated Narrative Account of Certain Disclosures
BIS has adopted an abbreviated “narrative account” option for parties that disclose violations where aggravating factors are not present. The abbreviated narrative account should briefly describe the nature of the potential violations as outlined in EAR Section 764.5(c)(3). Parties do not need to include all of the accompanying documentation outlined in EAR Section 764.5(c)(4), or conduct a full five-year lookback as recommended in EAR Section 764.5(c)(3), unless specifically requested by the Office of Export Enforcement (“OEE”).
In the event OEE suspects the existence of aggravating factors that were not disclosed, the OEE Director will request all accompanying documentation and a full five-year lookback. For VSDs with aggravating factors, parties should continue to conduct a thorough review of all export-related transactions regarding potential violations. BIS continues to recommend such review cover a period up to five years prior to the date of the initial notification.
- Bundling Minor or Technical Violations
In addition to the “fast track” resolution policy for VSDs that involve minor or technical infractions (i.e., those without aggravating factors), which now includes the abbreviated narrative account described above, parties may also bundle multiple minor or technical violations into one overarching submission if the violations occurred close in time. Parties may submit a single VSD submission with multiple minor or technical violations on a quarterly basis. Examples of multiple minor or technical violations include immaterial filing errors of electronic export information, certain inadvertent record keeping violations, and the use of an incorrect license exception where another license exception was available.
- Treatment of Unlawfully Exported Items
BIS has implemented an expedited process for handling requests to take corrective action for unlawfully exported items. In addition to submitting a formal request to BIS’ Office of Exporter Services to request special permission to deal with an item subject to a VSD (e.g., buying, disposing of, transferring, or storing the item), parties should also email courtesy copies of such requests to OEE to help expedite the review process. Further, any person (i.e., not just a party submitting a VSD) may notify the OEE Director that a violation has occurred and request permission from the Office of Exporter Services to engage in otherwise prohibited activities. OEE’s presumptive recommendation will be for BIS to authorize reexports for parties seeking to return an unlawfully exported item back to the United States from abroad, regardless of who is seeking such permission.