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Civil Monetary Penalties

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Maria Sergeyeva recently authored the blog post “Industry Groups Push Back on Commerce Department’s Proposed Supply Chain Regulations That Could Block or Restrict Tech Transactions” for Baker McKenzie’s Global Supply Chain Compliance blog.  The post highlights concerns expressed by many trade associations and businesses with the highly anticipated proposed regulations issued by the US Department of Commerce to implement Executive Order 13873, “Securing the Information and Communications Technology and Services Supply Chain.”  Executive Order 13873…

On November 26, 2019, the US Department of Commerce (“Commerce”) issued a highly anticipated proposed rule with proposed regulations (“Proposed Regulations”) to implement Executive Order 13873, “Securing the Information and Communications Technology and Services Supply Chain” (“Executive Order 13873“).

Executive Order 13873 gives the Secretary of Commerce (“Secretary”) sweeping, unprecedented authority to prevent or modify transactions involving information and communications technology and services (“ICTS”) originating in countries designated as “foreign adversaries” which pose an undue risk to critical infrastructure or the digital economy in the United States, or an unacceptable risk to US national security or the safety of United States persons.  All industries are potentially affected by the Proposed Regulations, whether directly or indirectly, which allow for case-by-case reviews of transactions at the Secretary’s discretion.  Any transaction that is ongoing as of, or was initiated on or after, May 15, 2019, can be reviewed and there is no mechanism by which a company may seek to clear transactions in advance.

A summary of the background and the Proposed Regulations is provided below:

The US Treasury Department’s Office of Foreign Assets Control (“OFAC”), the US State Department (“State”), and the US Commerce Department (“Commerce”) issued rules adjusting maximum civil monetary penalties (“CMPs”) under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (“FCA”).

The US Treasury Department’s Office of Foreign Assets Control (“OFAC”), the US State Department’s Directorate of Defense Trade Control (“DDTC”), and the US Commerce Department’s Bureau of Industry and Security (“BIS”) have announced increases in the maximum civil monetary penalties (“CMPs”) under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (“2015 Act”). This statute requires the agencies to make such adjustments annually by January 15 of each year.  These newly adjusted CMPs may be imposed for violations of OFAC sanctions regulations, the International Traffic in Arms Regulations, and the Export Administration Regulations (“EAR”).