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US Commerce Department Releases Updated Enforcement Guidance Regarding Antiboycott Violations

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On October 6, 2022, the Assistant Secretary for Export Enforcement issued a policy aimed at enhancing enforcement of the antiboycott rules administered by the US Department of Commerce (“Commerce”). The following day a final rule came into effect updating Commerce’s guidance on charging and penalty determinations related to violations of the antiboycott provisions of the Export Administration Regulations (the “EAR”). The changes are intended to bring penalty determinations in line with Commerce’s current view of the severity of certain types of antiboycott violations.

The key updates are as follows:

  • Commerce will begin seeking higher penalties than it has in the past. Commerce categorizes violations into three groups, A – C, with Category A being the most serious. Commerce indicated that it will use the maximum penalty as the starting point for its calculation of all Category A penalties (currently $328,121 or twice the value of the underlying transaction), a denial order, and/or an exclusion order. Historically, only a small subset of Category A violations have received the maximum penalty. Commerce will also seek higher penalties for Categories B and C violations, although no further detail regarding the increase was provided.
  • Commerce will require a company that enters into a settlement agreement related to antiboycott violations to admit to a statement of facts regarding the company’s misconduct. Previously, a company may have been able to enter into a settlement agreement and pay a reduced penalty without having admitted to the violation.
  • Commerce will increasingly focus on bringing enforcement actions against non-US subsidiaries of US parent companies that violate the antiboycott provisions of the EAR.
  • Finally, in connection with the policy regarding higher penalties, Commerce has re-categorized certain violations in order not to over- or under-penalize them:
    • Violations downgraded from Category A to Category B:
      • Knowingly agreeing to refuse to do business;
      • Implementing letters of credit;
      • Furnishing information about business relationships with boycotted countries or blacklisted persons.
    • Violations upgraded from Category B to Category A:
      • Furnishing information about associations with charitable or fraternal organizations.

The complete list of violations in Categories A, B, and C is set out here.

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Author

Paul Amberg is a partner in Baker McKenzie’s Madrid office, where he handles international trade and compliance issues. He advises multinational companies on export controls, trade sanctions, antiboycott rules, customs laws, anticorruption laws, and commercial law matters. Paul helps clients assess and address compliance risks presented by export controls, trade sanctions, antiboycott rules, customs laws, and anticorruption laws. His practice especially focuses on internal reviews, voluntary disclosure filings, and enforcement actions brought by, the US Government in relation to the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), trade and economic sanctions programs, and US customs laws.

Author

Callie C. Lefevre is an associate in the Washington, DC office where she is a member of the International Practice Group. Her practice is focused on all aspects of International Trade law, particularly compliance with US export controls, trade and economic sanctions, and US foreign investment restrictions. *Admitted in New York only. Practice limited to matters and proceedings before US courts and federal agencies.

Author

Daniel’s practice focuses on US economic and trade sanctions, including those targeting Iran, Russia, Cuba, Syria, and North Korea, export controls, and anti-boycott laws. He represents clients in national security reviews before the Committee on Foreign Investment in the United States (CFIUS), and has experience in federal court litigation and congressional investigations. His pro bono practice includes providing sanctions and export control advice to a global humanitarian NGO.

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