Export Controls: A National Security Tool Implemented and Enforced by the United States and Key Allies | BakerHotelier

From June 29, 2022 through July 1, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) held its 35th Annual Export Controls and Policy Update Conference (Update ) in Washington, DC. This important event included keynote speeches from Commerce Department Secretary Raimondo, Director of National Intelligence Haines and Commerce Department Assistant Secretary Graves as well as attendance by officials from the United Kingdom, European Union and Japan. . Presentations detailed the growing importance of export controls as a US and global national security tool and their effectiveness in restricting Russia’s access to sensitive technology and its ability to support its military. The development of a global framework to monitor, implement and enforce export controls against Russia and countries supporting Russia was another important theme highlighted by keynote speakers, the international delegation and senior government officials. BRI. In addition to policy updates, subject matter experts from BIS, the Department of State, and the Department of Defense provided comprehensive updates on changes to export control regulations and export control regimes. licenses as well as the application. Some highlights and takeaways from this annual conference are summarized below.

BIS 2022 Annual Update Conference: Some Highlights and Takeaways

Cooperation with key allies has led to a significant drop in Russia’s access to sensitive technologies

Keynote speakers and senior BIS officials made it clear that the Biden administration remains steadfastly focused on isolating the Russian government and military from access to U.S. and global technology and is working closely with 37 others. country for this purpose. The critical nature of strong and effective Russia-focused cooperative efforts between and among the United States, the European Union (EU), the United Kingdom (UK), Japan and other key regional partner countries and their Commitment to “monitor, implement and enforce Russia Sanctions” was repeatedly emphasized. The BRI noted that the US government estimates that shipments to Russia of critical technology semiconductor chips are down 90% from shipments the previous year due to cooperation between the EU, the Kingdom United Kingdom, Japan and other key regional partners. In addition, senior Commerce Department officials have repeatedly used words and phrases such as “squeeze” and “insulate” Russia from any access to technology and have stated that the BRI will “aggressively enforce” the US sanctions laws against Russia and Belarus. They also made it clear that BIS will “err on the side of national security” when assessing Russia’s access to American technology and will vigorously enforce laws against those who violate them.

The BIS noted that as part of the effort to foster multilateral cooperation, U.S. government agencies, including the intelligence community, receive and provide key information to countries of trust (at the personnel and senior level). direction) from all over the world in Europe and Asia on technology transfer. threats posed by Russia and China. Companies should be aware that the U.S. Government may share export control information filed with BIS or another agency with allied national governments, even if the information has been submitted to the U.S. Government as “confidential matters”. if BIS determines that sharing is justified for national security purposes.

China also remains a priority

While a significant portion of the update focused on Russia, the BRI has repeatedly stated that China remains a top concern for the BRI and the US government. Keynote speakers and BRI officials said China has made clear its intention to develop critical technologies that would enable it to become a nation close to the United States, Europe and Asian countries in technological capabilities. Speakers noted that China is currently seeking to further develop its semiconductor technology, quantum computing and additive manufacturing capabilities, among others, and that China’s strong civil-military fusion is central to its technological development. .

Significant Changes in the Application of Export Administration Regulations

“Law enforcement is essential to national security” was a recurring theme from BRI speakers. BRI export law enforcement officials have signaled their intention to be more “aggressive” (a term used repeatedly) in investigating and enforcing U.S. export and anti-export regulations. -boycott. As such, businesses should expect a stricter BRI enforcement regime in 2022 compared to previous years.

During the update, Assistant Secretary for Export Enforcement Axelrod announced four new policies and/or points of attention that are being implemented by the Office of Export Enforcement (OEE):

  1. The OEE will focus extra attention and effort on cases it deems gross or “serious” violations and seek “serious sanctions” for those matters.
    • Failure to invest in an export compliance program is an aggravating factor that will result in stiffer penalties.
  2. The OEE will no longer accept or approve “no admit/no deny” resolutions with companies that resolve cases with the EE.
    • Companies must now admit the underlying behavior to receive mitigating credit for settling the case.
  3. In certain non-serious cases, instead of imposing a monetary penalty, the OEE will focus settlements on ensuring remedial action by imposing a conditional denial order with compliance conditions, which may include training, audits and other compliance requirements.
    • Significantly, failure to properly complete the repair may result in the application of the suspended denial order.
  4. BIS will expedite (60 day target) the resolution of “minor and technical” violations in which there has been a voluntary self-disclosure (VSD) and all other VSDs will be escalated in importance within the OEE with assignment to a OEE Special Agent and an Office of the Chief Prosecutor and, if applicable, the Department of Justice, whether or not the matter was voluntarily disclosed.
    • This revised VOD policy alerts us that the OEE will be issuing financial and other penalties for more VOD issues and that the monetary penalties will be higher. Further, Assistant Secretary Axelrod’s statement that the referral of VSDs involving serious issues to the Department of Justice (DOJ) is clear evidence of the OEE’s more aggressive enforcement posture.
    • Additionally, Assistant Secretary Axelrod noted that to receive a mitigation credit from the DOJ, the company must have submitted a VSD to the DOJ. Thus, companies should consider submitting a VSD to both the OEE and the DOJ in the event of serious export control violations.

Assistant Secretary Axelrod also pointed to the June 2 EAR amendment requiring all letters of indictment filed with an administrative law judge to be made public upon filing. Assistant Secretary Axelrod confirmed that offers charge letters will not be made public upon issuance.

OEE officials also noted that its staff had recently visited more than 500 US companies regarding Russia, and had also increased contact with US academic research institutions on technology transfer issues (mostly focused on China). BRI management also reported that the OEE has continued to increase its field office staff resources in the United States and globally (for example, additional export analyst resources are sent to Asia, in Europe and Canada), and that the OEE field office in Phoenix is ​​being upgraded to a full field office. given the US government’s increased focus on the safety of semiconductor technology and the fact that the Phoenix area has a strong and growing semiconductor industry. The BRI also noted that it receives intelligence on weapons captured in Ukraine and, in some cases, it may follow up on intelligence gathered for diversion and/or export control violations (for example, an example provided was that some semiconductor chips used in household appliances are being diverted for use in Russian weapons systems; and if this is true, BIS may contact the US company that made the chip to gather additional information so that the ‘OEE can better understand how the technology has been misused).

Updates from the Department of State’s Directorate of Defense Commerce Controls

A senior official from the Department of State’s Directorate of Defense Trade Controls (DDTC) provided a detailed update on developments related to the DDTC and the International Traffic in Arms Regulations (ITAR). DDTC’s licensing volume is stable at over 23,000 licenses and over 150 commodity jurisdictions (CJs) over the past year and average processing times of 47 days. In addition, 18% of license applications are returned without action. The DDTC has announced that an “Open General License Pilot Program” will soon be released by Federal Register the notice will be similar to the UK’s Open General Export License (OGEL) scheme under which exporters can self-certify and use an OGEL. This program will be available for exports to the UK, Australia and Canada. The DDTC also said a proposed rule moving all ITAR exemptions to a single section will soon be posted for comment, and that it is working on the comments revising the definition of U.S. person for deemed export purposes and plans to publish a final rule within the next month. Other announcements included a discussion of the revised defense service definition and a reminder of the September effective date of the reorganization of definitions in ITAR Part 120.

Conclusion

Export controls have become an important and popular national security and foreign policy tool for the United States and our allies and we expect new controls to continue to be implemented, monitored and enforced in various areas, especially with regard to Russia, China, newly controlled. technologies, and military end uses and end users. We also expect an increase in the number of cases referred for criminal prosecution as well as a significant increase in administrative export enforcement cases. With the monetary penalty for an administrative violation of the EAR now exceeding $330,000, the revised VOD policy, and the longstanding basis of strict liability for administrative matters, it is clear that there has never been a time more important to comply with US export controls. and ensure that your company has a properly tailored and fully implemented written compliance program.

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