Apr

3

Piling On


Posted by at 8:15 pm on April 3, 2012
Category: BIS

Piling OnBack when the Bureau of Industry and Security (“BIS”) was begging Congress to give it authority to increase the amount of penalties it could impose, it said that higher penalties would avoid the need for creative charging letters which allege that a single action constitutes four, five, six or more separate violations. For a while, BIS seemed to stick to its word after Congress essentially gave BIS the power to fine exporters in amounts equal to the gross domestic products of certain small countries.

But good intentions, like party balloons, are ephemeral. Look at the settlement documents recently released by BIS pursuant to which Dresser, Inc. agreed to pay $88,000 to settle charges of export violations. In that charging letter, BIS resurrects from its deserved grave the old practice, thought to be forsworn, of adding a separate count for an S.E.D. violation to each and every export count. The first ten counts allege export of control valves classified as ECCN 2B350 without a license. The next 10 counts are for S.E.D. violations for each of the ten preceding export violations. For nine of the ten S.E.D. violations, the only alleged misstatement was “N.L.R.,” or “No License Required” when in fact licenses were required. Of course, every export violation where an S.E.D. is required and the exporter fails to get a license will necessarily involve this same S.E.D. violation, effectively increasing the maximum penalty for export violations from $250,000 to $500,000.

One of the charged S.E.D. violations also involves an alleged failure by the company to state the correct ECCN on the S.E.D. It’s not entirely clear what ECCN was listed. If the incorrect ECCN charged was EAR99, then this will necessarily occur with every export violation. It also seems likely that the other nine S.E.Ds showed EAR99 as the ECCN, making it unclear as to why just one instance of this was singled out.

Also puzzling here was why BIS engaged in this piling on of charges where the ultimate penalty was $88,000 and didn’t require these charging gymnastics. Where the exporter has purposefully given a false description of the item exported in order to export it without a license, I can see some justification for adding an S.E.D. charge. But there is absolutely nothing in this case to suggest that the S.E.D.s called the exported items anything but what they were: control valves.

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2 Comments:


Given how old the violations are (2002 to 2005), I think what happened was the voluntary disclosure was filed in 2006, prior to the IEEPA Enhancement Act, and a charging document was then drafted based on the prior practice that got stuck in a BIS time warp and never updated (probably because it was in an outdated version of Word Perfect). Still, this will be good for lawyers trying to scare the bejesus belt out of their clients.

Comment by C. Stein on April 4th, 2012 @ 12:16 pm