Export Administration Regulations Archives | Customs & International Trade Law Blog

DoJ Declines Prosecution of Company That Self-Disclosed Export Control Offenses

The Justice Department announced that it will not be prosecuting Universities Space Research Association (USRA) for violations of U.S. export control laws, citing prompt self-disclosure and cooperation.

EAR Violation

In 2016, USRA was granted a contract with NASA to license and distribute

aeronautics-related and U.S. Army-owned flight control software. Jonathan Soong was employed by USRA and was responsible for performing due diligence on prospective purchasers. Soong willfully exported software subject to the Export Administration Regulations (EAR) to Beijing University, knowing that an export control license was required for the export because it was on the Entity List.

Soong used an intermediary to avoid detection, and embezzled tens of thousands of dollars in software license sales. He ultimately plead guilty to willfully violating the EAR. He was sentenced to 20 months in prison.

Company Disclosure & Remediation

Within days of learning of Soong’s actions, USRA self-disclosed the violation to the Department’s National Security Division (NSD). The company fully cooperated with the ensuing criminal investigation, which eventually established that Soong had acted alone.

USRA’s cooperation included proactively collecting and disclosing evidence and providing detailed and timely responses to the government’s requests for information. USRA remediated the root cause of the misconduct by disciplining an employee who failed to appropriately supervise Soong, and by improving its internal controls and compliance program.

USRA also compensated the government both for the funds Soong embezzled, and for the time Soong had spent embezzling funds instead of performing his duties under the contract with NASA.

The DoJ cited the timely disclosure, cooperation, and remediation […]

By Jennifer Diaz|2025-05-07T16:07:04-04:00May 7, 2025|EAR, Export|Comments Off

ICYMI: G7 Issues Guidance on Preventing Evasion of Export Controls and Sanctions Imposed on Russia

The United States, Canada, France, Germany, Italy, Japan, the United Kingdom, and the European Union (the G7) published joint guidance for industry on preventing evasion of the export controls and sanctions imposed on Russia.

The goal of the guidance is to protect common high priority list items from misappropriation, prevent reputational harm, and mitigate liability risk. The guidance aims to assist industry with complying with multilateral export controls and sanctions and with identifying evolving Russian evasion practices.

The guidance outlines three priority areas: Items that pose a heightened risk of being diverted to Russia, red flag indicators of potential evasion, and best practices to address red flags.

1. The Common High Priority List (CHPL)

The European Union, Japan, the United Kingdom, and the United States developed the CHPL to identify items that pose a heightened risk of illicit diversion to Russia. Items include:

Integrated circuits
Navigational instruments
Digital cameras
Transistors
Signal generators
Milling machines

See the full CHPL here.

2. Red Flag Indicators

The G7 identified the following red flags indicators of potential export control and sanctions evasion:

Sudden changes in business activity after February 24, 2022
Fales, inaccurate, or misleading documentation
Concealing the end user
Inconsistencies in the transaction
Vague details and/or incomplete information
Dividing invoices
Suspicious customer information

3. Best Practices

The G7 calls on responsible traders to improve export compliance systems and exercise enhanced due diligence. Specifically, following these steps when encountering any red flags:

Run transaction parties against applicable public sanctions lists
Conduct additional due diligence
Analyze the risk of export control and/or […]

By Jennifer Diaz|2024-10-11T11:23:50-04:00October 11, 2024|Export|Comments Off

BIS Issues Final Rule on VSD Policies and Penalty Guidelines

BIS recently issued a final rule to amend the Export Administration Regulations (EAR), making several changes to their Voluntary Self Disclosure (VSD) policies, as well as updates to guidance on penalty determinations.

The rule codifies previously announced policy changes through several Policy Memoranda including an April 2023 memorandum on voluntary-self disclosures, and a June 2022 memorandum on strengthening administrative enforcement.

Revisions to Voluntary Self-Disclosures

The rule makes both substantive and procedural changes to the VSD policies:

Addition of non-disclosure as an aggravating factor – the new rule makes clear that BIS will consider a deliberate decision to not disclose a violation as an aggravated factor when determining what administrative sanctions will be imposed.
New dual track for processing VSDs – one track for minor or technical violations, the other for significant violations.
Authorizes any person (not just the party submitting a VSD) to notify the Director of BIS’s Office of Export Enforcement (OEE) that a violation has occurred and to request permission to engage in corrective activities.

Revisions to Penalty Guidelines

This rule makes several changes to the BIS Penalty Guidelines, including:

Changes the base penalty caps:
1. Non-egregious VSD cases: was $125,000, now one-half of the transaction value.
2. Non-egregious cases that are not initiated by a VSD: was $250,000, now the full transaction value.
Permits BIS to use non-monetary penalties to resolve cases that are not egregious and have not resulted in national security harm, but rise above the level of cases warranting a warning letter.
Removes from the BIS […]

By Jennifer Diaz|2024-09-26T15:59:58-04:00September 26, 2024|EAR, Export, U.S. Bureau of Industry and Security (BIS)|Comments Off

BIS Issues New Guidelines for Preparing Export License Applications Involving Foreign Persons (Deemed Exports/Reexports)

The Bureau of Industry and Security (BIS) issued new guidelines to assist deemed export applicants in obtaining licenses. The guidelines primarily apply to employment situations; however, they also address other situations such as the release of controlled technology to foreign students participating in research.

The guidelines cover basic requirements for applying and renewal and include an application checklist.

Background on Licenses for Deemed Exports/Reexports

The obligation to obtain an export license from BIS before releasing controlled technology to a foreign person is informally referred to as a “deemed” export. The release is considered an export to the person’s country or countries of nationality.

The Export Administration Regulations (EAR), Section 734.13, defines a deemed export as releasing or otherwise transferring “technology” or “source code” to a foreign person in the United States.

Typical organizations using deemed export licenses include universities, research institutions, bio-chemical firms, medical organizations, and computer companies.

New Guidance

The basic guidance for filling out license applications is set forth in Supplement 1 to part 748 of the EAR. The new guidelines supplement the basic guidance and are intended to assist licensing officers in reviewing license applications more efficiently.

Basic Requirements

The guidelines reiterate that applicants must include all the necessary information and documentation required when submitting a license application. BIS will return applications with insufficient information.

Basic documentation required:

By Jennifer Diaz|2024-09-13T11:58:26-04:00September 13, 2024|Export, U.S. Bureau of Industry and Security (BIS)|Comments Off

ICYMI: Congress Doubles the Statute of Limitations for Sanctions Violations

On April 24, 2024, President Biden signed into law H.R. 815, an emergency supplemental appropriations bill that included spending for Israel and Ukraine, along with other priorities such as data protection from foreign adversaries.

Within the fentanyl trafficking section, the bill included a provision that doubles the statute of limitations for all sanctions violations from five to 10 years. It also extended the limitation for certain export control violations such as biological weapon proliferation.

On September 11, 2024, the Department of Treasury’s Office of Foreign Assets Control (OFAC) issued an interim final rule amending their Reporting, Procedures and Penalties Regulations to reflect the new statute of limitations. The new rule extends recordkeeping requirements for certain transactions from five to 10 years.

Impact

This policy change will change how exporters keep records, maintain compliance programs, and conduct due diligence. It also allows more time for the government to investigate violations.

Government

The Department of Justice and the Department of Treasury’s Office of Foreign Assets Control (OFAC) are the primary authorities that will benefit from this policy change. Agency officials and prosecutors will now have twice as much time to investigate and bring charges against exporters.

The majority of federal crimes currently have a five-year statute of limitations. Some serious crimes such as capital murder or treason have no statute of limitations, other serious crimes such as embezzlement from a federal financial institution or racketeering have a 10 year limit.

Congress deliberately extending the limitations period in line with serious federal crimes sends a clear […]

By Jennifer Diaz|2024-09-13T12:01:08-04:00June 21, 2024|EAR, Export, U.S. Office of Foreign Assets Control (OFAC)|Comments Off

ICYMI: Commerce, Treasury, and Justice Issue Compliance Note on Obligations of Foreign-Based Persons to Comply with U.S. Export Laws

On March 6, 2024, the Department of Commerce, Department of the Treasury, and Department of Justice issued a tri-seal compliance note titled: “Obligations of foreign-based persons to comply with U.S. sanctions and export control laws.”

The note:

Highlights the applicability of U.S. sanctions and export control laws to persons and entities located abroad;
Outlines the enforcement mechanisms that are available for the U.S. government to hold non-U.S. persons accountable for violations of such laws; and
Provides an overview of compliance considerations for non-U.S. companies and compliance measures to help mitigate their risk

Applicability of U.S. Sanctions and Export Control Laws to Foreign-Based Persons

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions, primarily against foreign jurisdictions but also against individuals and entities such as traffickers and terrorists.

The following persons/entities must comply with OFAC regulations:

U.S. citizens and permanent resident aliens
All persons within the United States
All U.S.-incorporated entities and their foreign branches

In certain sanctions programs, foreign entities owned or controlled by U.S. persons also must comply with applicable restrictions – such as engaging in a transaction with the government of Iran. Certain sanctions programs also require foreign persons in possession of U.S.-origin goods to comply.

Non-U.S. persons are also subject to certain OFAC prohibitions. For example, non-U.S. persons are prohibited from causing or conspiring to cause U.S. persons to wittingly or unwittingly violate U.S. sanctions, as well as engaging in conduct that evades U.S. sanctions.

Applicability of U.S. Export Control Laws

The compliance […]

By Jennifer Diaz|2024-03-15T13:13:23-04:00March 15, 2024|EAR, Export, U.S. Department of Commerce (DOC), U.S. Department of Justice (DOJ)|Comments Off

Significant Updates to BIS Enforcement Policies in 2022

Diaz Trade Law’s President, Jennifer Diaz, Associate Attorney Sharath Patil, are enthusiastic to announce Bloomberg Law published another one of our articles, “Significant Updates to BIS Enforcement Policies in 2022“! Below is the article reproduced with permission for your reading pleasure. You can read the article here (where you’ll have the ability to access all of the great hyperlinks). Please note you cannot click on the hyperlinks below.

We’d love to hear your feedback!

[…]

By Jennifer Diaz|2022-11-08T14:42:31-05:00November 8, 2022|Bloomberg, Bloomberg Export, China, Cuba, EAR, Export, International Trade, IRAN, People's Republic of China, Russia, Russian Harmful Foreign Activities Sanctions Regulations, U.S. Bureau of Industry and Security (BIS)|Comments Off

Understanding the RPL Export License Exception

U.S. exporters have an important responsibility to adhere to U.S. export control laws, including the Export Administration Regulations (“EAR”). Administered by the U.S. Commerce Department, the EAR is a set of regulations which governs whether U.S. persons may export or transfer goods, software, and technology outside of the United States or to non-U.S. citizens. U.S. exporters have an important responsibility to adhere to the EAR. Violations of the EAR carry hefty civil and criminal penalties. Exporters can pay hundreds of thousands of dollars in penalties, lose export privileges, and even be imprisoned.

Licensing Exception for “Servicing and Replacement of Parts and Equipment” (RPL)

An export license under the EAR is not necessary if the License Exception for “Servicing and Replacement of Parts and Equipment” (“RPL”) applies. License Exception RPL is described under Part 740.10 of the EAR. RPL is known as a transaction-based exception because the availability/applicability of the exception is based on the terms of the transaction.

According to BIS guidance, the RPL License Exception may be used for the two following scenarios:

Replacement Parts – This authorizes the export and reexport of replacement parts for the immediate repair of previously exported, reexported or foreign made equipment incorporating U.S. origin parts on a one-for-one replacement basis. It also authorizes the export and reexport of stock spare parts that were authorized to accompany the export of equipment.
Servicing and Replacement – Replacements for defective or unacceptable U.S.-origin equipment. (a) The commodity or software to be replaced must have been […]

By Jennifer Diaz|2022-08-22T15:53:35-04:00August 30, 2022|EAR, EEI, Export, International Trade, U.S. Bureau of Industry and Security (BIS)|2 Comments

Encryption Controls under the Export Administration Regulations

Encryption is generally defined as the process of converting information or data into a code, especially to prevent unauthorized access. Put simply, encryption makes a wide range of technologies more secure. Since 1996, most encrypted technology is controlled by the EAR. Some encrypted technology, which has military-related functionalities, is controlled by the International Traffic in Arms Regulations (“ITAR”). This article provides an overview of encryption controls under the EAR, outlines license exceptions for certain encrypted technologies, and provides best practices for export compliance.

Background on Export Administration Regulations

Over 95% of the world’s population is outside of the United States. Opportunities abound for U.S. companies that export. However, exporting is a privilege and not a right. U.S. exporters have an important responsibility to adhere to U.S. export control laws, including the Export Administration Regulations (“EAR”).

Administered by the U.S. Commerce Department, the EAR is a set of regulations which governs whether U.S. persons may export or transfer goods, software, and technology outside of the United States or to non-U.S. citizens. U.S. exporters have an important responsibility to adhere to the EAR. Violations of the EAR carry hefty civil and criminal penalties. Exporters can pay hundreds of thousands of dollars in penalties, lose export privileges, and even be imprisoned.

Encryption Controls

According to 15 CFR 742.15:

“Encryption items can be used to maintain the secrecy of information, and thereby may be used by persons abroad to harm U.S. national security, foreign policy and law enforcement interests. The United States has a critical interest in ensuring that […]

By Jennifer Diaz|2022-09-09T08:08:45-04:00August 24, 2022|EAR, EEI, Export, ITAR, U.S. Bureau of Industry and Security (BIS), U.S. Census Bureau, U.S. Department of Commerce (DOC), U.S. Department of State (DOS)|1 Comment

$432k Penalty From BIS Stresses Importance of Export Compliance

Building and maintaining a strong export compliance program is essential if you don’t want your company to become a headline. The Bureau of Industry and Security (BIS) announced an administrative settlement with a penalty amount of $432,570, for Alfa Laval US of Richmond, VA and Alfa Laval Middle East Ltd. of the United Emirates for alleged violations of the Export Administration Regulations.

Do you know if your company is meeting export regulations and obligations? Obtaining counsel who is an expert in export compliance is the first step. Are your employees/staff trained in all exporting issues? Our one-hour webinar is a must attend to help provide you with a foundation of tools and key elements that must be included in your export compliance program. Register today to hear from the following experts:

[…]