8:32am It couldn’t be more clear that the law and order folks are running this session when Deputy Assistant Secretary for Export Enforcement Wendy Wysong introduces herself by way of a stern command to turn off cellphones.
8:35 Applause for Wysong’s new boss Darryl Jackson, Assistant Secretary for Export Enforcement, who’s not speaking today
8:36 Wysong yields the floor to Michael Turner, Director of the Office of Export Enforcement
8:38 It’s show and tell time – Turner holds up a triggered spark gap
8:41 OEE still wants to “chat” with Karni’s alleged co-conspirator Humayun Khan, who apparently remains free in Pakistan. That implies that OEE has not interviewed him to date. Has any other federal law enforcement agency spoken with Khan? The FBI’s attaché in Islamabad maybe? Or are the Pakistanis keeping him bottled up?
8:43 FY05 enforcement stats: 31 criminal convictions, $7.7 million in criminal fines, 69 administrative cases (the slide actually indicated 74*), $6.8 million administrative penalties
8:48 Enforcement initiatives for the next year: (1) Compliance reviews of licenses issued for deemed export transfers, will selectively review and follow up and (2) Crackdown on companies who don’t bother to apply for deemed export licenses in the first place, including the examination of visa information to indicate
8:49 Over to Director of the Office of Enforcement Analysis Tom Andrukonis
8:50 OEA are “the guys with green eye shades behind the desk” in contrast to the pistol-packin’ OEE types
8:52 Who carries out end-use checks? (1) Sentinel teams: BIS enforcement agents who travel to foreign countries to complete a large number of end-use checks in one trip; (2) non-BIS USG personnel (e.g. foreign service officers, commercial service officers); (3) BIS enforcement officials resident in several key locations abroad
8:54 End-use checks stats for FY05: 505 post-shipment verifications of which 7.5% had unfavorable outcomes, 256 pre-license checks of which 8.5% were unfavorable
8:57 Licensing tips: review application carefully and provide points of contact at foreign consignees (and their phone numbers)
8:59 BIS is doing end use checks in some cases even where a license wasn’t required (i.e. exports authorized under license exception or NLR)
9:01 OEA uses AES to check up on exporters’ compliance with license conditions
9:02 Acting Director of the Office of Antiboycott Compliance Ned Weant steps up to the podium
9:02 Pats self on back for USG’s success in convincing Arab countries to dismantle their boycott of Israel (to be fair, he does mention that Bahrain’s parliament is getting cold feet)
9:04 Interesting…Weant’s talking about the boycott by “US religious groups” of Caterpillar for supplying bulldozers to the Israeli military (which some also argue violates the Arms Export Control Act)…OAC got calls asking if this boycott violated the Commerce Antiboycott regs….it does not
9:08 Iraq continues to sustain the boycott. Oops. At least nobody tried to justify the war with that one.
9:09 Libya, too.
9:10 Weant wants you to call his office if you suspect noncompliance. Your employer would really, really prefer that you call the legal department first.
9:16 Administrative Case Review Board – internal BIS committee which advises the assistant secretary on enforcement cases; members are the DAS for EE, bureau chief counsel, OAC director and OEE director; exporters can make written submissions to the ACRB
9:17 Wysong says she looked at every case resulting from a voluntary self disclosure over the past two years and that BIS has given at least a 50% reduction from the maximum fine possible in all cases with three exceptions. Only 27 of over 200 disclosures over the past two years have resulted in administrative penalties (and zero criminal cases). The three exceptions involved either only partial disclosures or other significant aggravating factors. Penalty calculation: 50% reduction from the maximum off the bat for a VSD and then take into account mitigating and aggravating factors.
9:22 Wysong: “It is very unlikely that the penalty will ever be below 50% without a voluntary self disclosure.” (i.e. if BIS discovers the violation)
9:23 VSD stats: 75 in FY 2004 (40 resolved, 5 charging letters), 145 in FY 2005 (no charges yet)
9:33 Q: Which two Arab counties are dropping their boycott? A: Bahrain and Oman
9:34 Q: What is your authority in imposing denial orders (since the Export Administration Act is expired)? A: We believe we have the authority, but there is pending litigation on this so we're going to punt to the chief counsel’s office.
9:35 Q: Are there specific guidelines for exporters to conduct their own PSVs? A: We provide guidelines to the officials conducting the request. (I think there was a bit of a misunderstanding of the question here.)
9:36 Q: What does an “unfavorable” PSV mean? Which countries do you have these outcomes in? A: If an end user has violated one or more license conditions or just won’t cooperate. Unfavorables are not concentrated in a few countries.
9:38 Q: Have you considered a sliding scale for penalties if the maximum goes up? A: Yes.
9:39 Q: Give you give an example of how poor record keeping can be injurious to an exporter? A: Five year retention is specifically required under the EAR and a concealed or altered document can lead to other charges, some of which are criminal.
9:41 Q: Is BIS reaching out to banks on antiboycott issues due to their role in letters of credit? A: Banks are primary callers to OAC advice line and we’re very involved with them.
9:42 Q: Can you tell us what percentage of cases resulted in no action or warning letters only? A: We didn’t track these very well prior to 2004. (She already told us this, see 9:23 above.)
9:44 Q: On antiboycott side, you seem to almost always issue some penalty even for a first time failure to report? Can you tell us about your forthcoming penalty guidelines? A: Guidelines will be similar in many respects. It’s not necessarily true that first time violators are always penalized.
9:45 Q: Can we get some additional hard copies of “Don’t Let This Happen to You!” A: We have limited quantities, you can download it, too. (Here's the link in pdf)
9:46 Q: The FBI is making cooperation more difficult now that they’re collaborating more with OEE and ICE. A: “The FBI really is conducting outreach with us.” “The FBI has been growing into an export enforcement area” especially in foreign counterintelligence related cases. If you get a subpoena it’s an investigation not outreach.
9:49 Q: Is reporting a violation anonymous? For a criminal charge is criminal intent required? A: Yes and yes. (Sounds like someone is both angry and thorough.)
9:50 Q: Why aren’t VSDs on the BIS website? It would be nice to know more about them – industries, products, even if no names. A: Administrative penalties are on the website, warning letters and no actions are not.
9:52 Q: I don’t see OEE focusing on software. Will this change? A: “We’ll be taking a look at various sectors in the software industry”, possibly encryption and other sensitive software.
9:53 Q: How do you use AES to find suspicious exports? A: AES has been a big help. Look at parties of interest, what are US parties sending, what are foreigners receiving, countries, values, etc.
9:56 Q: How do you handle repeat offenders? A: Successive violations are an aggravating factor. Previous cases can establish a base of knowledge which may contribute to criminal intent in subsequent violations. In settlement negotiations, companies will often agree to improvements in their compliance program….also suspended denial orders as a sort of probations. Also audit conditions in some recent settlements.
9:59 Q: How does BIS deal with violations inherited in an acquisition? A: We’ll look at if due diligence was done, but that doesn’t get you off the hook.
10:00 Q: Can you expand on the audit requirement you mentioned in relation to settlements? A: It’s new, if there are reasons to doubt their commitment we may require it. If a company proposes it, “we’ll certainly look on it favorably in the right circumstances.”
*UPDATE: Michael Turner writes to clarify: "The slide captured both dual-use and anti-boycott administrative cases. The 69 number is dual use, the remainder is anti-boycott. Sorry for any confusion."