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18 July 2007
[Federal Register: July 17, 2007 (Volume 72, Number 136)]
[Rules and Regulations]
[Page 38999-39009]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17jy07-3]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
15 CFR Parts 730, 764 and 766
[Docket No. 0612242577-7145-01]
RIN 0694-AD63
Antiboycott Penalty Guidelines
AGENCY: Bureau of Industry and Security, Commerce.
ACTION: Final rule.
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SUMMARY: This rule sets forth BIS policy concerning voluntary self-
disclosures of violations of part 760 (Restrictive Trade Practices or
Boycotts) of the Export Administration Regulations (EAR) and violations
of part 762 (Recordkeeping) of the EAR that relate to part 760. This
rule also sets forth the factors that the Bureau of Industry and
Security (BIS) considers when deciding whether to pursue administrative
charges or settle allegations of such violations as well as the factors
that BIS considers when deciding what level of penalty to seek in
administrative antiboycott cases.
DATES: This rule is effective August 16, 2007.
FOR FURTHER INFORMATION CONTACT: Edward O. Weant III, Director, Office
of Antiboycott Compliance, Bureau of Industry and Security, United
States Department of Commerce, at (202) 482-2381.
SUPPLEMENTARY INFORMATION:
Background
Part 760 of the EAR--Restrictive Trade Practices or Boycotts--
prohibits U.S. persons from taking or knowingly agreeing to take
certain actions with intent to comply with, further, or support an
unsanctioned foreign boycott. Part 760 of the EAR also requires U.S.
persons who are recipients of requests ``* * * to take any action which
has the effect of furthering or
[[Page 39000]]
supporting a restrictive trade practice or boycott fostered or imposed
by a foreign country against a country friendly to the United States or
against any United States person * * *'' to report receipt of those
requests to BIS and whether they took the requested action. Part 762 of
the EAR--Recordkeeping--requires, inter alia, retention of certain
documents that contain information related to the prohibitions or
reporting requirements of part 760. Collectively, these provisions of
the EAR are referred to in this notice as the ``antiboycott
provisions.'' BIS administers and enforces the antiboycott provisions
through its Office of Antiboycott Compliance (OAC). On June 30, 2006,
BIS published a proposed rule regarding specific procedures for
voluntary self-disclosures of violations to OAC, guidance about how BIS
responds to violations of the antiboycott provisions, and a description
of how BIS makes penalty determinations in the settlement of
administrative enforcement cases related to the antiboycott provisions.
After reviewing the public comments on the proposed rule, BIS is
publishing this final rule.
This rule does not address disclosure provisions or penalty
determination factors in any other matters such as criminal
prosecutions for violations of the antiboycott provisions or tax
penalties that the Department of Treasury may impose for antiboycott
violations that arise pursuant to the Ribicoff Amendment to the Tax
Reform Act of 1976, as implemented by Section 999 of the Internal
Revenue Code. Voluntary self-disclosure provisions and guidance on
charging and penalty determinations in settlement of administrative
enforcement cases that are not related to the antiboycott provisions
are stated elsewhere in the EAR.
BIS received comments from two organizations regarding the proposed
rule. Collectively, the two organizations raised seven issues. Three of
the issues were general in nature and four addressed specific
provisions of the proposed rule.
General Issues Raised by the Comments
One commenter suggested that BIS consult with industry and provide
guidance on what a company's reporting structure should be. BIS
concludes that this proposal is outside the scope of the issues raised
by the proposed rule. BIS recognizes that among the entities that have
reporting obligations, one could find myriad organizational structures.
BIS believes that any tailoring of the manner of reporting to
accommodate both an organization's structure and BIS's need to properly
identify the source of reports can best be done through consultations
between the organization and BIS rather than through an amendment to
the regulations. BIS encourages organizations that have questions about
how to submit reports to contact BIS for such consultations.
One commenter suggested that BIS develop a system to allow the
public to submit boycott reports electronically. This suggestion is
outside the scope of the proposed rule.
One commenter suggested that BIS update and publish its telephone
advice guidance and look for other opportunities to provide practical
written guidance for companies to use in complying with boycott
requests. This comment is outside the scope of the proposed rule.
Comments Relating to Specific Features of the Proposed Rule
The comments address four specific issues in connection with the
proposed rule. Those four issues are: The burden that would be imposed
by new Sec. 764.8 regarding voluntary self-disclosures; whether the
provision of new Sec. 764.8(f) regarding requests to take action that
would otherwise violate Sec. 764.2(e) is contrary to prior agency
practice; whether new Sec. 764.8 should allow verbal voluntary self-
disclosures with written follow-up; and whether the rule should provide
more concrete incentives to disclose by making a warning letter the
maximum sanction for most voluntary self-disclosure cases.
Comment on Paperwork Burden
One commenter stated that BIS had underestimated the costs large
global companies would incur in complying with the voluntary disclosure
provisions. In particular, the commenter noted that a company with
decentralized operations would incur costs measured in tens of
thousands of dollars if it conducted the five-year review of all its
operations recommended by BIS. Upon review, BIS acknowledges that the
burden on large companies with decentralized operations would be
greater than estimated in the proposed rule. However, BIS believes that
such burden will be justified in many instances because of the risks to
the firm involved if it performs a less comprehensive review. The risk
of conducting a review covering a period shorter than five years or
that does not include all business units is that some violations will
be made known to OAC through other sources or during the course of an
OAC investigation initiated in response to the voluntary self-
disclosure. Such undisclosed violations would not receive the ``great
weight'' mitigating factor that BIS would apply in settlement
negotiations to voluntarily self-disclosed violations under this rule.
The larger penalties imposed for such undisclosed violations might
exceed the cost of doing a business-wide five-year search. Hence, BIS
believes that it is appropriate to recommend a five-year period for
this kind of review. BIS notes that the proposed rule and this final
rule recommend but do not require a review extending back for a period
of five years prior to the initial notification.
In the proposed rule, BIS stated that it intended to treat the
collection of information related to the voluntary self-disclosure
procedures in this rule as an extension of the scope of the collection
approved under OMB control number 0694-AD58. Based on this comment, BIS
re-evaluated the burden hours associated with this information
collection and concluded that the burden is large enough to justify a
separate collection authorization. Therefore, BIS sought and obtained
separate OMB authorization for the collection related to the voluntary
self-disclosure procedure in this rule. The collection related to the
voluntary self-disclosure procedure in this rule explicitly accounts
for the larger burden that would be imposed on large companies with
decentralized locations and is authorized under OMB control number
0694-0132 for which the estimated annual burden hours and costs are
1,280 and $51,200, respectively.
Comment on Sec. 764.8(f) and Prior Agency Practice
One commenter raised an issue concerning the implication of
proposed Sec. 764.8(f). Proposed Sec. 764.8(f) would have provided a
procedure by which a person making a voluntary self-disclosure of a
violation of the antiboycott provision may request authorization to
take certain actions with respect to the transaction. The commenter
expressed a belief that ``the current OAC practice is not to require
companies to seek BIS authorization to continue with a transaction
after filing a voluntary disclosure.'' The commenter went on to state
that ``[t]he proposed rule, however, would impose such a requirement *
* * if a company were to commit a Category B or C violation it seems
unreasonable that the company would have to file a voluntary disclosure
and then seek BIS authorization to continue with the transaction. A
more reasonable approach would be to require BIS
[[Page 39001]]
authorization only in those instances where the company voluntarily
discloses a Category A violation.''
BIS agrees that, in the past, OAC has advised members of the public
who contacted OAC via its telephone advice line a violation of part 760
does not preclude exporting in connection with the same commercial
transaction. Upon review, BIS has decided to remove paragraph (f) from
Sec. 764.8 because it is not consistent with prior agency practice.
Comment Proposing Allowing Verbal Voluntary Self-Disclosures
BIS received one comment expressing the opinion that the Bureau of
Customs and Border Protection self-disclosure procedure set forth in 19
CFR 162.74(a) is better than the procedure in the proposed rule. The
procedure in 19 CFR 162.74(a) allows an importer to make a verbal
disclosure to a Customs officer of a violation with the requirement
that the disclosure be followed up in writing within 10 days. The
commenter suggested that this Customs procedure encourages more
disclosures by allowing the importer to disclose the violation at the
earliest possible moment. The ten day written follow-up deadline
encourages accurate and complete disclosures. BIS has reviewed 19 CFR
162.74(a) and the commenter's rationale. BIS notes that 19 CFR
162.74(a) applies to penalties for certain violations related to
tariffs on imports into the United States. Compliance with the
disclosure requirements in Sec. 162.74 can allow the importer to pay a
reduced penalty as compared with violations for which no such
disclosure takes place. The penalties are set forth in 19 CFR 162.73
and 19 CFR 162.73a. Generally, the penalties are expressed as a
percentage of value of the merchandise that was the subject of the
violation. BIS believes that violations of the antiboycott provisions
are substantively different from the violations addressed by 19 CFR
162.74(a). As noted in the preamble to the proposed rule, BIS believes
that written initial notifications reduce the possibility of confusion
as to whether a particular communication was intended to be a voluntary
self-disclosure and are likely to produce more complete disclosures
than would oral disclosures. In addition, BIS believes that preparing
and submitting a written submission of the information required in an
initial notification, i.e., the name of the person making the
disclosure and a brief description of the suspected violations and
their general nature and extent, is not an onerous task. Therefore,
this final rule makes no changes to the provisions of the proposed rule
that required initial notifications to be in writing.
Comment Regarding Incentives to Self-Disclose Violations
One commenter recommended that BIS provide more concrete incentives
for making disclosures of violations of the antiboycott provisions.
This commenter noted that although new Supplement No. 2 to part 764
provides that voluntary self-disclosures be given ``GREAT WEIGHT'' as a
mitigating factor, other language in the supplement concerning the
effect of other factors as well as language in new Sec. 764.8(b)
stating that ``[t]he weight given to a voluntary self-disclosure is
solely within discretion of BIS and the effect of voluntary self-
disclosure may be outweighed by aggravating factors'' makes the
benefits of voluntary self-disclosure almost speculative and could
affect decisions to disclose. That commenter stated that BIS's proposal
``contrasts sharply with * * * customs law administration. [Where] * *
* definite advantages always flow from disclosing violations * * *.''
The commenter recommended that BIS at least adopt a position of
resolving all voluntary self-disclosure cases with a warning letter
unless the ``violation involves serious anti-boycott concerns--e.g.,
complying with boycott requests to discriminate on the basis of race,
religion, sex, or national origin, or where there are significant
aggravating factors.''
BIS notes that as stated in Sec. 764.8, the weight to be given to
any factor is solely within the discretion of BIS. Supplement No. 2 to
part 764 describes how BIS exercises that discretion. BIS's statement
in the supplement that voluntary self-disclosure made in accordance
with Sec. 764.8 be given great weight and that factors of great weight
ordinarily should be given considerably more weight than other factors
reflects the policy that BIS has followed and intends to follow in
settling administrative enforcement actions involving the antiboycott
provisions. However, given the myriad possible combinations of facts
that may be present in any given case, including a range of possible
aggravating and mitigating factors, BIS believes that it cannot
determine in advance the maximum sanction that would be appropriate for
a particular violation or combination of violations. Moreover,
attempting to do so could create incentives to violate the antiboycott
provisions in cases where the potential economic benefit to the
violator is large relative to the maximum monetary penalty. Such
incentives could occur, for example, in a situation in which a single
violation provides the violator with access to a very large market.
Changes to the EAR in This Rule
This rule creates a new Sec. 764.8 setting forth the procedures
for voluntary self-disclosure of violations of the antiboycott
provisions. It also creates a new supplement No. 2 to part 764 that
describes how BIS responds to violations of the antiboycott provisions
and how BIS makes penalty determinations in the settlement of
antiboycott administrative enforcement cases. The rule also makes
technical and conforming changes to part 766.
This rule provides specific criteria with respect to what
constitutes a voluntary self-disclosure and how voluntary self-
disclosures relate to other sources of information that OAC may have
concerning violations of the antiboycott provisions. The rule also
informs the public of the factors that BIS usually considers to be
important when settling antiboycott administrative enforcement cases.
BIS believes that publishing this information in the EAR will tend to
place all potential respondents on a more equal footing because
procedures for making voluntary self-disclosures, information about how
BIS responds to violations and how BIS makes penalty determinations in
the settlement of antiboycott administrative enforcement cases will all
be matters of public record. BIS also believes such publication will
make settlement of antiboycott administrative cases more efficient, as
respondents and BIS will be able to focus on the important factors in
antiboycott administrative enforcement cases and OAC generally expends
fewer resources to obtain information received through voluntary self-
disclosure than information obtained by other means.
This rule also revises Supp. No. 1 to part 730 of the EAR to
display the OMB control number of the newly approved collection of
information that relates to Sec. 764.8 of the EAR, which is created by
this rule.
Creation of Sec. 764.8--Voluntary Self-Disclosure of Boycott
Violations
The new Sec. 764.8 both defines what constitutes a voluntary self-
disclosure and provides the procedures for making such disclosures.
Compliance with the provisions of Sec. 764.8 is important because a
voluntary self-disclosure ``satisfying the requirements of Sec.
764.8'' is designated as a mitigating factor of ``GREAT WEIGHT'' in the
settlement of administrative cases as set forth in the new Supplement
No. 2 to part 764. Supplement No. 2 provides that such
[[Page 39002]]
factors ``will ordinarily be given considerably more weight than a
factor that is not so designated.'' In addition to providing such an
incentive for the submission of voluntary self-disclosures, BIS
anticipates that Sec. 764.8 will promote more effective use of OAC
resources, as the receipt of voluntary self-disclosures will reduce the
time that OAC must spend identifying and investigating possible
violations. The rule provides the benefit of a mitigating factor to
those who self-disclose before OAC has invested resources to
investigate violations based on information it might receive from
another source.
Section 764.8 requires, among other things, that voluntary self-
disclosures be in writing and that they be received by OAC before OAC
learns of the same or substantially similar information from ``another
source'' and has commenced an investigation or inquiry in connection
with that information. Section 764.8 provides that a person may make an
initial written notification followed by submission of a more detailed
narrative account and supporting documents. For purposes of determining
whether a voluntary self-disclosure was received before OAC learned of
the same or substantially similar information from another source, the
date of the voluntary self-disclosure will be deemed to be the date
that OAC received the initial notification if the person making the
disclosure subsequently submits the required narrative account and
supporting documentation.
BIS recognizes that two features of its existing regulations and
practices may impact the requirement that a voluntary self-disclosure
be received before OAC learns of the same or substantially similar
information from another source. The first such feature is the set of
reporting requirements in Sec. 760.5. The second such feature is OAC's
practice of encouraging persons with questions about the EAR to contact
OAC by telephone or e-mail for advice.
Section 760.5 of the EAR requires any ``U.S. person who receives a
request to take any action that would have the effect of furthering or
supporting a restrictive trade practice or boycott fostered or imposed
by a foreign country against a country friendly to the United States or
against any United States person'' to report to OAC both receipt of the
request and the action that the person took in response to that
request. In some instances, taking the requested action would be a
violation of Sec. 760.2. BIS recognizes that, in such instances, the
reporting requirements of Sec. 760.5 would have the effect of
requiring a person to disclose a violation that it had committed.
Section 764.8(b)(3)(i) provides that reports filed pursuant to Sec.
760.2 constitute ``information received from another source.'' Thus, a
person who wishes to make a voluntary self-disclosure of a violation
that is based on an action that Sec. 760.5 requires that person to
report would have to make sure that OAC receives the written initial
notification portion of the voluntary self-disclosure before OAC began
an investigation or inquiry based on the information received in the
required report. The report itself would not serve as the initial
notification. However, if OAC received the report and the initial
notification simultaneously, it would be deemed to have received the
initial notification before it had begun an investigation or inquiry
based on the report. That person would then have to comply with the
remaining requirements of Sec. 764.8, but once that person complied
with those requirements, the voluntary self-disclosure would be treated
as having been received at the time that the initial notification was
received.
OAC has, for a number of years, provided advice about the
antiboycott provisions to persons requesting such advice via telephone
or e-mail. In some instances, the persons requesting such advice may
disclose that they have committed a violation. OAC's practice has been
to encourage such persons to make voluntary self-disclosures. OAC wants
to continue to encourage persons with questions about the antiboycott
provisions to disclose fully all relevant facts when making telephone
or e-mail inquiries for advice concerning the antiboycott provisions.
Therefore, Sec. 764.8(b)(3)(ii) provides that violations revealed in
telephone or e-mail requests for advice concerning the antiboycott
provisions are not information received from another source for
purposes of Sec. 764.8. Section 764.8(b)(3)(ii) also states that the
information provided over the telephone or via e-mail while seeking
advice would not constitute a voluntary self-disclosure or even an
initial notification of a voluntary self-disclosure. OAC's practice is
to inform persons who reveal violations in the course of seeking such
advice of their opportunity to make a voluntary self-disclosure.
Section 764.8 also provides that for a firm to be deemed to have
made a voluntary self-disclosure under that section, the individual
making the disclosure must do so with the ``full knowledge and
authorization of the firm's senior management or of an officer or
employee who is authorized to make such disclosures on behalf of the
firm.'' BIS believes that approval of a person with such authority is
needed to make clear that a firm may not claim the benefits of a
voluntary self-disclosure when a subordinate employee acting on his or
her own initiative has disclosed wrongdoing. The proposed rule did not
include the phrase ``or of an officer or employee who is authorized to
make such disclosures on behalf of the firm.'' Upon review, BIS does
not believe that knowledge and approval of ``senior management'' are
needed so long as someone with authority to make such disclosures on
behalf of the firm has approved the disclosure on behalf of the firm.
Creation of Supplement No. 2 to Part 766
This rule creates a new supplement to part 766 of the EAR to set
forth publicly BIS's practice with respect to violations of the
antiboycott provisions. The supplement describes the ways that BIS
responds to violations, the types of administrative sanctions that may
be imposed for violations, the factors that BIS considers in
determining what sanctions are appropriate, the factors that BIS
considers in determining the appropriate scope of the denial or
exclusion order sanctions, and the factors BIS considers when deciding
whether to suspend a sanction.
Paragraph (a) of the supplement contains introductory material that
defines the scope and limitations of the supplement as well as sets
forth BIS's policy of encouraging any party in settlement negotiations
with BIS to provide all information that the party believes is relevant
to the application of the guidance in the supplement as well as
information that is relevant to determining whether a violation has, in
fact, occurred and whether the party has a defense to any potential
charges.
Paragraph (b) of the supplement sets forth the three actions that
BIS may take in response to a violation, namely, issuing a warning
letter, pursuing an administrative case, and referring a case to the
Department of Justice for criminal prosecution. This paragraph also
lists the factors that often cause BIS to issue a warning letter.
Additionally, it notes BIS's ability to issue proposed administrative
charging letters rather than actual administrative charging letters.
Proposed charging letters are issued informally to provide an
opportunity for settlement before initiation of a formal administrative
proceeding. As noted in paragraph (b), BIS is not required to issue a
proposed charging letter. Finally, paragraph (b) notes that BIS may
refer a case to the Department of Justice for criminal
[[Page 39003]]
prosecution in addition to pursuing an administrative enforcement
action.
Paragraph (c) of the supplement lists the types of administrative
sanctions that may be imposed in antiboycott administrative enforcement
cases. Those sanctions are: A monetary penalty, a denial of export
privileges and an order excluding the party from practice before BIS.
Paragraph (d) provides information about how BIS determines what
sanctions are appropriate in settlement of antiboycott administrative
enforcement cases. The paragraph describes the general factors that BIS
believes are important in cases concerning violations of the
antiboycott provisions. The paragraph then describes specific
mitigating and aggravating factors. BIS typically looks to the presence
or absence of the specific factors, alongside the general factors, in
determining what sanctions should apply in a given settlement.
Paragraph (d) begins by listing seven general factors to which BIS
looks in determining what administrative sanctions are appropriate in
each settlement. Those seven general factors are: Degree of
seriousness, category of violation, whether multiple violations arise
from related transactions, whether multiple violations arise from
unrelated transactions, the timing of a settlement, whether there are
related civil or criminal violations, and the party's familiarity with
the antiboycott provisions. The supplement provides general guidance on
how BIS applies each of these seven general factors.
Paragraph (d) then addresses the role of eight specific mitigating
and nine specific aggravating factors whose presence or absence BIS
generally considers when determining what sanctions should apply. The
listed factors are not exhaustive and BIS may consider other factors as
well in a particular case. However, the listed factors are those that
BIS's experience indicates are commonly relevant to penalty
determinations in cases that are settled. Factors identified by the
term ``GREAT WEIGHT'' will ordinarily be given considerably more weight
than other factors.
The eight specific mitigating factors in paragraph (d) are:
Voluntary self-disclosure, effective compliance program, limited
business with or in boycotted or boycotting countries, history of
compliance with the antiboycott provisions, exceptional cooperation
with the investigation, (lack of) clarity of request to furnish
prohibited information or take prohibited action, violations arising
out of a party's ``passive'' refusal to do business in connection with
an agreement, and isolated occurrence. The proposed rule contained a
statement in paragraph (d)(2)(i)(B)(2), to the effect that deliberate
or intentional destruction of records may be an issue in settlement.
Paragraph (d)(2)(i)(B)(2) is part of a discussion of mitigating factors
of great weight. Upon review BIS removed the sentence about intentional
or deliberate destruction of records because it pertains to aggravating
factors and would be subsumed in the serious disregard for compliance
issues provision in paragraph (d)(2)(ii)(B).
The nine specific aggravating factors in paragraph (d) are:
Concealment or obstruction, serious disregard for compliance
responsibilities, history of (lack of) compliance with the antiboycott
provisions, familiarity with the type of transaction at issue in the
violation, prior history of business with or in boycotted countries or
boycotting countries, long duration or high frequency of violations,
clarity of request to furnish prohibited information or take prohibited
action, violation relating to information concerning a specific
individual or entity, and violations relating to ``active'' conduct
concerning an agreement to refuse to do business.
The specific mitigating and aggravating factors are set forth in
more detail in the supplement. BIS believes that in most cases
evaluating these factors provides a fair basis for determining the
penalty that is appropriate when settling an antiboycott administrative
enforcement case. However, these mitigating and aggravating factors are
not exclusive. BIS may consider other factors that are relevant in a
particular case and respondents in settlement negotiations may submit
other relevant factors for BIS's consideration.
Paragraph (e) sets forth the factors that BIS considers to be
particularly relevant when deciding whether to impose a denial or
exclusion order in the settlement of antiboycott administrative
enforcement cases. Certain factors in paragraph (d)--the four factors
that are given great weight, degree of seriousness, and history of
prior violations and their seriousness--are included in paragraph (e).
In addition, BIS considers the extent to which a firm's senior
management participated in or was aware of the conduct that gave rise
to the violation, the likelihood of future violations, and whether a
monetary penalty could be expected to have a sufficient deterrent
effect to be particularly relevant in determining whether a monetary
penalty is appropriate.
Paragraph (f) provides examples of factors that BIS may consider in
deciding whether to suspend or defer a monetary penalty or suspend an
order denying export privileges or an order providing for exclusion
from practice. With respect to suspension or deferral of monetary
penalties, BIS may consider whether the party has demonstrated a
limited ability to pay a penalty that would be appropriate for such
violation so that suspended or deferred payment can be expected to have
sufficient deterrent value, and whether the impact of the penalty would
be consistent with the impact of penalties on other parties who commit
similar violations. When deciding whether to suspend denial or
exclusion orders, BIS may consider the adverse economic consequences of
the order on the party, its employees, and other persons, as well as on
the national interest in the competitiveness of U.S. businesses.
However, such orders will be suspended for adverse economic
consequences only if future violations are unlikely and if there are
adequate measures (usually a substantial civil penalty) to achieve the
necessary deterrent effect.
Rulemaking Requirements
1. This rule has been determined to be not significant for purposes
of Executive Order 12866.
2. Notwithstanding any other provision of law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with a collection of information, subject to the
requirements of the Paperwork Reduction Act, unless that collection of
information displays a currently valid Office of Management and Budget
Control Number. This rule contains a new collection of information
subject to the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.)
that has been approved by the Office of Management and Budget under
control number 0694-0132 which carries a burden hour estimate of 1,280
and a cost estimate of $51,200.
Send comments about this collection, including suggestions for
reducing the burden, to David Rostker, Office of Management and Budget,
by e-mail to David_Rostker@omb.eop.gov, or by fax to (202) 395-7285;
and to the Office of Administration, Bureau of Industry and Security,
Department of Commerce, 14th and Pennsylvania Avenue, NW., Room 6883,
Washington, DC 20230.
3. This rule does not contain policies with Federalism implications
as that term is defined in Executive Order 13132.
4. The Chief Counsel for Regulation at the Department of Commerce
certified
[[Page 39004]]
to the Chief Counsel for Advocacy at the Small Business Administration
that this rule, if adopted, would not have a significant economic
impact on a substantial number of small entities. The factual basis was
published in the proposed rule and is not repeated here. BIS received
only one comment that addressed the economic impact of this rule. That
comment addressed the rule's economic impact on large businesses with
multiple operating units in many countries and did not address the
rule's impact on small entities. BIS has included that comment in its
Paperwork Reduction Act submission to OMB and addressed it under the
heading ``Comment on Paperwork Burden'' earlier in this preamble.
Therefore, BIS has not prepared a final regulatory flexibility analysis
for this rule.
List of Subjects
15 CFR Part 730
Administrative practice and procedure, Advisory committees,
Exports, Reporting and recordkeeping requirements, Strategic and
critical materials.
15 CFR Part 764
Administrative practice and procedure, Exports, Law enforcement,
Penalties.
15 CFR Part 766
Administrative practice and procedure, Confidential business
information, Exports, Law enforcement, Penalties.
0
For the reasons set forth above, the Export Administration Regulations
(15 CFR 730-774) are amended as follows:
PART 730--[AMENDED]
0
1. The authority citation for part 730 continues to read as follows:
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c; 22 U.S.C. 2151
note, Pub. L. 108-175; 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; 30
U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C.
1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; Sec. 901-911, Pub. L.
106-387; Sec. 221, Pub. L. 107-56; E.O. 11912, 41 FR 15825, 3 CFR,
1976 Comp., p. 114; E.O. 12002, 42 FR 35623, 3 CFR, 1977 Comp.,
p.133; E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O.
12214, 45 FR 29783, 3 CFR, 1980 Comp., p. 256; E.O. 12851, 58 FR
33181, 3 CFR, 1993 Comp., p. 608; E.O. 12854, 58 FR 36587, 3 CFR,
1993 Comp., p. 179; E.O. 12918, 59 FR 28205, 3 CFR, 1994 Comp., p.
899; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 12947,
60 FR 5079, 3 CFR, 1995 Comp., p. 356; E.O. 12981, 60 FR 62981, 3
CFR, 1995 Comp., p. 419; E.O. 13020, 61 FR 54079, 3 CFR, 1996 Comp.
p. 219; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O.
13099, 63 FR 45167, 3 CFR, 1998 Comp., p. 208; E.O. 13222, 66 FR
44025, 3 CFR, 2001 Comp., p. 783; E.O. 13224, 66 FR 49079, 3 CFR,
2001 Comp., p. 786; E.O. 13338, 69 FR 26751, May 13, 2004; Notice of
August 3, 2006, 71 FR 44551 (August 7, 2006); Notice of October 27,
2006, 71 FR 64109 (October 31, 2006).
0
2. In Supp. No. 1 to part 730, add a new row to the table of approved
information collections immediately following the row that begins with
``0694-0129'' and immediately preceding the row that begins with
``0607-0152'' to read as follows:
Supplement No. 1 to Part 730--Information Collection Requirements Under
the Paperwork Reduction Act: OMB Control Numbers
* * * * *
------------------------------------------------------------------------
Reference in the
Collection No. Title EAR
------------------------------------------------------------------------
* * * * * * *
0694-0132....................... Voluntary Self- Sec. 764.8.
Disclosure of
Antiboycott
Violations.
* * * * * * *
------------------------------------------------------------------------
PART 764--[AMENDED]
0
3. The authority citation for part 764 continues to read as follows:
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August
3, 2006, 71 FR 44551 (August 7, 2006).
0
4. Add a new Sec. 764.8 to read as follows:
Sec. 764.8 Voluntary self-disclosures for boycott violations.
This section sets forth procedures for disclosing violations of
part 760 of the EAR--Restrictive Trade Practices or Boycotts and
violations of part 762--Recordkeeping--with respect to records related
to part 760. In this section, these provisions are referred to
collectively as the ``antiboycott provisions.'' This section also
describes BIS's policy regarding such disclosures.
(a) General policy. BIS strongly encourages disclosure to the
Office of Antiboycott Compliance (OAC) if you believe that you may have
violated the antiboycott provisions. Voluntary self-disclosures are a
mitigating factor with respect to any enforcement action that OAC might
take.
(b) Limitations. (1) This section does not apply to disclosures of
violations relating to provisions of the EAR other than the antiboycott
provisions. Section 764.5 of this part describes how to prepare
disclosures of violations of the EAR other than the antiboycott
provisions.
(2) The provisions of this section apply only when information is
provided to OAC for its review in determining whether to take
administrative action under parts 764 and 766 of the EAR for violations
of the antiboycott provisions.
(3) Timing. The provisions of this section apply only if OAC
receives the voluntary self-disclosure as described in paragraph (c)(2)
of this section before it commences an investigation or inquiry in
connection with the same or substantially similar information it
received from another source.
(i) Mandatory Reports. For purposes of this section, OAC's receipt
of a report required to be filed under Sec. 760.5 of the EAR that
discloses that a person took an action prohibited by part 760 of the
EAR constitutes the receipt of information from another source.
(ii) Requests for Advice. For purposes of this section, a violation
that is revealed to OAC by a person who is seeking advice, either by
telephone or e-mail, about the antiboycott provisions does not
constitute the receipt of information from another source. Such
revelation also does not constitute a voluntary self-disclosure or
initial notification of a voluntary self-disclosure for purposes of
this section.
(4) Although a voluntary self-disclosure is a mitigating factor in
determining what administrative sanctions, if any, will be sought by
BIS, it is a factor that is considered together with all other factors
in a case. The weight given to voluntary self-disclosure is solely
within the discretion of BIS, and the mitigating effect of voluntary
self-disclosure may be outweighed by aggravating factors. Voluntary
self-disclosure does not
[[Page 39005]]
prevent transactions from being referred to the Department of Justice
for criminal prosecution. In such a case, BIS would notify the
Department of Justice of the voluntary self-disclosure, but the
decision as to how to consider that factor is within the discretion of
the Department of Justice.
(5) A firm will not be deemed to have made a disclosure under this
section unless the individual making the disclosure did so with the
full knowledge and authorization of the firm's senior management or of
a person with authority to make such disclosures on behalf of the firm.
(6) The provisions of this section do not, nor should they be
relied on to, create, confer, or grant any rights, benefits,
privileges, or protection enforceable at law or in equity by any
person, business, or entity in any civil, criminal, administrative, or
other matter.
(c) Information to be provided. (1) General. Any person wanting to
disclose information that constitutes a voluntary self-disclosure
should, in the manner outlined below, initially notify OAC as soon as
possible after violations are discovered, and then conduct a thorough
review of all transactions where violations of the antiboycott
provisions are suspected.
(2) Initial notification. The initial notification must be in
writing and be sent to the address in Sec. 764.8(c)(7) of this part.
The notification should include the name of the person making the
disclosure and a brief description of the suspected violations. The
notification should describe the general nature and extent of the
violations. If the person making the disclosure subsequently completes
the narrative account required by Sec. 764.8(c)(3) of this part, the
disclosure will be deemed to have been made on the date of the initial
notification for purposes of Sec. 764.8(b)(3) of this part.
(3) Narrative account. After the initial notification, a thorough
review should be conducted of all business transactions where possible
antiboycott provision violations are suspected. OAC recommends that the
review cover a period of five years prior to the date of the initial
notification. If your review goes back less than five years, you risk
failing to discover violations that may later become the subject of an
investigation. Any violations not voluntarily disclosed do not receive
the same mitigation as the violations voluntarily self-disclosed under
this section. However, the failure to make such disclosures will not be
treated as a separate violation unless some other section of the EAR or
other provision of law enforced by BIS requires disclosure. Upon
completion of the review, OAC should be furnished with a narrative
account that sufficiently describes the suspected violations so that
their nature and gravity can be assessed. The narrative account should
also describe the nature of the review conducted and measures that may
have been taken to minimize the likelihood that violations will occur
in the future. The narrative account should include:
(i) The kind of violation involved, for example, the furnishing of
a certificate indicating that the goods supplied did not originate in a
boycotted country;
(ii) An explanation of when and how the violations occurred,
including a description of activities surrounding the violations (e.g.,
contract negotiations, sale of goods, implementation of letter of
credit, bid solicitation);
(iii) The complete identities and addresses of all individuals and
organizations, whether foreign or domestic, involved in the activities
giving rise to the violations; and
(iv) A description of any mitigating factors.
(4) Supporting documentation.
(i) The narrative account should be accompanied by copies of
documents that explain and support it, including:
(A) Copies of boycott certifications and declarations relating to
the violation, or copies of documents containing prohibited language or
prohibited requests for information;
(B) Other documents relating to the violation, such as letters,
facsimiles, telexes and other evidence of written or oral
communications, negotiations, internal memoranda, purchase orders,
invoices, bid requests, letters of credit and brochures;
(ii) Any relevant documents not attached to the narrative account
must be retained by the person making the disclosure until the latest
of the following: the documents are supplied to OAC; BIS informs the
disclosing party that it will take no action; BIS issues a warning
letter for the violation; BIS issues an order that constitutes the
final agency action in the matter and all avenues for appeal are
exhausted; or the documents are no longer required to be kept under
part 762 of the EAR.
(5) Certification. A certification must be submitted stating that
all of the representations made in connection with the voluntary self-
disclosure are true and correct to the best of that person's knowledge
and belief. Certifications made by a corporation or other organization
should be signed by an official of the corporation or other
organization with the authority to do so. Section 764.2(g) of this part
relating to false or misleading representations applies in connection
with the disclosure of information under this section.
(6) Oral presentations. OAC believes that oral presentations are
generally not necessary to augment the written narrative account and
supporting documentation. If the person making the disclosure believes
otherwise, a request for a meeting should be included with the
disclosure.
(7) Where to make voluntary self-disclosures. The information
constituting a voluntary self-disclosure or any other correspondence
pertaining to a voluntary self-disclosure should be submitted to:
Office of Antiboycott Compliance, 14th and Pennsylvania Ave., NW., Room
6098, Washington, DC 20230, tel: (202) 482-2381, facsimile: (202) 482-
0913.
(d) Action by the Office of Antiboycott Compliance. After OAC has
been provided with the required narrative and supporting documentation,
it will acknowledge the disclosure by letter, provide the person making
the disclosure with a point of contact, and take whatever additional
action, including further investigation, it deems appropriate. As
quickly as the facts and circumstances of a given case permit, BIS may
take any of the following actions:
(1) Inform the person making the disclosure that, based on the
facts disclosed, it plans to take no action;
(2) Issue a warning letter;
(3) Issue a proposed charging letter and attempt to settle the
matter pursuant to Sec. 766.18 of the EAR;
(4) Issue a charging letter pursuant to Sec. 766.3 of the EAR if a
settlement is not reached or BIS otherwise deems appropriate; and/or
(5) Refer the matter to the Department of Justice for criminal
prosecution.
(e) Criteria. Supplement No. 2 to part 766 of the EAR describes how
BIS typically exercises its discretion regarding whether to pursue an
antiboycott administrative enforcement case under part 766 and what
administrative sanctions to seek in settling such a case.
PART 766--[AMENDED]
0
5. The authority citation for part 766 continues to read as follows:
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August
3, 2006, 71 FR 44551 (August 7, 2006).
0
6. In Sec. 766.3, paragraph (a) the second sentence is revised to read
as follows:
[[Page 39006]]
Sec. 766.3 Institution of administrative enforcement proceedings.
(a) Charging letters. * * * Supplements Nos. 1 and 2 to this part
describe how BIS typically exercises its discretion regarding the
issuance of charging letters. * * *
* * * * *
0
5. In Sec. 766.18 paragraph (f) is revised to read as follows:
Sec. 766.18 Settlement.
* * * * *
(f) Supplements Nos. 1 and 2 to this part describe how BIS
typically exercises its discretion regarding the terms under which it
is willing to settle particular cases.
0
6. Add Supplement No. 2 to part 766 to read as follows:
Supplement No. 2 to Part 766--Guidance on Charging and Penalty
Determinations in Settlement of Administrative Enforcement Cases
Involving Antiboycott Matters
(a) Introduction.
(1) Scope. This Supplement describes how the Office of
Antiboycott Compliance (OAC) responds to violations of part 760 of
the EAR ``Restrictive Trade Practices or Boycotts'' and to
violations of part 762 ``Recordkeeping'' when the recordkeeping
requirement pertains to part 760 (together referred to in this
supplement as the ``antiboycott provisions''). It also describes how
BIS makes penalty determinations in the settlement of administrative
enforcement cases brought under parts 764 and 766 of the EAR
involving violations of the antiboycott provisions. This supplement
does not apply to enforcement cases for violations of other
provisions of the EAR.
(2) Policy Regarding Settlement. Because many administrative
enforcement cases are resolved through settlement, the process of
settling such cases is integral to the enforcement program. BIS
carefully considers each settlement offer in light of the facts and
circumstances of the case, relevant precedent, and BIS's objective
to achieve in each case an appropriate level of penalty and
deterrent effect. In settlement negotiations, BIS encourages parties
to provide, and will give serious consideration to, information and
evidence that the parties believe is relevant to the application of
this guidance to their cases, to whether a violation has in fact
occurred, and to whether they have a defense to potential charges.
(3) Limitation. BIS's policy and practice is to treat similarly
situated cases similarly, taking into consideration that the facts
and combination of mitigating and aggravating factors are different
in each case. However, this guidance does not confer any right or
impose any obligation regarding what posture or penalties BIS may
seek in settling or litigating a case. Parties do not have a right
to a settlement offer or particular settlement terms from BIS,
regardless of settlement postures BIS has taken in other cases.
(b) Responding to Violations. OAC within BIS investigates
possible violations of Section 8 of the Export Administration Act of
1979, as amended (``Foreign Boycotts''), the antiboycott provisions
of EAR, or any order or authorization related thereto. When BIS has
reason to believe that such a violation has occurred, BIS may issue
a warning letter or initiate an administrative enforcement
proceeding. A violation may also be referred to the Department of
Justice for criminal prosecution.
(1) Issuing a warning letter. Warning letters represent BIS's
belief that a violation has occurred. In the exercise of its
discretion, BIS may determine in certain instances that issuing a
warning letter, instead of bringing an administrative enforcement
proceeding, will fulfill the appropriate enforcement objective. A
warning letter will fully explain the violation.
(i) BIS may issue warning letters where:
(A) The investigation commenced as a result of a voluntary self-
disclosure satisfying the requirements of Sec. 764.8 of the EAR; or
(B) The party has not previously committed violations of the
antiboycott provisions.
(ii) BIS may also consider the category of violation as
discussed in paragraph (d)(2) of this supplement in determining
whether to issue a warning letter or initiate an enforcement
proceeding. A violation covered by Category C (failure to report or
late reporting of receipt of boycott requests) might warrant a
warning letter rather than initiation of an enforcement proceeding.
(iii) BIS will not issue a warning letter if it concludes, based
on available information, that a violation did not occur.
(iv) BIS may reopen its investigation of a matter should it
receive additional evidence or if it appears that information
previously provided to BIS during the course of its investigation
was incorrect.
(2) Pursuing an administrative enforcement case. The issuance of
a charging letter under Sec. 766.3 of this part initiates an
administrative proceeding.
(i) Charging letters may be issued when there is reason to
believe that a violation has occurred. Cases may be settled before
or after the issuance of a charging letter. See Sec. 766.18 of this
part.
(ii) Although not required to do so by law, BIS may send a
proposed charging letter to a party to inform the party of the
violations that BIS has reason to believe occurred and how BIS
expects that those violations would be charged. Issuance of the
proposed charging letter provides an opportunity for the party and
BIS to consider settlement of the case prior to the initiation of
formal enforcement proceedings.
(3) Referring for criminal prosecution. In appropriate cases,
BIS may refer a case to the Department of Justice for criminal
prosecution, in addition to pursuing an administrative enforcement
action.
(c) Types of administrative sanctions. Administrative
enforcement cases generally are settled on terms that include one or
more of three administrative sanctions:
(1) A monetary penalty may be assessed for each violation as
provided in Sec. 764.3(a)(1) of the EAR;
Note to paragraph (c)(1): The maximum penalty is subject to
adjustments under the Federal Civil Penalties Adjustment Act of 1990
(28 U.S.C. 2461, note (2000)), which are codified at 15 CFR 6.4. For
violations that occurred before March 9, 2006, the maximum monetary
penalty per violation is $11,000. For violations occurring on or
after March 9, 2006, the maximum monetary penalty per violation is
$50,000.
(2) An order denying a party's export privileges under the EAR
may be issued, under Sec. 764.3(a)(2) of the EAR; or
(3) Exclusion from practice under Sec. 764.3(a)(3) of the EAR.
(d) How BIS determines what sanctions are appropriate in a
settlement.
(1) General Factors. BIS looks to the following general factors
in determining what administrative sanctions are appropriate in each
settlement.
(i) Degree of seriousness. In order to violate the antiboycott
provisions of the EAR, a U.S. person does not need to have actual
``knowledge'' or a reason to know, as that term is defined in Sec.
772.1 of the EAR, of relevant U.S. laws and regulations. Typically,
in cases that do not involve knowing violations, BIS will seek a
settlement for payment of a civil penalty (unless the matter is
resolved with a warning letter). However, in cases involving knowing
violations, conscious disregard of the antiboycott provisions, or
other such serious violations (e.g., furnishing prohibited
information in response to a boycott questionnaire with knowledge
that such furnishing is in violation of the EAR), BIS is more likely
to seek a denial of export privileges or an exclusion from practice,
and/or a greater monetary penalty as BIS considers such violations
particularly egregious.
(ii) Category of violations. In connection with its activities
described in paragraph (a)(1) of this supplement, BIS recognizes
three categories of violations under the antiboycott provisions of
the EAR. (See Sec. 760.2, Sec. 760.4 and Sec. 760.5 of the EAR
for examples of each type of violation other than recordkeeping).
These categories reflect the relative seriousness of a violation,
with Category A violations typically warranting the most stringent
penalties, including up to the maximum monetary penalty, a denial
order and/or an exclusion order. Through providing these categories
in this penalty guidelines notice, BIS hopes to give parties a
general sense of how it views the seriousness of various violations.
This guidance, however, does not confer any right or impose any
obligation as to what penalties BIS may impose based on its review
of the specific facts of a case.
(A) The Category A violations and the sections of the EAR that
set forth their elements are:
(1) Discriminating against U.S. persons on the basis of race,
religion, sex, or national origin--Sec. 760.2(b);
(2) Refusing to do business or agreeing to refuse to do
business--Sec. 760.2(a);
(3) Furnishing information about race, religion, sex, or
national origin of U.S. persons including, but not limited to,
providing information in connection with a boycott questionnaire
about the religion of employees--Sec. 760.2(c);
(4) Evading the provisions of part 760--Sec. 760.4;
[[Page 39007]]
(5) Furnishing information about business relationships with
boycotted countries or blacklisted persons--Sec. 760.2(d); and
(6) Implementing letters of credit--Sec. 760.2(f).
(B) The Category B violations and the sections of the EAR that
set forth their elements are:
(1) Furnishing information about associations with charitable or
fraternal organizations which support a boycotted country--Sec.
760.2(e); and
(2) Making recordkeeping violations--part 762.
(C) The Category C violation and the section of the EAR that
sets forth its elements is: Failing to report timely receipt of
boycott requests--Sec. 760.5.
(iii) Violations arising out of related transactions.
Frequently, a single transaction can give rise to multiple
violations. Depending on the facts and circumstances, BIS may choose
to impose a smaller or greater penalty per violation. In exercising
its discretion, BIS typically looks to factors such as whether the
violations resulted from conscious disregard of the requirements of
the antiboycott provisions; whether they stemmed from the same
underlying error or omission; and whether they resulted in
distinguishable or separate harm. The three scenarios set forth
below are illustrative of how BIS might view transactions that lead
to multiple violations.
(A) First scenario. An exporter enters into a sales agreement
with a company in a boycotting country. In the course of the
negotiations, the company sends the exporter a request for a signed
statement certifying that the goods to be supplied do not originate
in a boycotted country. The exporter provides the signed
certification. Subsequently, the exporter fails to report the
receipt of the request. The exporter has committed two violations of
the antiboycott provisions, first, a violation of Sec. 760.2(d) for
furnishing information concerning the past or present business
relationships with or in a boycotted country, and second, a
violation of Sec. 760.5 for failure to report the receipt of a
request to engage in a restrictive trade practice or boycott.
Although the supplier has committed two violations, BIS may impose a
smaller mitigated penalty on a per violation basis than if the
violations had stemmed from two separate transactions.
(B) Second scenario. An exporter receives a boycott request to
provide a statement that the goods at issue in a sales transaction
do not contain raw materials from a boycotted country and to include
the signed statement along with the invoice. The goods are shipped
in ten separate shipments. Each shipment includes a copy of the
invoice and a copy of the signed boycott-related statement. Each
signed statement is a certification that has been furnished in
violation of Sec. 760.2(d)'s bar on the furnishing of prohibited
business information. Technically, the exporter has committed ten
separate violations of Sec. 760.2(d) and one violation of Sec.
760.5 for failure to report receipt of the boycott request. Given
that the violations arose from a single boycott request, however,
BIS may treat the violations as related and impose a smaller penalty
than it would if the furnishing had stemmed from ten separate
requests.
(C) Third scenario. An exporter has an ongoing relationship with
a company in a boycotting country. The company places three separate
orders for goods on different dates with the exporter. In connection
with each order, the company requests the exporter to provide a
signed statement certifying that the goods to be supplied do not
originate in a boycotted country. The exporter provides a signed
certification with each order of goods that it ships to the company.
BIS has the discretion to penalize the furnishing of each of these
three items of information as a separate violation of Sec. 760.2(d)
of the EAR for furnishing information concerning past or present
business relationships with or in a boycotted country.
(iv) Multiple violations from unrelated transactions. In cases
involving multiple unrelated violations, BIS is more likely to seek
a denial of export privileges, an exclusion from practice, and/or a
greater monetary penalty than in cases involving isolated incidents.
For example, the repeated furnishing of prohibited boycott-related
information about business relationships with or in boycotted
countries during a long period of time could warrant a denial order,
even if a single instance of furnishing such information might
warrant only a monetary penalty. BIS takes this approach because
multiple violations may indicate serious compliance problems and a
resulting risk of future violations. BIS may consider whether a
party has taken effective steps to address compliance concerns in
determining whether multiple violations warrant a denial or
exclusion order in a particular case.
(v) Timing of settlement. Under Sec. 766.18 of this part,
settlement can occur before a charging letter is served, while a
case is before an administrative law judge, or while a case is
before the Under Secretary for Industry and Security under Sec.
766.22 of this part. However, early settlement--for example, before
a charging letter has been filed--has the benefit of freeing
resources for BIS to deploy in other matters. In contrast, for
example, the BIS resources saved by settlement on the eve of an
adversary hearing under Sec. 766.13 of this part are fewer, insofar
as BIS has already expended significant resources on discovery,
motions practice, and trial preparation. Given the importance of
allocating BIS resources to maximize enforcement of the EAR, BIS has
an interest in encouraging early settlement and will take this
interest into account in determining settlement terms.
(vi) Related criminal or civil violations. Where an
administrative enforcement matter under the antiboycott provisions
involves conduct giving rise to related criminal charges, BIS may
take into account the related violations and their resolution in
determining what administrative sanctions are appropriate under part
766 of the EAR. A criminal conviction indicates serious, willful
misconduct and an accordingly high risk of future violations, absent
effective administrative sanctions. However, entry of a guilty plea
can be a sign that a party accepts responsibility for complying with
the antiboycott provisions and will take greater care to do so in
the future. In appropriate cases where a party is receiving
substantial criminal penalties, BIS may find that sufficient
deterrence may be achieved by lesser administrative sanctions than
would be appropriate in the absence of criminal penalties.
Conversely, BIS might seek greater administrative sanctions in an
otherwise similar case where a party is not subjected to criminal
penalties. The presence of a related criminal or civil disposition
may distinguish settlements among civil penalty cases that appear to
be otherwise similar. As a result, the factors set forth for
consideration in civil penalty settlements will often be applied
differently in the context of a ``global settlement'' of both civil
and criminal cases, or multiple civil cases involving other
agencies, and may therefore be of limited utility as precedent for
future cases, particularly those not involving a global settlement.
(vii) Familiarity with the Antiboycott Provisions. Given the
scope and detailed nature of the antiboycott provisions, BIS will
consider whether a party is an experienced participant in the
international business arena who may possess (or ought to possess)
familiarity with the antiboycott laws. In this respect, the size of
the party's business, the presence or absence of a legal division or
corporate compliance program, and the extent of prior involvement in
business with or in boycotted or boycotting countries, may be
significant.
(2) Specific mitigating and aggravating factors. In addition to
the general factors described in paragraph (d)(1) of this
supplement, BIS also generally looks to the presence or absence of
the specific mitigating and aggravating factors in this paragraph in
determining what sanctions should apply in a given settlement. These
factors describe circumstances that, in BIS's experience, are
commonly relevant to penalty determinations in settled cases.
However, this listing of factors is not exhaustive and BIS may
consider other factors that may further indicate the blameworthiness
of a party's conduct, the actual or potential harm associated with a
violation, the likelihood of future violations, and/or other
considerations relevant to determining what sanctions are
appropriate. The assignment of mitigating or aggravating factors
will depend upon the attendant circumstances of the party's conduct.
Thus, for example, one prior violation should be given less weight
than a history of multiple violations, and a previous violation
reported in a voluntary self-disclosure by a party whose overall
compliance efforts are of high quality should be given less weight
than previous violation(s) not involving such mitigating factors.
Some of the mitigating factors listed in this paragraph are
designated as having ``great weight.'' When present, such a factor
should ordinarily be given considerably more weight than a factor
that is not so designated.
(i) Specific mitigating factors.
(A) Voluntary self-disclosure. (GREAT WEIGHT) The party has made
a voluntary self-disclosure of the violation, satisfying the
requirements of Sec. 764.8 of the EAR.
(B) Effective compliance program. (GREAT WEIGHT)
[[Page 39008]]
(1) General policy or program pertaining to Antiboycott
Provisions. BIS will consider whether a party's compliance efforts
uncovered a problem, thereby preventing further violations, and
whether the party has taken steps to address compliance concerns
raised by the violation, including steps to prevent recurrence of
the violation, that are reasonably calculated to be effective. The
focus is on the party's demonstrated compliance with the antiboycott
provisions. Whether a party has an effective export compliance
program covering other provisions of the EAR is not relevant as a
mitigating factor. In the case of a party that has done previous
business with or in boycotted countries or boycotting countries, BIS
will examine whether the party has an effective antiboycott
compliance program and whether its overall antiboycott compliance
efforts have been of high quality. BIS may deem it appropriate to
review the party's internal business documents relating to
antiboycott compliance (e.g., corporate compliance manuals, employee
training materials).
(2) Compliance with reporting and recordkeeping requirements. In
the case of a party that has received reportable boycott requests in
the past, BIS may examine whether the party complied with the
reporting and recordkeeping requirements of the antiboycott
provisions.
(C) Limited business with or in boycotted or boycotting
countries. The party has had little to no previous experience in
conducting business with or in boycotted or boycotting countries.
Prior to the current enforcement proceeding, the party had not
engaged in business with or in such countries, or had only
transacted such business on isolated occasions. BIS may examine the
volume of business that the party has conducted with or in boycotted
or boycotting countries as demonstrated by the size and dollar
amount of transactions or the percentage of a party's overall
business that such business constitutes.
(D) History of compliance with the Antiboycott Provisions of the
EAR.
(1) BIS will consider it to be a mitigating factor if:
(i) The party has never been convicted of a criminal violation
of the antiboycott provisions;
(ii) In the past 5 years, the party has not entered into a
settlement or been found liable in a boycott-related administrative
enforcement case with BIS or another U.S. government agency;
(iii) In the past 3 years, the party has not received a warning
letter from BIS relating to the antiboycott provisions; or
(iv) In the past 5 years, the party has not otherwise violated
the antiboycott provisions.
(2) Where necessary to ensure effective enforcement, the prior
involvement in violations of the antiboycott provisions of a party's
owners, directors, officers, partners, or other related persons may
be imputed to a party in determining whether these criteria are
satisfied. When an acquiring firm takes reasonable steps to uncover,
correct, and disclose to BIS conduct that gave rise to violations
that the acquired business committed before the acquisition, BIS
typically will not take such violations into account in applying
this factor in settling other violations by the acquiring firm.
(E) Exceptional cooperation with the investigation. The party
has provided exceptional cooperation to OAC during the course of the
investigation.
(F) Clarity of request to furnish prohibited information or take
prohibited action. The party responded to a request to furnish
information or take action that was ambiguously worded or vague.
(G) Violations arising out of a party's ``passive'' refusal to
do business in connection with an agreement. The party has
acquiesced in or abided by terms or conditions that constitute a
prohibited refusal to do business (e.g., responded to a tender
document that contains prohibited language by sending a bid). See
``active'' agreements to refuse to do business in paragraph
(d)(2)(ii)(I) of this supplement.
(H) Isolated occurrence of violation. The violation was an
isolated occurrence. (Compare to long duration or high frequency of
violations as an aggravating factor in paragraph (d)(2)(ii)(F) of
this supplement.)
(ii) Specific Aggravating Factors.
(A) Concealment or obstruction. The party made a deliberate
effort to hide or conceal the violation. (GREAT WEIGHT)
(B) Serious disregard for compliance responsibilities. (GREAT
WEIGHT] There is evidence that the party's conduct demonstrated a
serious disregard for responsibilities associated with compliance
with the antiboycott provisions (e.g.: knowing violation of party's
own compliance policy or evidence that a party chose to treat
potential penalties as a cost of doing business rather than develop
a compliance policy).
(C) History of compliance with the Antiboycott Provisions.
(1) BIS will consider it to be an aggravating factor if:
(i) The party has been convicted of a criminal violation of the
antiboycott provisions;
(ii) In the past 5 years, the party has entered into a
settlement or been found liable in a boycott-related administrative
enforcement case with BIS or another U.S. government agency;
(iii) In the past 3 years, the party has received a warning
letter from BIS relating to the antiboycott provisions; or
(iv) In the past 5 years, the party has otherwise violated the
antiboycott provisions.
(2) Where necessary to ensure effective enforcement, the prior
involvement in violations of the antiboycott provisions of a party's
owners, directors, officers, partners, or other related persons may
be imputed to a party in determining whether these criteria are
satisfied.
(3) When an acquiring firm takes reasonable steps to uncover,
correct, and disclose to BIS conduct that gave rise to violations
that the acquired firm committed before being acquired, BIS
typically will not take such violations into account in applying
this factor in settling other violations by the acquiring firm.
(D) Familiarity with the type of transaction at issue in the
violation. For example, in the case of a violation involving a
letter of credit or related financial document, the party routinely
pays, negotiates, confirms, or otherwise implements letters of
credit or related financial documents in the course of its standard
business practices.
(E) Prior history of business with or in boycotted countries or
boycotting countries. The party has a prior history of conducting
business with or in boycotted and boycotting countries. BIS may
examine the volume of business that the party has conducted with or
in boycotted and boycotting countries as reflected by the size and
dollar amount of transactions or the percentage of a party's overall
business that such business constitutes.
(F) Long duration or high frequency of violations. Violations
that occur at frequent intervals or repeated violations occurring
over an extended period of time may be treated more seriously than a
single violation or related violations that are committed within a
brief period of time, particularly if the violations are committed
by a party with a history of business with or in boycotted and
boycotting countries. (Compare to isolated occurrence of violation
in paragraph (d)(2)(i)(H) of this supplement.)
(G) Clarity of request to furnish prohibited information or take
prohibited action. The request to furnish information or take other
prohibited action (e.g., enter into agreement to refuse to do
business with a boycotted country or entity blacklisted by a
boycotting country) is facially clear as to its intended purpose.
(H) Violation relating to specific information concerning an
individual entity or individual. The party has furnished prohibited
information about business relationships with specific companies or
individuals.
(I) Violations relating to ``active'' conduct concerning an
agreement to refuse to do business. The party has taken action that
involves altering, editing, or enhancing prohibited terms or
language in an agreement to refuse to do business, including a
letter of credit, or drafting a clause or provision including
prohibited terms or language in the course of negotiating an
agreement to refuse to do business, including a letter of credit.
See ``passive'' agreements to refuse to do business in paragraph
(d)(2)(i)(G) of this supplement.
(e) Determination of Scope of Denial or Exclusion Order. In
deciding whether and what scope of denial or exclusion order is
appropriate, the following factors are particularly relevant: The
presence of mitigating or aggravating factors of great weight; the
degree of seriousness involved; the extent to which senior
management participated in or was aware of the conduct in question;
the number of violations; the existence and seriousness of prior
violations; the likelihood of future violations (taking into account
relevant efforts to comply with the antiboycott provisions); and
whether a civil monetary penalty can be expected to have a
sufficient deterrent effect.
(f) How BIS Makes Suspension and Deferral Decisions.
(1) Civil Penalties. In appropriate cases, payment of a civil
monetary penalty may be
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deferred or suspended. See Sec. 764.3(a)(1)(iii) of the EAR. In
determining whether suspension or deferral is appropriate, BIS may
consider, for example, whether the party has demonstrated a limited
ability to pay a penalty that would be appropriate for such
violations, so that suspended or deferred payment can be expected to
have sufficient deterrent value, and whether, in light of all the
circumstances, such suspension or deferral is necessary to make the
impact of the penalty consistent with the impact of BIS penalties on
other parties who committed similar violations.
(2) Denial of Export Privileges and Exclusion from Practice. In
deciding whether a denial or exclusion order should be suspended,
BIS may consider, for example, the adverse economic consequences of
the order on the party, its employees, and other persons, as well as
on the national interest in maintaining or promoting the
competitiveness of U.S. businesses. An otherwise appropriate denial
or exclusion order will be suspended on the basis of adverse
economic consequences only if it is found that future violations of
the antiboycott provisions are unlikely and if there are adequate
measures (usually a substantial civil monetary penalty) to achieve
the necessary deterrent effect.
Dated: July 9, 2007.
Christopher A. Padilla,
Assistant Secretary for Export Administration.
[FR Doc. E7-13717 Filed 7-16-07; 8:45 am]
BILLING CODE 3510-33-P