U.S. Commerce Department Announces New Export Enforcement Programs – Export Controls & Trade & Investment Sanctions

Last week, several officials from the U.S. Department of
Commerce’s Bureau of Industry and Security (BIS) spoke at
BIS’ 2024 Update Conference, highlighting the regulatory
changes to the Export Administration Regulations (EAR) over the
past year and providing guidance for those operating in the
national security and international trade sectors. Making clear
that compliance and enforcement remain top of mind for BIS, Matthew
S. Axelrod, Assistant Secretary for Export Enforcement, reinforced BIS’ commitment to implement
“more aggressive and effective ways to hold companies that
don’t comply accountable,” especially if those companies
fail to invest adequately in robust compliance programs on the
front end.

BIS revealed four recent updates or programs designed to
facilitate industry commitment to effective front-end
compliance:

• “Red Flag” Letters to U.S. Companies: In an effort to
  prevent the diversion of items to Russia, BIS sent “red
  flag” letters over the past year to specific U.S. companies
  about customers and distributors within their supply chains that
  continue to ship high-priority items to Russia. Using customs data,
  BIS identified specific customers of U.S. companies exporting to
  Russia, and BIS cautioned the U.S. companies to use enhanced due
  diligence and further bolster their export screening efforts when
  engaging with those parties. BIS also announced it has gone a step
  further and recently sent lists of parties located in third
  countries to 20 U.S. manufacturers and distributors whose products
  have been recovered in weapons found inside Ukraine. BIS requested
  these 20 companies voluntarily stop engaging with such customers
  due to high diversion concerns. These “red flag” letters
  are not to be confused with “is informed” letters. In
  these “red flag” letters, BIS is requesting U.S.
  companies to exercise additional caution and/or voluntarily cease
  engaging with such customers. In contrast, “is informed”
  letters provide notice that a license from BIS is required to
  engage in the contemplated activity.




• Published Anti-Boycott List: Last year, BIS required
  anyone reporting boycott requests to identify the entity or
  individual that made the request. Using those inputs, BIS has
  published a list of companies, financial institutions, freight
  forwarders, and others that were reported to BIS as having made
  boycott requests to help industry comply with the EAR’s
  antiboycott regulations. The list contains names of entities
  located in various jurisdictions, including those outside of the
  Middle East region (e.g., Bangladesh, Pakistan, Japan, Malaysia,
  India, Singapore, Brazil, Hong Kong, United Kingdom, Germany,
  Marshall Islands). While companies and individuals can continue to
  transact with those on the list, BIS urges caution and “to
  diligently review transaction documents from all sources, but
  especially transaction documents with these parties, given that
  they’ve been identified by others as a source of boycott
  requests.” The EAR requires U.S. persons to report boycott
  requests and, in certain circumstances, prohibits U.S. persons from
  taking certain actions in furtherance or support of an unsanctioned
  boycott. BIS noted that it will update this list quarterly based on
  boycott reports it receives.




• Updated Freight Forwarder Guidance and Best Practices:
  In this updated guidance, BIS emphasizes freight forwarders’
  “obligation in securing the global supply chain stemming the
  flow of illegal exports” and provides an overview of best
  practices that freight forwarders should adopt, including
  identifying certain red flags indicative of potential diversion
  tactics.




• Updated “Don’t Let This Happen to You”: BIS
  updated its list of criminal and administrative enforcement case
  examples. The list provides illustrations of actions and activities
  that could run afoul of the EAR. Assistant Secretary Axelrod
  emphasized, “[w]e put this guide out because we mean it
  — we want to help make sure you literally don’t let this
  happen to you.”

In light of these policy changes and BIS’ continued
expansion of export control restrictions, companies and individuals
should take stock of BIS’ current enforcement priorities. For
questions about U.S. export controls or sanctions, contact the
authors or any of their colleagues in Arnold & Porter’s
White Collar Defense & Investigations or Export Control &
Sanctions practice groups.

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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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