Holy IEEPA, Batman! Export Penalties Increase to $250,000 or More

Tracy A. Smith | November 11, 2007 | Export Compliance
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Export Penalties Increase to $250,000 or More | Shipping SolutionsBesides being something you might scream while bungee jumping from a 1,000-foot high bridge, IEEPA is the acronym for the International Emergency Economic Powers Act. When Congress enacted IEEPA in 1977, they granted the President emergency powers to protect against foreign national security threats.

When the Export Administration Act (EAA) expired in August of 2001, President Bush used his powers under IEEPA to issue Executive Order 13222, which extended the authority of Export Administration Regulations (EAR). The EAR are issued by the Department of Commerce, Bureau of Industry and Security to control most U.S. exports, reexports and other activities.

President Bush has now signed S. 1612, the International Emergency Economic Powers Enhancement Act, which, among other things, increased the penalties for violations under the IEEPA into law on October 16, 2007.

The amendments to the IEEPA increased the civil penalty for a “person to violate, attempt to violate, or cause a violation” to “an amount not to exceed the greater of (1) $250,000; or (2) an amount that is twice the amount of the transaction that is the basis of the violation.” It also increased the criminal penalty, “upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.”

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If you haven’t been keeping track of export penalties, the maximum civil penalty under the EAA was $10,000 per violation. When the EAA expired in 2001, civil penalties for violations under the EAR were subsequently adjusted by the Department of Commerce to a maximum of $11,000 per violation. Just over a year ago, the EAR was amended to reflect changes in the civil penalties made by the USA Patriot Improvement and Reauthorization Act of 2005, which amended Section 206 of the IEEPA to raise the maximum civil penalty under the IEEPA to $50,000 per violation. So the latest change increases penalties five fold!

Hold on to your compliance hats, because those penalties won’t necessarily stop there. Senator Christopher Dodd introduced bill S. 2000 on August 3, 2007, that is intended to increase the enforcement authority and extend the Export Administration Act of 1979. If that bill is passed, the Export Administration Act of 2007 will, among other things, increase the maximum civil penalty to $500,000 per violation. It will also increase the maximum criminal penalties to the greater of $5 million or 10-times the value of the exports involved for corporations and the greater of $1 million and 10 years imprisonment for individuals.

Oh, yeah, keep in mind that a shipment, if in violation, will generally consist of multiple violations. 15 CFR 764.2 (g)(1) states that “no person may make any false or misleading representation, statement or certification, or falsify or conceal any material fact, either directly to BIS, the U.S. Customs Service, or an official of any other U.S. agency, or indirectly through any other person. (ii) In connection with the preparation, submission, issuance, use, or maintenance of any export control document as defined in § 772.1 or any report filed or required to be filed pursuant to § 760.5 of the EAR. Export control documents include, but are not limited to a license, an application for a license, dock receipt or bill of lading issued by any carrier in connection with any export shipment subject to the EAR, and all documents prepared and submitted by exporters and agents pursuant to the export clearance requirement of Part 758 of the EAR (§772.1).”

Exports are good for U.S. companies and their workers and help the ever-growing trade deficit. With the weaker U.S. dollar and efforts to boost revenues, more and more companies may see increased export sales or start exporting all together. But all companies and individuals involved in exporting must be aware of the export rules and the penalties for noncompliance.

The changes to the penalties under the IEEPA just signed into law as well as the impending changes proposed by the EAA of 2007 are two very compelling reasons to ensure your compliance Export Management System is up to date and you are performing your due diligence as required by the law. Remember, “Regulations; what regulations?” or “I did not know about any export regulations” are not going to fly with the Office of Export Enforcement if they come knocking at your doorstep.

From a compliance standpoint, your executive team should need no incentive to provide you the support you need for your compliance program. If they do, the increased penalty provisions speak for themselves. After all I don’t think they would like to trade in those business casual khakis for a bright orange jumpsuit anytime soon.

I can’t think of a better time than now to ensure the compliance side of the house is in order and up to date with necessary resources. A proactive approach to compliance is the best way to mitigate risk of a violation and possible penalties.

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