The United States Department of Commerce’s Bureau of Industry and Security (BIS), is responsible for administering and enforcing export controls on U.S. commercial products, software and technology.
In addition to maintaining the Commerce Control List, issuing export licenses and enforcing U.S. export control laws, BIS is responsible for administering several restricted party lists, including the Denied Persons List, Entity List and Unverified List. Significant civil and criminal fines and other penalties can be imposed on persons or companies engaging in prohibited transactions with parties included on these and other lists maintained by the U.S. and other U.S. Government agencies.
In some cases, where there has been a willful violation of the Export Administration Regulations (EAR), violators may be subject to both criminal fines and administrative penalties. However, for most administrative violations, there is no intent requirement, which means that administrative cases can be brought in a much wider variety of circumstances than criminal cases. Under the International Emergency Economic Powers (IEEPA) Enhancement Act, signed into law on October 16, 2007, for administrative cases pending or commenced on or after October 16, 2007, a civil penalty amounting to the greater of $250,000 or twice the value of the transaction may be imposed for each violation of IEEPA. For criminal violations in cases that were commenced on or after October 16, 2007, violators may be fined up to $1,000,000 and/or face up to 20 years of imprisonment.
BIS has issued Guidelines to companies on how to develop an effective export compliance program. With respect to restricted party list screening, the BIS Guidelines provide as follows:
- Internal procedures and controls should be implemented to systematically detect sanctioned persons and entities prior to engaging in exports, reexports and other activities that are prohibited or require licenses by BIS and other U.S. Government agencies.
- When developing screening procedures, consider persons and entities beyond the customer and end-user, including suppliers, freight forwarders, agents and other parties involved in international transactions.
- Depending on the nature of a company’s business, there are two basic techniques for screening transactions involving the export of goods and technology:
- Customer-based method – Where customers are routinely screened against the restricted party lists and company maintains database of approved customers.
- Transaction-based method – Company screens each order received. Screening should occur at various times in the sales process, including upon receipt of the order and prior to shipment.
- The restricted party screening process should be clearly documented
Automating these restricted party screening processes and procedures can greatly assist companies with their export compliance obligations and reduce the likelihood of engaging in a prohibited transaction with a prohibited party.
Learn how to maintain BIS compliance and avoid costly fines and penalties for doing business with restricted parties.