Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Rules and Regulations 75477 

Country Entity License 

requirement 

License 

review policy 

Federal Register 

citation 

*******

NETHERLANDS ..... * * * * * * 

Kapil Raj Arora, Breukelensestraat 44, 2574 

RC, The Hague, Netherlands; and 

Knobbelswaansingel 19, 2496 LN, The 

Hague, Netherlands.

For all items subject to the 

EAR. (See § 744.11 of the 

EAR).

Presumption of denial ............ 81 FR 14958, 3/21/16. 

* * * * * * 

PAKISTAN ............. * * * * * * 

Orion Eleven Pvt. Ltd., Street 11 Valley 

Road, Westridge Rawalpindi, Pakistan.

For all items subject to the 

EAR. (See § 744.11 of the 

EAR).

Presumption of denial ............ 79 FR 56003, 9/18/14. 

* * * * * * 

* * * * * 

[FR Doc. 2024–21109 Filed 9–13–24; 8:45 am] 

BILLING CODE 0099–10–P 

DEPARTMENT OF COMMERCE 

Bureau of Industry and Security 

15 CFR Parts 764 and 766 

[Docket No. 240911–0236] 

RIN 0694–AJ84 

Administrative and Enforcement 

Provisions 

AGENCY: Bureau of Industry and 

Security, Department of Commerce. 

ACTION: Final rule. 

SUMMARY: With this final rule, the 

Bureau of Industry and Security (BIS) 

amends the Export Administration 

Regulations (EAR) by making certain 

revisions and clarifications. This final 

rule revises provisions related to the 

voluntary self-disclosure process for 

exporters who believe that they may 

have violated the EAR, or any order, 

license or authorization issued 

thereunder. This final rule also provides 

clarified guidance on charging and 

penalty determinations in settlement of 

administrative enforcement cases. 

DATES: This rule is effective September 

16, 2024. 

FOR FURTHER INFORMATION CONTACT: For 

general questions, contact Tracy Martin, 

Office of Export Enforcement, Bureau of 

Industry and Security, U.S. Department 

of Commerce at (202) 482–1208 or by 

email: Tracy.Martin@bis.doc.gov. 

SUPPLEMENTARY INFORMATION: 

A. Background 

With this rule BIS revises § 764.5 of 

the EAR regarding the procedures for 

submitting voluntary self-disclosures 

(VSDs) and supplement No. 1 to part 

766, which includes guidance on 

charging and penalty determinations in 

settlement of administrative 

enforcement cases. As discussed in 

more detail below, these revisions 

implement certain policies related to the 

VSD process that BIS has announced in 

policy memoranda since 2022, and also 

makes changes to how BIS calculates 

penalties in administrative cases. 

1. Relevant Statutory Authority and 

Regulatory Framework 

On August 13, 2018, the President 

signed into law the John S. McCain 

National Defense Authorization Act for 

Fiscal Year 2019, which included the 

Export Control Reform Act of 2018 

(ECRA) (50 U.S.C. 4801–4852). Section 

1760(c) of ECRA (50 U.S.C. 4819(c)) 

authorizes the Secretary of Commerce 

(Secretary) to impose civil penalties for 

violations of ECRA, its implementing 

regulations, or any order or license 

issued thereunder. Specifically, ECRA 

authorizes the Secretary to impose the 

following civil penalties for each 

violation: 

(A) A fine of not more than $300,000 

or an amount that is twice the value of 

the transaction that is the basis of the 

violation with respect to which the 

penalty is imposed, whichever is 

greater. 

(B) Revocation of a license issued 

under [ECRA] to the person. 

(C) A prohibition on the person’s 

ability to export, reexport, or in-country 

transfer any items controlled under 

[ECRA]. 

50 U.S.C. 4819(c)(1). The amount of the 

maximum civil penalty per violation 

under ECRA is subject to adjustment 

under the Civil Penalties Inflation 

Adjustment Act of 1990 (28 U.S.C. 2461) 

and is currently $364,992. See 15 CFR 

6.3(c)(6). Within these limits, 50 U.S.C. 

4819(c)(3) authorizes the Secretary to 

issue regulations to ‘‘provide standards 

for establishing levels of civil penalty 

. . . based upon factors such as the 

seriousness of the violation, the 

culpability of the violator, and such 

mitigating factors as the violator’s 

record of cooperation with the 

Government in disclosing the 

violation.’’ The Secretary’s authority 

under ECRA is delegated to BIS (see 

section 1781 of ECRA, 50 U.S.C. 4851) 

and is implemented through the EAR. 

Consistent with these authorities, BIS 

has implemented regulations providing 

standards for establishing levels of civil 

penalties in supplement No. 1 to part 

766, titled ‘‘Guidance on Charging and 

Penalty Determinations in Settlement of 

Administrative Enforcement Cases’’ 

(‘‘BIS Penalty Guidelines’’). Last revised 

in the rule entitled ‘‘Guidance on 

Charging and Penalty Determinations in 

Settlement of Administrative 

Enforcement Cases’’ published in the 

Federal Register on June 22, 2016 (81 

FR 40506), the BIS Penalty Guidelines 

describe how BIS’s Office of Export 

Enforcement (OEE), the organizational 

unit of BIS that is responsible for 

enforcing the provisions of the EAR, 

makes penalty determinations in 

administrative enforcement cases. The 

BIS Penalty Guidelines describe various 

factors—including aggravating, general, 

and mitigating factors—that OEE will 

consider in determining how to respond 

to apparent export violations in 

administrative cases. Specifically, the 

BIS Penalty Guidelines outline how 

OEE calculates monetary penalties for a 

particular violation, which includes 

determination of the relevant base 

penalty, and how the various 

aggravating, general, and mitigating 

factors justify an upward or downward 

departure from that base penalty. As 

discussed in the BIS Penalty Guidelines, 

the presence of significant aggravating 

factors may lead OEE to consider the 

conduct to be egregious, which may 

result in considerably higher monetary 

penalties. Conversely, the presence of 

significant mitigating factors may result 

in a lower monetary penalty. 

One factor given significant weight in 

the BIS Penalty Guidelines is whether a 

party submitted a VSD regarding the 

violation. BIS encourages parties who 


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75478 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Rules and Regulations 

may have violated the EAR to submit a 

VSD and views VSDs as a strong 

indication of a party’s commitment to 

U.S. export control compliance. Section 

764.5 of the EAR establishes BIS’s 

general policy and procedures for 

disclosing potential violations of ECRA 

and the EAR to BIS. Specifically, BIS 

encourages the submission of a VSD if 

a potential violation of the EAR is 

discovered. 

2. BIS Enforcement Policy Memoranda 

Beginning in 2022, BIS issued a series 

of publicly available memoranda 

describing policy changes to strengthen 

its administrative enforcement program 

and to encourage companies, 

universities, and individuals to submit 

VSDs. Such disclosures can provide BIS 

with helpful information from industry 

about export compliance practices, as 

well as information about other 

potential violations. These memoranda 

include the following: (1) ‘‘Further 

Strengthening Our Administrative 

Enforcement Program,’’ dated June 30, 

2022 (https://www.bis.gov/sites/default/ 

files/files/Administrative%20

Enforcement%20Memo.pdf) (the ‘‘2022 

Policy Memorandum’’); (2) ‘‘Clarifying 

Our Policy Regarding Voluntary SelfDisclosures and Disclosures Concerning 

Others,’’ dated April 18, 2023 (https:// 

www.bis.gov/sites/default/files/files/ 

VSD%20Policy%20Memo

%20%2804.18.2023%29.pdf) (the ‘‘2023 

Policy Memorandum’’); and (3) ‘‘Further 

Enhancements to Our Voluntary SelfDisclosure Process,’’ dated January 16, 

2024 (https://www.bis.gov/sites/default/ 

files/files/VSD%20MEMO.pdf) (the 

‘‘2024 Policy Memorandum’’) 

(collectively, the ‘‘Policy Memoranda’’). 

The Policy Memoranda emphasize the 

importance of administrative 

enforcement measures to mitigate the 

threat that sensitive technologies will 

fall into adversarial hands and focus on 

the deterrent effect of imposing 

significantly higher penalties for 

egregious violations that affect national 

security. So that OEE can focus its 

limited resources on more serious cases, 

the Policy Memoranda also highlight 

OEE’s desire to resolve less serious 

violations as quickly as possible—with 

lower penalties or no penalty where 

appropriate—and announce new 

policies making it easier to submit 

disclosures and expanding the 

beneficial effect of submitting a VSD. 

Policy changes that were announced 

in the Policy Memoranda include: (1) 

the establishment of a ‘‘fast track’’ 

disclosure process for minor or 

technical violations and allowing for 

companies to submit an abbreviated 

narrative account in connection with 

such disclosures that contains less 

detail than required by § 764.5; (2) the 

availability of electronic submission of 

VSDs via email; (3) using non-monetary 

penalties to resolve cases that are not 

egregious and have not resulted in 

national security harm, but rise above 

the level of cases warranting a warning 

letter; (4) clarifying that OEE will 

consider it an aggravating factor for 

purposes of determining a potential 

penalty if a party identifies that it 

committed a possible violation and then 

chooses not to disclose it; and (5) 

clarifying and simplifying BIS’s process 

for handling requests to take corrective 

action for unlawfully exported items at 

issue in a VSD that would otherwise be 

prohibited by § 764.2(e) 

The substance of the Policy 

Memoranda and their codification into 

regulations are firmly within the 

statutory authority granted by section 

1760(c) of ECRA (50 U.S.C. 4819(c)). 

The Policy Memoranda were developed 

in accordance with the legislative 

framework, which empowers the 

Secretary to implement and enforce 

policies in this area. By translating these 

memoranda into formal regulations, BIS 

can ensure that the directives are legally 

binding and consistent with the 

legislative intent, thereby enhancing 

their effectiveness and enforceability 

while adhering to the statutory 

requirements. 

B. Purpose of This Final Rule 

The primary purpose of this final rule 

is twofold: first, to incorporate into the 

EAR the various policies announced in 

the Policy Memoranda, which are 

designed to encourage industry and 

academia to submit VSDs and to 

provide for efficient resolution of cases 

involving less serious violations, and 

second, to revise the BIS Penalty 

Guidelines to change how OEE 

calculates the base penalty in 

administrative cases, and how it applies 

various factors to the base penalty to 

determine the final penalty. 

With respect to the changes 

implementing the elements of the Policy 

Memoranda, BIS is revising § 764.5 

(regarding voluntary self-disclosure) and 

the BIS Penalty Guidelines. BIS is 

incorporating into the EAR relevant 

elements from the Policy Memoranda so 

that the regulations contain all relevant 

policies and procedures for submitting 

VSDs. As a result, industry will not be 

required to look to multiple sources to 

understand OEE’s procedures and 

expectations regarding the submission 

of VSDs. BIS is also making clear in the 

BIS Penalty Guidelines that for 

violations of a lower value and with 

minimal aggravating factors, OEE’s 

preference is to impose non-monetary 

penalties to shore up a company’s 

compliance program, which is more 

effective in these types of cases. 

With respect to the changes to the 

way OEE calculates penalties, BIS is 

revising the BIS Penalty Guidelines so 

that potential penalties more 

appropriately reflect the seriousness of 

the offense by linking that 

determination directly to transaction 

value and other circumstances 

pertaining to a violation. These Penalty 

Guideline changes do so primarily for 

two reasons. First, BIS has identified 

scenarios in which the previous BIS 

Penalty Guidelines, which applied 

schedule amounts and caps well below 

the statutory limitations to penalties for 

non-egregious cases, produce a base 

penalty that is disproportionately low 

compared to the transaction value, and 

therefore is insufficient to serve as a 

deterrent or incentive for companies to 

invest properly in export compliance. 

For example, under the previous rule, 

the penalty for a non-egregious violation 

disclosed through a VSD for a 

transaction valued at $100 million 

would be capped at $125,000. In this 

rule, BIS is removing from the BIS 

Penalty Guidelines the caps that 

previously existed for non-egregious 

cases. BIS will continue to take 

mitigating factors into account, as 

described in the revised BIS Penalty 

Guidelines, and to apply an appropriate 

reduction to the base penalty if 

circumstances warrant it. 

Second, the previous BIS Penalty 

Guidelines provided specific percentage 

ranges for reductions associated with 

certain mitigating factors (but not all 

mitigating factors), while it provided no 

such ranges for aggravating or general 

factors. The inclusion of specific 

percentage ranges for some mitigating 

factors and not for other factors led 

parties to incorrect assumptions about 

the range of reduction to which they 

were entitled. For example, the previous 

BIS Penalty Guidelines provided for a 

reduction of the base penalty amount of 

up to 25% for first time violations; 

however, a party’s first offense might 

occur together with aggravating factors 

or with other mitigating factors that, 

when taken into account, indicate that 

a penalty based on a smaller or larger 

reduction to the base penalty is 

appropriate. Since it is impossible to 

associate potential ranges for reductions 

or increases with all mitigating and 

aggravating factors that would 

appropriately capture every potential 

combination of facts and circumstances 

associated with a violation, in this rule 

BIS is removing from the BIS Penalty 

Guidelines all specific ranges for 


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Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Rules and Regulations 75479 

potential reduction. With these 

revisions, OEE is making clear that the 

civil monetary penalty will be adjusted 

(up or down) to reflect the applicable 

factors for administrative action set 

forth in the BIS Penalty Guidelines. The 

factors may result in a penalty amount 

that is lower or higher than the base 

penalty amount, depending upon 

whether they are aggravating or 

mitigating and how they, in the 

discretion of OEE, apply in totality in a 

particular case. As before, aggravating 

factors will not be used to increase the 

base penalty beyond the limits 

established in ECRA. 

C. Revisions to § 764.5 (Voluntary SelfDisclosures) 

1. Addition of Non-Disclosure as an 

Aggravating Factor 

Section 764.5 did not previously 

include as an aggravating factor, the 

failure of a party to submit a voluntary 

disclosure. In this final rule, and 

consistent with the policy outlined in 

the 2023 Policy Memorandum, BIS 

revises paragraph (a) of § 764.5 to state 

that OEE will consider a deliberate 

decision by a firm (as that term is 

defined in § 772.1 of the EAR) not to 

disclose a significant apparent violation 

to be an aggravating factor when 

determining what administrative 

sanctions, if any, will be sought. A 

deliberate decision not to disclose 

occurs when a firm uncovers a 

significant apparent violation that it has 

committed but then chooses not to file 

a VSD. This new rule effectively 

enhances the mitigating effect of 

voluntary disclosure, particularly in 

serious cases. For example, under the 

previous guidelines, if a firm identified 

a significant apparent violation and 

chose not to disclose it to OEE, the 

company was only choosing to forgo the 

mitigation credit offered under the 

guidelines. Now, because a deliberate 

decision not to disclose is an 

aggravating factor, if a firm chooses not 

to disclose, it not only forgoes the 

mitigation credit, but also faces the 

possibility that BIS will further increase 

the penalty. 

This change also reflects the 

importance of a firm’s deliberate 

decision not to disclose a significant 

apparent violation to OEE’s assessment 

of the strength of the company’s 

commitment to compliance. This 

revision makes clear that OEE will 

include in its consideration of a firm’s 

commitment to compliance whether the 

company made a decision not to 

disclose significant apparent violations. 

It also reflects that the deliberate nondisclosure of a significant apparent 

violation may compound the harm to 

U.S. national security or foreign policy 

interests by preventing the government 

from taking steps to mitigate the 

national security consequences of the 

violation in a manner that a firm could 

not. This revision allows OEE to impose 

penalties—or to charge certain conduct 

that may have otherwise been treated 

with a warning letter—in such cases 

that are appropriate to deter future 

noncompliance and encourage 

voluntary disclosure. 

2. Addition of Dual Track Process for 

Processing VSDs 

Section 764.5 previously had only one 

process for handling all VSDs, 

regardless of whether the violation at 

issue in the VSD was significant, or 

minor. This final rule revises § 764.5 by 

adding a new paragraph (c) regarding 

disclosures involving minor or technical 

violations. The previous paragraph (c), 

now paragraph (d), is revised to focus 

on the portion of the dual-track system 

that relates to significant violations. 

Former paragraphs (d) through (f) are 

redesignated as paragraphs (e) through 

(g) and are also revised to reflect the 

dual-track system. The redesignation 

and changes to these paragraphs are 

explained below. 

New paragraph (c) of § 764.5, titled 

‘‘Voluntary Self-Disclosures involving 

minor or technical violations,’’ explains 

the process for submitting VSDs 

involving minor or technical violations. 

Paragraph (c)(1) explains that a minor or 

technical violation is one that does not 

include any aggravating factors, as 

defined in the BIS Penalty Guidelines, 

and includes several examples. 

Paragraph (c)(2) provides guidance on 

submitting an abbreviated narrative for 

a VSD involving minor or technical 

violations, including where to submit 

the abbreviated narrative report and 

what information to include, and 

provides that the Director of OEE may 

require a full narrative report pursuant 

to new paragraph (d)(3) if OEE suspects 

that aggravating factors are present. 

Paragraph (c)(3) authorizes parties to 

bundle the submission of multiple 

minor or technical violations into one 

overarching submission if the violations 

occurred within the preceding quarter. 

This change allows for disclosures of 

minor or technical violations to be 

bundled into a single VSD submission 

on a quarterly basis using the 

abbreviated narrative account process as 

described elsewhere in this rule. This 

revision will significantly reduce the 

workload of companies submitting 

minor or technical violations. 

New paragraph (d), which is now 

titled ‘‘Voluntary Self-Disclosures 

involving significant violations,’’ 

explains the process for voluntarily 

disclosing a significant violation. This 

paragraph largely retains the language of 

former paragraph (c) regarding how to 

submit the disclosure, what to include 

in the narrative, the types of supporting 

documentation to include, deadlines 

regarding submitting information, and 

the related extension request process. 

BIS has added the instruction that a 

significant violation is one that involves 

one or more of the aggravating factors in 

the BIS Penalty Guidelines, and that 

parties who are unsure whether their 

disclosure involves a minor or technical 

violation or a significant violation 

should follow the procedures for 

disclosing a significant violation. 

Former paragraph (d), now paragraph 

(e) of § 764.5, has been renamed from 

‘‘Action by the Office of Export 

Enforcement’’ to ‘‘Dual-track processing 

of Voluntary Self-Disclosures by the 

Office of Export Enforcement’’ for 

consistency with the dual-track 

approach to VSDs. In paragraph (e)(1), 

BIS explains that OEE will generally 

resolve VSDs involving minor or 

technical violations within 60 days, 

either by informing the submitter that it 

intends to take no action or by issuing 

a warning letter. In paragraph (e)(2), BIS 

explains that for VSDs that indicate 

significant violations, BIS will conduct 

an investigation and, as quickly as the 

facts and circumstances permit, take one 

of five possible actions. The five 

potential actions correspond to the 

possible actions BIS could take under 

the former paragraph (d). 

BIS has made conforming changes 

throughout these paragraphs to reflect 

the updated paragraph numbering, as 

well as minor revisions for clarity. 

These include consistently using the 

term ‘‘full narrative’’ instead of 

‘‘narrative account’’ to describe the 

detailed submission that follows an 

initial notification when using the 

process in paragraph (d)(2), adding 

packing lists to the examples of 

supporting documentation that may be 

appropriate to include with a full 

narrative, and adding contact 

information for email submissions. 

3. Revisions to Paragraph Regarding 

Treatment of Unlawfully Exported Items 

Former paragraph (f) is now moved to 

paragraph (g) to accommodate the 

addition of new paragraph (c). 

Consistent with announcements in the 

2024 Policy Memorandum, this 

paragraph has been revised to add a 

clause explaining that any person (not 

just the party submitting a VSD) may 

notify the Director of OEE that a 

violation has occurred and then request 


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75480 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Rules and Regulations 

permission from the Office of Exporter 

Services to engage in activities 

described in § 764.2(e) that would 

otherwise be prohibited. Previously, this 

paragraph limited such requests for 

permission to parties who submitted a 

VSD. This change allows parties in 

possession of or with an interest in an 

item involved in a VSD that would 

otherwise be subject to the prohibitions 

in § 764.2(e) to submit a request to OEE 

even if they did not submit a VSD. 

BIS also added paragraph (g)(1)(iii), 

which explains that in order to return to 

the United States an item that has been 

unlawfully exported and disclosed 

under § 764.5, a person is only required 

to notify the Director of OEE. BIS adds 

this language to clarify that OEE 

authorizes the return of any unlawfully 

exported item to the United States and 

to reduce the burden on industry and 

BIS by removing the need for companies 

to submit and OEE to review such 

requests for authorization. 

This section also adds a new 

paragraph detailing how to submit 

requests for authorization and that 

explains what information is required to 

process requests, which includes: the 

nature of the violation including when 

and how the violations occurred; 

description, quantity, value in U.S. 

dollars and Export Control 

Classification Number (ECCN) or other 

classification of the items involved; 

license reference numbers, if applicable; 

identities and addresses of all 

individuals and organizations subject to 

the request; the scope of the request 

specifying the § 764.2(e) activities, 

including end-use; and point of contact. 

Paragraph (g)(4) regarding 

authorization for reexports of items 

subject to a VSD is revised to clarify that 

such authorization is required for 

transfers as well. Paragraph (4) is 

revised to include reference to the 

notifications provided for in the 

revisions to the note to paragraph 

(g)(1)(ii) discussed above. BIS also adds 

language to this paragraph instructing 

applicants to include with any request 

for authorization under this paragraph a 

copy of the relevant VSD or notification. 

A new note to paragraph (g)(4) clarifies 

that a party may submit a request under 

this section to obtain permission to use 

a license exception or No License 

Required (NLR) designation so long as 

the reexport or transfer at issue 

otherwise meets the terms and 

conditions of the relevant license 

exception or the NLR designation. 

Finally, this additional paragraph (g) 

clarifies that Automated Export System 

(AES) filing errors, where there is no 

other violation of the EAR, only require 

notification to OEE under paragraphs 

(g)(1)(i) and (ii) and do not require 

additional authorization under this 

paragraph (g). Paragraph (g) also 

clarifies that in such cases, a party must 

correct the AES filing with the Census 

Bureau before proceeding with activities 

subject to the EAR, provided the 

activities meet any EAR requirements. 

Removing authorization requests related 

to AES filing errors will save exporter 

and government resources. If a report 

includes any other violation, such as 

failure to obtain a required license, 

authorization under section 764 is 

required. 

D. Revisions to the BIS Penalty 

Guidelines (Supplement No. 1 to Part 

766) 

This rule makes several changes to the 

BIS Penalty Guidelines in supplement 

no. 1 to part 766 of the EAR, described 

in greater detail below. These include 

updates to the statutory references, 

changes to the penalty calculations and 

to certain mitigating or aggravating 

factors, the addition of non-monetary 

settlements as an action that BIS may 

take, and the removal of language 

relating to the application of penalty 

amounts toward compliance program 

enhancements. 

1. Updates to Statutory References 

This rule revises the BIS Penalty 

Guidelines to replace references to 

outdated statutes. References to the 

Export Administration Act of 1979 

(EAA) are replaced by references to 

ECRA; additionally, references to the 

‘‘Federal Civil Penalties Inflation 

Adjustment Act of 1990’’ (FPIAA 1990) 

are replaced by the ‘‘Federal Civil 

Penalties Inflation Adjustment Act 

Improvements Act of 2015’’ (FCPIAAIA 

2015). These changes are made to reflect 

BIS’s current statutory authorities. 

2. Removal of Applicable Schedule 

Amounts From the BIS Penalty 

Guidelines 

Under section I ‘‘Definitions,’’ BIS is 

removing the definition of ‘‘applicable 

schedule amount’’ completely. BIS is 

also removing the corresponding 

references in the base penalty matrix 

and in the explanation of the base 

penalty calculation in non-egregious 

cases in section IV.B. This change will 

make administrative penalties more 

straightforward and in line with the 

overall value of the transaction at issue. 

Previously, these schedule amounts 

limited the amount of the penalty in 

situations where they applied. For 

example, penalties for a transaction 

valued at $170,000 or more were capped 

at $250,000. OEE is removing this 

limitation so that it can impose 

penalties with sufficient deterrent effect 

in situations where transaction values 

are high. 

3. Changes to Section II To Clarify and 

Expand the Range of Possible OEE 

Responses to Apparent Violations of the 

EAR 

a. Addition of Paragraph (II)(C) for the 

Provision of Non-Monetary Penalties 

In the 2022 Policy Memorandum, BIS 

introduced non-monetary resolutions as 

a new type of penalty response to 

resolve enforcement cases that involve 

non-egregious conduct and that have 

not resulted in serious national security 

harm, but remain serious enough to 

warrant more than a warning letter or 

no-action letter. Such resolutions 

require remediation through the 

imposition of a suspended denial order 

with certain conditions, such as training 

and compliance requirements, as 

appropriate, to mitigate harm from past 

violations and prevent future ones. Nonmonetary resolutions give OEE the 

flexibility to impose sanctions that 

require a company to improve its 

compliance program even when a 

monetary penalty would not be 

appropriate or the value of such a 

penalty would be too low to have a 

deterrent effect. In this rule, BIS 

formalizes non-monetary resolutions as 

an enforcement response by listing it 

under paragraph (II)(D) of the BIS 

Penalty Guidelines. The subsequent 

subparagraphs under section II to 

supplement no. 1 are renumbered 

paragraph (II)(E) through new paragraph 

(II)(H). 

b. Removal of Application of Penalty 

Toward Compliance Enhancements in 

OEE Consideration of Suspended or 

Deferred Penalties. 

Paragraphs (II)(G) and (II)(H), formerly 

paragraphs (II)(F) and (II)(G), are revised 

to remove reference to the practice of 

allowing a Respondent to apply a 

portion of a suspended or deferred 

penalty toward compliance program 

enhancements. This change reflects 

BIS’s view that companies should 

independently make appropriate 

investments in their compliance 

program sufficient to identify and 

prevent potential violations, and 

generally should not expect to receive 

credit for the cost of making such 

investments against administrative 

penalties for past misconduct. 

4. Changes to Section III, ‘‘Factors 

Affecting Administrative Sanctions’’ 

BIS also makes several changes to 

section III regarding aggravating, 

general, and mitigating factors affecting 


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Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Rules and Regulations 75481 

administrative sanctions. These changes 

include revising the foreign policy 

considerations in paragraph (III)(C)(2) 

and adding a paragraph (N) under 

section III. Paragraphs (III)(D) through 

the new paragraph (III)(N) and their 

headings and content are changed 

accordingly and redesignated to 

accommodate this additional paragraph 

(N). The revisions, redesignation, and 

changes to these paragraphs are 

explained below. 

a. Amending Factor C To Include OEE’s 

Consideration of Conduct Enabling 

Human Rights Abuses 

ECRA authorizes BIS to implement 

export controls ‘‘to carry out the foreign 

policy of the United States, including 

the protection of human rights and the 

promotion of democracy,’’ 50 U.S.C. 

4811(2)(D). Consistent with this 

authority, and in line with U.S. foreign 

policy objectives, BIS is amending 

Aggravating Factor C, Harm to 

Regulatory Program Objectives, at 

Paragraph (III)(C)(2) to include the 

enabling of human rights abuses as a 

specific consideration when BIS 

assesses the potential impact of an 

apparent violation on U.S. foreign 

policy objectives. 

b. Addition of New Aggravating Factor 

for Deliberate Failure To Disclose a 

Significant Apparent Violation 

This rule adds a new aggravating 

factor at paragraph (III)(D), titled 

‘‘Failure to disclose a significant 

apparent violation,’’ This new 

paragraph (III)(D) is added to clarify that 

OEE will consider a deliberate decision 

by a firm (as that term is defined in 

§ 772.1 of the EAR) not to disclose a 

significant apparent violation to be an 

aggravating factor when determining 

what administrative sanctions, if any, 

will be sought. This is consistent with 

the corresponding change to § 764.5 

discussed above. As discussed above, 

this revision is intended to encourage 

disclosure by industry when significant 

apparent violations are uncovered. The 

text previously found in paragraph 

(III)(D) is relocated to paragraph (III)(E), 

and all of the subsequent factors in 

section III are renumbered through new 

factor N at paragraph (III)(N). 

BIS has made two additional changes 

for consistency with the addition of this 

aggravating factor. First, BIS has also 

deleted the note under ‘‘Concealment’’ 

in Aggravating Factor A, which 

previously stated that failure to file a 

VSD does not constitute concealment. 

Second, BIS has added a sentence under 

‘‘Compliance Program’’ in new 

paragraph (F), previously paragraph (E), 

stating that OEE will consider whether 

a firm has made a deliberate decision 

not to voluntarily disclose a significant 

apparent violation uncovered by its 

compliance program as part of its 

consideration of the compliance 

program under General Factors. 

c. Clarifying ‘‘Regulatory History’’ and 

‘‘Criminal Convictions’’ Subfactors 

Under General Factors 

BIS has changed two subfactors to 

Factor E (previously D), titled 

‘‘Individual Characteristics,’’ to clarify 

how it considers the respondent’s prior 

history. First, in subfactor 4, which 

relates to the respondent’s regulatory 

history, BIS has removed language that 

previously excluded a respondent’s 

history relating to antiboycott matters 

from consideration, as well as language 

that limited BIS’s review of prior history 

to five years preceding the date of the 

transaction giving rise to the apparent 

violation. This change was made to 

focus OEE penalty decisions on the 

most relevant prior conduct. BIS has 

also made clarifying revisions, 

including bringing the information that 

OEE will consider previous penalties, 

warning letters, or administrative 

actions (including settlements)—which 

was already reflected in the header for 

this subfactor—into the explanatory 

text. 

Second, subfactor 6 at paragraph 

(III)(E)(6), ‘‘Criminal Convictions,’’ is 

revised to clarify that, in addition to 

considering whether a respondent has 

been convicted or entered a guilty plea 

as part of a resolution with the 

Department of Justice, OEE also may 

consider whether a respondent has 

entered into any other type of resolution 

with the Department of Justice or other 

prosecutorial authorities related to a 

criminal violation. This change clarifies 

that OEE will consider resolutions other 

than a criminal conviction, such as 

Deferred Prosecution Agreements or 

Non-Prosecution Agreements, as part of 

the respondent’s criminal history. 

d. Clarifying What Constitutes 

Exceptional Cooperation Under 

Mitigating Factors 

The mitigating factor ‘‘Exceptional 

Cooperation with OEE,’’ previously 

Factor G, is now renumbered under 

Factor H at paragraph (III)(H), and 

continues to list illustrative examples of 

how OEE evaluates exceptional 

cooperation. Paragraph (III)(H)(4) under 

this factor is revised to list an additional 

consideration regarding whether the 

Respondent has previously disclosed 

information regarding the conduct of 

others that led to an enforcement action 

by OEE. This change is made to provide 

an incentive for companies to disclose 

the wrongful conduct of others. 

5. Changes to Section IV, ‘‘Civil 

Penalties’’ 

a. Revisions to Paragraph (IV)(B)(1) To 

Identify Decision Maker for 

Egregiousness Determination 

The previous paragraph (IV)(B)(1) said 

simply that ‘‘OEE’’ will determine 

whether a case is considered 

‘‘egregious’’ under the BIS Penalty 

Guidelines. BIS has revised this 

paragraph to specify that the OEE 

Director will make determinations as to 

whether a case is deemed egregious for 

purposes of the base penalty 

calculation. This determination no 

longer requires the Assistant Secretary 

of Commerce for Export Enforcement to 

give concurrence. The Assistant 

Secretary is already the signature 

authority on final orders implementing 

settlement agreements, so the Assistant 

Secretary’s additional concurrence is 

unnecessary. 

b. Revisions to Paragraph (IV)(B)(2) 

The ‘‘Base Penalty Matrix’’ under 

paragraph (IV)(B)(2)(a) and paragraph 

(IV)(B)(2)(b) are edited as follows: 

paragraph (IV)(B)(2)(a)(i) provides that 

in non-egregious VSD cases, the base 

penalty amount is no longer capped at 

a maximum of $125,000, but is instead 

capped at one-half of the transaction 

value. Paragraph (IV)(B)(2)(a)(ii) 

provides that, in a non-egregious case 

not initiated by a VSD, the base penalty 

amount is no longer based on the 

applicable schedule amount or capped 

at $250,000, but is instead capped at the 

full transaction value. BIS is removing 

from the base penalty matrix and related 

text the previously established schedule 

amounts and penalty caps for nonegregious cases to allow penalties to be 

calculated based on transactional value 

instead of progressive brackets that 

round up. For example, a transaction 

valued at $100,000 would have a 

schedule amount of $170,000 under 

existing guidelines. The penalty cap is 

removed to recognize that certain 

transactions are of such high value, that 

any potential penalty under the cap 

would not serve as an effective 

deterrent. 

Additionally, in paragraph 

(IV)(B)(2)(b) ‘‘Adjustment for Applicable 

Relevant Factors,’’ this rule removes 

references to percentages and reductions 

that may correspond to certain factors 

affecting administrative sanctions in a 

specific case and replaces them with an 

explanation that the application of the 

factors, as they apply in combination to 

a particular case, may result in a penalty 


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amount that is higher or lower than the 

base penalty amount. As discussed in 

the background section above, this 

change is necessary because the 

previous guidelines, which assigned 

percentages to certain factors but not to 

other factors, reduced OEE’s flexibility 

to impose appropriate penalties that 

serve as a deterrent and created a 

misperception that those percentages 

could not be offset by aggravating 

factors. 

c. Addition of Paragraph (IV)(B)(2)(a)(v) 

To Clarify Annual Adjustments to 

Statutory Maximum Penalty 

BIS is adding paragraph 

(IV)(B)(2)(a)(v). This new paragraph 

describes the applicable statutory 

maximum civil penalty per violation as 

established by ECRA, and which is 

adjusted annually under FCPIAAIA 

2015. 

Export Control Reform Act of 2018 

On August 13, 2018, the President 

signed into law the John S. McCain 

National Defense Authorization Act for 

Fiscal Year 2019, which included the 

Export Control Reform Act (ECRA), 50 

U.S.C. 4801–4852. ECRA, as amended, 

provides the legal basis for BIS’s 

principal authorities and serves as the 

authority under which BIS issues this 

rule. 

Rulemaking Requirements 

1. Executive Orders 12866, 13563, and 

14094 direct agencies to assess all costs 

and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects and distributive impacts and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits and 

of reducing costs, harmonizing rules, 

and promoting flexibility. 

Pursuant to E.O. 12866, this final rule 

has been determined to not be a 

significant regulatory action. This rule 

does not contain policies with 

Federalism implications as that term is 

defined under Executive Order 13132. 

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 of 1995 (44 U.S.C. 3501 

et seq.) (PRA), unless that collection of 

information displays a currently valid 

Office of Management and Budget 

(OMB) Control Number. BIS believes 

that the regulation will reduce the 

overall burden hours and costs 

associated with the following 

information collections. However, the 

minimal reduction of burden hours falls 

within the existing estimates currently 

associated with these control numbers. 

• 0694–0088, ‘‘Simplified Network 

Application Processing System,’’ which 

carries a burden-hour estimate of 29.7 

minutes for a manual or electronic 

submission; 

• 0694–0137 ‘‘License Exceptions and 

Exclusions,’’ which carries a burdenhour estimate of 1.5 hours per 

submission (Note: submissions for 

License Exceptions are rarely required); 

• 0694–0096 ‘‘Five Year Records 

Retention Period,’’ which carries a 

burden-hour estimate of less than 1 

minute; and 

• 0607–0152 ‘‘Automated Export 

System (AES) Program,’’ which carries a 

burden-hour estimate of 3 minutes per 

electronic submission. 

Additional information regarding 

these collections of information— 

including all background materials—can 

be found at https://www.reginfo.gov/ 

public/do/PRAMain and using the 

search function to enter either the title 

of the collection or the OMB Control 

Number. 

3. Pursuant to section 1762 of ECRA 

(50 U.S.C. 4821), this action is exempt 

from the Administrative Procedure Act 

(APA) (5 U.S.C. 553) requirements for 

notice of proposed rulemaking, 

opportunity for public participation and 

delay in effective date. 

4. Because a notice of proposed 

rulemaking and an opportunity for 

public comment are not required to be 

given for this rule by 5 U.S.C. 553, or 

by any other law, the analytical 

requirements of the Regulatory 

Flexibility Act, 5 U.S.C. 601, et seq., are 

not applicable. Accordingly, no 

regulatory flexibility analysis is 

required, and none has been prepared. 

List of Subjects in 15 CFR Parts 764 and 

766 

Administrative practice and 

procedure, Confidential business 

information, Exports, Law enforcement, 

Penalties. 

Accordingly, parts 764 and 766 of the 

Export Administration Regulations (15 

CFR parts 730 to 774) are amended as 

follows: 

PART 764—ENFORCEMENT AND 

PROTECTIVE MEASURES 

■ 1. The authority citation for part 764 

continues to read as follows: 

Authority: 50 U.S.C. 4801–4852; 50 U.S.C. 

4611–4613; 50 U.S.C. 1701 et seq.; E.O. 

13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 

783. 

■ 2. Section 764.5 is amended by 

revising paragraphs (a) and (b) through 

(f) and adding paragraph (g) to read as 

follows: 

§ 764.5 Voluntary self-disclosure. 

(a) General policy. BIS strongly 

encourages disclosure to the Office of 

Export Enforcement (OEE) if you believe 

that you may have violated the EAR, or 

any order, license or authorization 

issued thereunder. As described in 

supplement no. 1 to part 766, voluntary 

self-disclosure is a mitigating factor, and 

a firm’s deliberate decision not to 

disclose significant apparent violations 

is an aggravating factor in determining 

what administrative sanctions, if any, 

will be sought by OEE. A deliberate 

decision not to disclose occurs when a 

firm uncovers a significant apparent 

violation that it has committed but then 

chooses not to file a VSD. 

* * * * * 

(c) Voluntary self-disclosures 

involving minor or technical 

violations—(1) General. Any person 

wanting to voluntarily disclose a minor 

or technical violation should submit an 

abbreviated narrative report, as 

described in paragraph (c)(2) of this 

section. A minor or technical violation 

is one that does not contain any 

aggravating factors present as defined in 

section III(A) of supplement no. 1 to 

part 766. Examples of minor or 

technical violations include, but are not 

limited to, immaterial Electronic Export 

Information (EEI) filing errors, 

inadvertent record keeping violations 

resulting from failed file retrieval or 

retention mechanisms (e.g., physical 

damage caused by flood or fire and/or 

electronic corruption due to malware, 

virus, or outage), incorrect use of one 

license exception where other license 

exceptions were available, etc. 

(2) Abbreviated narrative report. The 

abbreviated narrative report should be 

submitted by email to bis_vsd_intake@

bis.doc.gov or in writing to the address 

in paragraph (d)(7) of this section. The 

email subject line should include the 

word ‘‘abbreviated’’ if it is an 

abbreviated VSD.: 

(i) The notification should include: 

(A) The name of the person making 

the disclosure and should designate a 

contact person regarding the abbreviated 

narrative report and provide that contact 

person’s current business street address, 

email address, and telephone number; 

and 

(B) A description of the general nature 

and extent of the violations (including, 

but not limited to, the destination and 


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parties involved in any transaction, and 

the number, classification, and value of 

any items involved). Parties may itemize 

the various minor or technical 

violations in list or spreadsheet form. 

(ii) The Director of OEE at their 

discretion may request a full narrative 

report pursuant to paragraph (d)(3) of 

this section if OEE suspects the 

presence of aggravating factors which 

will be due in 180 days from the date 

of the OEE Director’s request. 

(3) Bundling of minor/technical 

violations. Parties may bundle multiple 

minor or technical violations into one 

overarching submission, if the 

violations occurred within the 

preceding quarter. Parties may submit 

such minor or technical violations into 

a single VSD submission on a quarterly 

basis using the abbreviated narrative 

account process identified in paragraph 

(c)(2) of this section. 

(d) Voluntary self-disclosures 

involving significant violations—(1) 

General. Any person wanting to 

voluntarily disclose a significant 

violation should, in the manner 

outlined in paragraph (c)(2) of this 

section, initially notify OEE as soon as 

possible after violations are discovered, 

and then conduct a thorough review of 

all export-related transactions where 

violations are suspected. A significant 

violation is one that involves one or 

more aggravating factors as defined in 

section III(A) of supplement no. 1 to 

part 766. Those unsure of whether their 

possible disclosure relates to a minor or 

technical violation, or a significant 

violation, should follow the procedure 

in paragraph (d)(2) of this section for a 

significant violation. 

(2) Initial notification—(i) Manner 

and content of initial notification. The 

initial notification should be submitted 

by email to bis_vsd_intake@bis.doc.gov 

or in writing to the address in paragraph 

(d)(7) of this section. The notification 

should include the name of the person 

making the disclosure and a brief 

description of the suspected violations 

and should designate a contact person 

regarding the initial notification and 

provide that contact person’s current 

business street address, email address, 

and telephone number. The notification 

should describe the general nature and 

extent of the violations. OEE recognizes 

that there may be situations where it 

will not be practical to make an initial 

notification in writing. For example, 

written notification may not be practical 

if a shipment leaves the United States 

without the required license, yet there is 

still an opportunity to prevent 

acquisition of the items by unauthorized 

persons. In such situations, OEE should 

be contacted promptly at the office 

listed in paragraph (d)(7) of this section. 

(ii) Initial notification date. For 

purposes of calculating when a 

complete narrative account must be 

submitted under paragraph (d)(2)(iii) of 

this section, the initial notification date 

is the date the notification is received by 

OEE. OEE will notify the disclosing 

party in writing of the date that it 

receives the initial notification. At 

OEE’s discretion, such writing from OEE 

may be on paper, or in an email message 

or facsimile transmission from OEE, or 

by any other method for the 

transmission of written 

communications. Where it is not 

practical to make an initial notification 

in writing, the person making the 

notification should confirm the oral 

notification in writing as soon as 

possible. 

(iii) Timely completion of narrative 

accounts. The full narrative account 

required by paragraph (d)(3) of this 

section must be received by OEE within 

180 days of the initial notification date 

for purposes of paragraph (b)(3) of this 

section, absent an extension from the 

Director of OEE. If the person making 

the initial notification subsequently 

completes and submits to OEE the 

narrative account required by paragraph 

(d)(3) of this section such that OEE 

receives it within 180 days of the initial 

notification date, or within the 

additional time, if any, granted by the 

Director of OEE pursuant to paragraph 

(d)(2)(iv) of this section, the disclosure, 

including violations disclosed in the 

narrative account that were not 

expressly mentioned in the initial 

notification, will be deemed to have 

been made on the initial notification 

date for purposes of paragraph (b)(3) of 

this section if the initial notification was 

made in compliance with paragraphs 

(d)(1) and (2) of this section. Failure to 

meet the deadline (either the initial 180- 

day deadline or an extended deadline 

granted by the Director of OEE) would 

not be an additional violation of the 

EAR, but such failure may reduce or 

eliminate the mitigating impact of the 

voluntary disclosure under supplement 

no. 1 to this part. For purposes of 

determining whether the deadline has 

been met under this paragraph, a 

complete narrative account must 

contain all of the pertinent information 

called for in paragraphs (d)(3) through 

(5) of this section, and the voluntary 

self-disclosure must otherwise meet the 

requirements of this section. 

(iv) Deadline extensions. The Director 

of OEE may extend the 180-day 

deadline upon a determination in his or 

her discretion that U.S. Government 

interests would be served by an 

extension or that the person making the 

initial notification has shown that more 

than 180 days is reasonably needed to 

complete the narrative account. 

(A) Conditions for extension. The 

Director of OEE in his or her discretion 

may place conditions on the approval of 

an extension. For example, the Director 

of OEE may require that the disclosing 

person agree to toll the statute of 

limitations with respect to violations 

disclosed in the initial notification or 

discovered during the review for or 

preparation of the narrative account, 

and/or require the disclosing person to 

undertake specified interim remedial 

compliance measures. 

(B) Contents of request. (1) In most 

instances 180 days should be adequate 

to complete the narrative account. 

Requests to extend the 180-day deadline 

set forth in paragraph (d)(2)(iii) of this 

section will be determined by the 

Director of OEE pursuant to his or her 

authority under this paragraph (d)(2)(iv) 

based upon his consideration and 

evaluation of U.S. Government interests 

and the facts and circumstances 

surrounding the request and any related 

investigations. Such requests should 

show specifically that the person 

making the request: 

(i) Began its review promptly after 

discovery of the violations; 

(ii) Has been conducting its review 

and preparation of the narrative account 

as expeditiously as can be expected, 

consistent with the need for 

completeness and accuracy; 

(iii) Reasonably needs the requested 

extension despite having begun its 

review promptly after discovery of the 

violations and having conducted its 

review and preparation of the narrative 

account as expeditiously as can be 

expected consistent with the need for 

completeness and accuracy; and 

(iv) Has considered whether interim 

compliance or other corrective measures 

may be needed and has undertaken such 

measures as appropriate to prevent 

recurring or additional violations. 

(2) Such requests also should set out 

a proposed timeline for completion and 

submission of the narrative account that 

is reasonable under the applicable facts 

and circumstances and should also 

designate a contact person regarding the 

request and provide that contact 

person’s current business street address, 

email address, and telephone number. 

Requests may also include additional 

information that the person making the 

request reasonably believes is pertinent 

to the request under the applicable facts 

and circumstances. 

(C) Timing of requests. Requests for an 

extension should be made before the 

180-day deadline and as soon as 


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possible once a disclosing person 

determines that it will be unable to meet 

the deadline or the extended deadline 

where an extension previously has been 

granted, and possesses the information 

needed to prepare an extension request 

in accordance with paragraph 

(d)(2)(iv)(B) of this section. Requests for 

extension that are not received before 

the deadline for completing the 

narrative account has passed will not be 

considered. Parties who request an 

extension shortly before the deadline 

incur the risk that the Director of OEE 

will be unable to consider the request, 

determine whether or not to grant the 

extension, and communicate his or her 

decision before the deadline, and that 

any subsequently submitted narrative 

account will be considered untimely 

under paragraph (d)(2)(iii) of this 

section. 

(3) Full narrative. After the initial 

notification, a thorough review should 

be conducted of export-related 

transactions where violations with 

potentially aggravating factors are 

suspected (as defined in section III(A) of 

supplement no. 1 to part 766). OEE 

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 

consideration 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 requires disclosure. Upon 

completion of the review, OEE 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, a shipment without the 

required license or dealing with a party 

denied export privileges; 

(ii) An explanation of when and how 

the violations occurred; 

(iii) The complete identities and 

addresses of all individuals and 

organizations, whether foreign or 

domestic, involved in the activities 

giving rise to the violations; 

(iv) License numbers; 

(v) The description, quantity, value in 

U.S. dollars and ECCN or other 

classification of the items involved; and 

(vi) A description of any mitigating 

circumstances. 

(4) Supporting documentation. (i) The 

narrative account should be 

accompanied by copies of documents 

that explain and support it, including: 

(A) Licensing documents such as 

licenses, license applications, import 

certificates and end-user statements; 

(B) Shipping documents such as 

Shipper’s Export Declarations, air 

waybills, bills of lading and packing 

lists; and 

(C) Other documents such as letters, 

facsimiles, telexes and other evidence of 

written or oral communications, 

internal memoranda, purchase orders, 

invoices, 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 OEE requests them, or 

until a final decision on the disclosed 

information has been made. After a final 

decision, the documents should be 

maintained in accordance with the 

recordkeeping rules in part 762 of the 

EAR (15 CFR part 762). 

(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. 

§ 764.2(g), relating to false or misleading 

representations, applies in connection 

with the disclosure of information 

under this section. 

(6) Oral presentations. OEE 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 selfdisclosures. The information 

constituting a voluntary self-disclosure 

or any other correspondence pertaining 

to a voluntary self-disclosure may be 

submitted by email to bis_vsd_intake@

bis.doc.gov or mailed to: Director, Office 

of Export Enforcement, 1401 

Constitution Ave., Room H4514, 

Washington, DC 20230, Tel: (202) 482– 

5036. 

(e) Dual-track processing of Voluntary 

Self-Disclosures by the Office of Export 

Enforcement. (1) For VSDs that involve 

minor or technical infractions, 

including abbreviated VSDs, OEE will 

generally resolve the VSD within 60 

days of a final VSD submission with one 

of the actions in paragraphs (e)(1)(i) and 

(ii) of this section. 

(i) Inform the person making the 

disclosure that, based on the facts 

disclosed, it plans to take no action; or 

(ii) Issue a warning letter. 

(2) For VSDs that indicate significant 

violations, OEE will conduct an 

investigation, and as quickly as the facts 

and circumstances of a given case 

permit, OEE may take any of the 

following actions: 

(i) Inform the person making the 

disclosure that, based on the facts 

disclosed, it plans to take no action; 

(ii) Issue a warning letter; 

(iii) Issue a proposed charging letter 

pursuant to § 766.18 of the EAR and 

attempt to settle the matter; 

(iv) Issue a charging letter pursuant to 

§ 766.3 of the EAR if a settlement is not 

reached; and/or 

(v) Refer the matter to the Department 

of Justice for criminal prosecution. 

(f) Criteria. Supplement no. 1 to part 

766 describes how BIS typically 

exercises its discretion regarding 

whether to pursue an administrative 

enforcement case under part 766 and 

what administrative sanctions to seek in 

settling such a case. 

(g) Treatment of unlawfully exported 

items. (1) Any person taking certain 

actions with knowledge that a violation 

of ECRA or the EAR has occurred has 

violated § 764.2(e). 

(i) Any person who has made a 

voluntary self-disclosure knows that a 

violation may have occurred. Therefore, 

at the time that a voluntary selfdisclosure is made, the person making 

the disclosure may request permission 

from BIS to engage in the activities 

described in § 764.2(e) that would 

otherwise be prohibited. 

(ii) Any person may also notify the 

Director of OEE that a violation has 

occurred and request permission from 

BIS to engage in the activities described 

in § 764.2(e) that would otherwise be 

prohibited. 

(iii) Actions to return to the United 

States an item that has been unlawfully 

exported and disclosed under this 

section only require notification to the 

Director of OEE. Items subject to a 

violation that have been returned to the 

United States do not require further 

authorization under this paragraph (g) 

for future activities, provided that those 

future activities comply with any 

applicable EAR requirements. 

(2) How to submit a request under 

paragraphs (g)(1)(i) through (iii) of this 

section: A request should be submitted 

on letterhead, signed, and sent to the 

Director of the Office of Exporter 


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Services at emcd@bis.doc.gov with a 

copy sent to bis_vsd_intake@

bis.doc.gov. The request should be 

specific and detail the following 

information: nature of the violation 

including when and how the violations 

occurred; description, quantity, value in 

U.S. dollars and ECCN or other 

classification of the items involved; 

license numbers, if applicable; identities 

and addresses of all individuals and 

organizations subject to the request, the 

scope of the request specifying the 

§ 764.2(e) activities, including end-use, 

and point of contact. A copy of the 

initial or final VSD or notification made 

to the Director of OEE should be 

attached to the request. 

(3) If a request submitted pursuant to 

paragraph (g)(1)(i) or (ii) of this section 

is granted by the Office of Exporter 

Services in consultation with OEE, 

future activities with respect to those 

items that would otherwise violate 

§ 764.2(e) will not constitute violations. 

Note 1 to paragraph (g)(3): Even if 

permission is granted, the person making a 

voluntary self-disclosure pursuant to 

paragraph (g)(1)(i) of this section is not 

absolved from liability for any violations 

disclosed nor relieved of the obligation to 

obtain any required reexport authorizations. 

(4) Reexports and transfers (incountry). To reexport or transfer (incountry) items that are the subject of a 

voluntary self-disclosure or notification, 

and that have been exported contrary to 

the provisions of ECRA or the EAR, 

authorization may be requested from 

BIS in accordance with the provisions of 

part 748 of the EAR (15 CFR part 748). 

If the applicant who submitted the 

reexport or transfer authorization knows 

that the items are the subject of a 

voluntary self-disclosure or notification, 

the request should state that a voluntary 

self-disclosure or notification was made 

in connection with the export of the 

items for which authorization is sought 

and a copy of the voluntary selfdisclosure or notification should be 

included with the license application. 

Note 2 to paragraph (g)(4): If the items are 

otherwise eligible for reexport or transfer 

under a license exception or the No License 

Required (NLR) designation, a request under 

this paragraph (g) may be submitted to obtain 

permission for the use of the license 

exception or NLR designation for such 

reexport or transfer, provided the transaction 

otherwise meets the terms and conditions of 

the license exception or NLR designation. 

(5) Automated Export System (AES) 

filing errors. Disclosures and 

notifications of AES filing errors 

reported to OEE under paragraphs 

(g)(1)(i) and (ii) of this section, where no 

other violation of the EAR only require 

notification to OEE and do not require 

authorization under this paragraph (g) to 

engage in activities subject to the EAR. 

The AES filing must be corrected with 

the Census Bureau before proceeding 

with such activities provided the 

activities meet any applicable EAR 

requirements. If another violation, such 

as failure to obtain a required license, 

has occurred in addition to the AES 

filing error, authorization under this 

paragraph (g) is required. 

PART 766—ADMINISTRATIVE 

ENFORCEMENT PROCEEDINGS 

■ 3. The authority citation for part 766 

continues to read as follows: 

Authority: 50 U.S.C. 4801–4852; 50 U.S.C. 

4601 et seq.; 50 U.S.C. 1701 et seq.; E.O. 

13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 

783. 

■ 4. Supplement no. 1 to part 766 is 

revised to read as follows: 

Supplement No. 1 to Part 766— 

Guidance on Charging and Penalty 

Determinations in Settlement of 

Administrative Enforcement Cases 

Introduction 

This supplement describes how the Office 

of Export Enforcement (OEE) at the Bureau of 

Industry and Security (BIS) responds to 

apparent violations of the Export 

Administration Regulations (EAR) and, 

specifically, how OEE makes penalty 

determinations in the settlement of civil 

administrative enforcement cases under part 

764 of the EAR. This guidance does not apply 

to enforcement cases for violations under 

part 760 of the EAR—Restrictive Trade 

Practices or Boycotts. Supplement no. 2 to 

part 766 continues to apply to civil 

administrative enforcement cases involving 

part 760 violations. 

Because many administrative enforcement 

cases are resolved through settlement, the 

process of settling such cases is integral to 

the enforcement program. OEE carefully 

considers each settlement offer in light of the 

facts and circumstances of the case, relevant 

precedent, and OEE’s objective to achieve in 

each case an appropriate penalty and 

deterrent effect. In settlement negotiations, 

OEE encourages parties to provide, and will 

give serious consideration to, information 

and evidence that parties believe are relevant 

to the application of this guidance to their 

cases, to whether a violation has in fact 

occurred, or to whether they have an 

affirmative defense to potential charges. 

This guidance does not confer any right or 

impose any obligation regarding what 

penalties OEE may seek in litigating a case 

or what posture OEE may take toward 

settling a case. Parties do not have a right to 

a settlement offer or particular settlement 

terms from OEE, regardless of settlement 

positions OEE has taken in other cases. 

I. Definitions 

Note: See also: Definitions contained in 

§ 766.2 of the EAR. 

Apparent Violation means conduct that 

constitutes an actual or possible violation of 

the Export Control Reform Act of 2018, the 

EAR, other statutes administered or enforced 

by BIS, as well as executive orders, 

regulations, orders, directives, or licenses 

issued pursuant thereto. 

Transaction value means the U.S. dollar 

value of a subject transaction, as 

demonstrated by commercial invoices, bills 

of lading, signed Customs declarations, AES 

filings or similar documents. Where the 

transaction value is not otherwise 

ascertainable, OEE may consider the market 

value of the items that were the subject of the 

transaction and/or the economic benefit 

derived by the Respondent from the 

transaction, in determining transaction value. 

In situations involving a lease of U.S.-origin 

items, the transaction value will generally be 

the value of the lease. For purposes of these 

guidelines, ‘‘transaction value’’ will not 

necessarily have the same meaning, nor be 

applied in the same manner, as that term is 

used for import valuation purposes at 19 CFR 

152.103. 

Voluntary self-disclosure means the selfinitiated notification to OEE of an apparent 

violation as described in and satisfying the 

requirements of § 764.5 of the EAR. 

II. Types of Responses to Apparent 

Violations 

OEE, among other responsibilities, 

investigates apparent violations of the EAR, 

or any order, license or authorization issued 

thereunder. When it appears that such a 

violation may have occurred, OEE 

investigations may lead to no action, a 

warning letter or an administrative 

enforcement proceeding. A violation may 

also be referred to the Department of Justice 

for criminal prosecution. The type of 

enforcement action initiated by OEE will 

depend primarily on the nature of the 

violation. Depending on the facts and 

circumstances of a particular case, an OEE 

investigation may lead to one or more of the 

following actions: 

A. No Action. If OEE determines that there 

is insufficient evidence to conclude that a 

violation has occurred, determines that a 

violation did not occur and/or, based on an 

analysis of the Factors outlined in section III 

of these guidelines, concludes that the 

conduct does not rise to a level warranting 

an administrative response, then no action 

will be taken. In such circumstances, if the 

investigation was initiated by a voluntary 

self-disclosure (VSD), OEE will issue a letter 

(a no-action letter) indicating that the 

investigation is being closed with no 

administrative action being taken. OEE may 

issue a no-action letter in non-voluntarily 

disclosed cases at its discretion. A no-action 

determination by OEE represents OEE’s 

disposition of the apparent violation, unless 

OEE later learns of additional information 

regarding the same or similar transactions or 

other relevant facts. A no-action letter is not 

a final agency action with respect to whether 

a violation occurred. 

B. Warning Letter. If OEE determines that 

a violation may have occurred but a civil 

penalty is not warranted under the 

circumstances, and believes that the 


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underlying conduct could lead to a violation 

in other circumstances and/or that a 

Respondent does not appear to be exercising 

due diligence in assuring compliance with 

the statutes, executive orders, and regulations 

that OEE enforces, OEE may issue a warning 

letter. A warning letter may convey OEE’s 

concerns about the underlying conduct and/ 

or the Respondent’s compliance policies, 

practices, and/or procedures. It may also 

address an apparent violation of a minor or 

technical nature, where good faith efforts to 

comply with the law and cooperate with the 

investigation are present, or where the 

investigation commenced as a result of a 

voluntary self-disclosure satisfying the 

requirements of § 764.5 of the EAR, provided 

that no aggravating factors exist. In the 

exercise of its discretion, OEE may determine 

in certain instances that issuing a warning 

letter, instead of bringing an administrative 

enforcement proceeding, will achieve the 

appropriate enforcement result. A warning 

letter will describe the apparent violation 

and urge compliance. A warning letter 

represents OEE’s enforcement response to 

and disposition of the apparent violation, 

unless OEE later learns of additional 

information concerning the same or similar 

apparent violations. A warning letter does 

not constitute a final agency action with 

respect to whether a violation has occurred. 

C. Administrative enforcement case. If OEE 

determines that a violation has occurred and, 

based on an analysis of the Factors outlined 

in section III of these guidelines, concludes 

that the Respondent’s conduct warrants a 

civil monetary penalty or other 

administrative sanctions, OEE may initiate an 

administrative enforcement case. The 

issuance of a charging letter under § 766.3 of 

the EAR initiates an administrative 

enforcement proceeding. 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 § 766.18 of the EAR. OEE 

may prepare a proposed charging letter 

which could result in a case being settled 

before issuance of an actual charging letter. 

See § 766.18(a) of the EAR. If a case does not 

settle before issuance of a charging letter and 

the case proceeds to adjudication, the 

resulting charging letter may include more 

violations than alleged in the proposed 

charging letter, and the civil monetary 

penalty amounts assessed may be greater that 

those provided for in section IV of these 

guidelines. Civil monetary penalty amounts 

for cases settled before the issuance of a 

charging letter will be determined as 

discussed in section IV of these guidelines. 

A civil monetary penalty may be assessed for 

each violation. The maximum amount of 

such a penalty per violation is stated in 

§ 764.3(a)(1), subject to adjustments under 

Federal Civil Penalties Inflation Adjustment 

Act Improvements Act of 2015 (Pub. L. 114– 

74, sec. 701), which are codified at 15 CFR 

6.4. OEE will afford the Respondent an 

opportunity to respond to a proposed 

charging letter. Responses to charging letters 

following the institution of an enforcement 

proceeding under part 766 of the EAR are 

governed by § 766.3 of the EAR. 

D. Non-Monetary Penalty. OEE may seek a 

non-monetary penalty if OEE determines the 

violations are not egregious and have not 

resulted in serious national security harm, 

but rise above the level of cases warranting 

a warning letter or no-action letter. Instead of 

requiring monetary penalties, such 

agreements will require remediation through 

the imposition of a suspended denial order 

with certain conditions, such as training and 

compliance requirements, as appropriate, to 

mitigate harm from past violations and 

prevent future ones. 

E. Civil Monetary Penalty. OEE may seek 

a civil monetary penalty if OEE determines 

that a violation has occurred and, based on 

the Factors outlined in section III of these 

guidelines, concludes that the Respondent’s 

conduct warrants a monetary penalty. 

Section IV of these guidelines will guide the 

agency’s exercise of its discretion in 

determining civil monetary penalty amounts. 

F. Criminal Referral. In appropriate 

circumstances, OEE may refer the matter to 

the Department of Justice for criminal 

prosecution. Apparent violations referred for 

criminal prosecution also may be subject to 

a civil monetary penalty and/or other 

administrative sanctions or action by BIS. 

G. Other Administrative Sanctions or 

Actions. In addition to or in lieu of other 

administrative actions, OEE may seek 

sanctions listed in § 764.3 of the EAR. BIS 

may also take the following administrative 

actions, among other actions, in response to 

an apparent violation: 

License Revision, Suspension or 

Revocation. BIS authorizations to engage in 

a transaction pursuant to a license or license 

exception may be revised, suspended or 

revoked in response to an apparent violation 

as provided in §§ 740.2(b) and 750.8 of the 

EAR. 

Denial of Export Privileges. An order 

denying a Respondent’s export privileges 

may be issued, as described in § 764.3(a)(2) 

of the EAR. Such a denial may extend to all 

export privileges, as set out in the standard 

terms for denial orders in supplement no. 1 

to part 764 of the EAR, or may be narrower 

in scope (e.g., limited to exports of specified 

items or to specified destinations or 

customers). A denial order may also be 

suspended in whole or in part in accordance 

with § 766.18(c). 

Exclusion from practice. Under 

§ 764.3(a)(3) of the EAR, any person acting as 

an attorney, accountant, consultant, freight 

forwarder or other person who acts in a 

representative capacity in any matter before 

BIS may be excluded from practicing before 

BIS. 

Training and Audit Requirements. In 

appropriate cases, OEE may require as part of 

a settlement agreement that the Respondent 

provide training to employees as part of its 

compliance program, adopt other compliance 

measures, and/or be subject to internal or 

independent audits by a qualified outside 

person. 

H. Suspension or Deferral. In appropriate 

cases, payment of a civil monetary penalty 

may be suspended or deferred during a 

probationary period under a settlement 

agreement and order. If the terms of the 

settlement agreement or order are not 

adhered to by the Respondent, then 

suspension or deferral may be revoked and 

the full amount of the penalty imposed. See 

§ 764.3(a)(1)(iii) of the EAR. In determining 

whether suspension or deferral is 

appropriate, OEE may consider, for example, 

whether the Respondent 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 of the 

circumstances, such suspension or deferral is 

necessary to make the financial impact of the 

penalty consistent with the impact of 

penalties on other parties who committed 

similar violations. 

III. Factors Affecting Administrative 

Sanctions 

Many apparent violations are isolated 

occurrences, the result of a good-faith 

misinterpretation, or involve no more than 

simple negligence or carelessness. In such 

instances, absent the presence of aggravating 

factors, the matter frequently may be 

addressed with a no action determination 

letter or, if deemed necessary, a warning 

letter. In other cases, where the imposition of 

an administrative penalty is deemed 

appropriate, OEE will consider some or all of 

the following Factors in determining the 

appropriate sanctions in administrative 

cases, including the appropriate amount of a 

civil monetary penalty where such a penalty 

is sought and is imposed as part of a 

settlement agreement and order. These 

factors describe circumstances that, in OEE’s 

experience, are commonly relevant to penalty 

determinations in settled cases. Factors that 

are considered exclusively aggravating, such 

as willfulness, or exclusively mitigating, such 

as situations where remedial measures were 

taken, are set forth paragraphs II(A) through 

(D) and (G) through (I). This guidance also 

identifies General Factors—which can be 

either mitigating or aggravating—such as the 

presence or absence of an internal 

compliance program at the time the apparent 

violations occurred. Other relevant Factors 

may also be considered at OEE’s discretion. 

While some violations of the EAR have a 

degree of knowledge or intent as an element 

of the offense, OEE may regard a violation of 

any provision of the EAR as knowing or 

willful if the facts and circumstances of the 

case support that conclusion. For example, 

evidence that a corporate entity had 

knowledge at a senior management level may 

mean that a higher penalty may be 

appropriate. OEE will also consider, in 

accordance with supplement no. 3 to part 

732 of the EAR (15 CFR part 732), the 

presence of any red flags that should have 

alerted the Respondent that a violation was 

likely to occur. The aggravating factors 

identified in the Guidelines do not alter or 

amend § 764.2(e) or the definition of 

‘‘knowledge’’ in § 772.1, or other provisions 

of parts 764 and 772 of the EAR (15 CFR 

parts 764 and 772). If the violations are of 

such a nature and extent that a monetary fine 

alone represents an insufficient penalty, a 

denial or exclusion order may also be 

imposed to prevent future violations of the 

EAR. 


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Aggravating Factors 

A. Willful or Reckless Violation of Law. 

OEE will consider a Respondent’s apparent 

willfulness or recklessness in violating, 

attempting to violate, conspiring to violate, or 

causing a violation of the law. Generally, to 

the extent the conduct at issue appears to be 

the result of willful conduct—a deliberate 

intent to violate, attempt to violate, conspire 

to violate, or cause a violation of the law— 

the OEE enforcement response will be 

stronger. Among the factors OEE may 

consider in evaluating apparent willfulness 

or recklessness are: 

1. Willfulness. Was the conduct at issue the 

result of a decision to take action with the 

knowledge that such action would constitute 

a violation of U.S. law? Did the Respondent 

know that the underlying conduct 

constituted, or likely constituted, a violation 

of U.S. law at the time of the conduct? 

2. Recklessness/gross negligence. Did the 

Respondent demonstrate reckless disregard 

or gross negligence with respect to 

compliance with U.S. regulatory 

requirements or otherwise fail to exercise a 

minimal degree of caution or care in avoiding 

conduct that led to the apparent violation? 

Were there warning signs that should have 

alerted the Respondent that an action or 

failure to act would lead to an apparent 

violation? 

3. Concealment. Was there a deliberate 

effort by the Respondent to hide or purposely 

obfuscate its conduct in order to mislead 

OEE, Federal, State, or foreign regulators, or 

other parties involved in the conduct, about 

an apparent violation? 

4. Pattern of Conduct. Did the apparent 

violation constitute or result from a pattern 

or practice of conduct or was it relatively 

isolated and atypical in nature? In 

determining both whether to bring charges 

and, once charges are brought, whether to 

treat the case as egregious, OEE will be 

mindful of certain situations where multiple 

recurring violations resulted from a single 

inadvertent error, such as misclassification. 

However, for cases that settle before filing of 

a charging letter with an Administrative Law 

Judge, OEE will generally charge only the 

most serious violation per transaction. If OEE 

issues a proposed charging letter and 

subsequently files a charging letter with an 

Administrative Law Judge because a 

mutually agreeable settlement cannot be 

reached, OEE will continue to reserve its 

authority to proceed with all available 

charges in the charging letter based on the 

facts presented. When determining a penalty, 

each violation is potentially chargeable. 

5. Prior Notice. Was the Respondent on 

notice, or should it reasonably have been on 

notice, that the conduct at issue, or similar 

conduct, constituted a violation of U.S. law? 

6. Management Involvement. In cases of 

entities, at what level within the organization 

did the willful or reckless conduct occur? 

Were supervisory or managerial level staff 

aware, or should they reasonably have been 

aware, of the willful or reckless conduct? 

B. Awareness of Conduct at Issue: The 

Respondent’s awareness of the conduct 

giving rise to the apparent violation. 

Generally, the greater a Respondent’s actual 

knowledge of, or reason to know about, the 

conduct constituting an apparent violation, 

the stronger the OEE enforcement response 

will be. In the case of a corporation, 

awareness will focus on supervisory or 

managerial level staff in the business unit at 

issue, as well as other senior officers and 

managers. Among the factors OEE may 

consider in evaluating the Respondent’s 

awareness of the conduct at issue are: 

1. Actual Knowledge. Did the Respondent 

have actual knowledge that the conduct 

giving rise to an apparent violation took 

place, and remain willfully blind to such 

conduct, and fail to take remedial measures 

to address it? Was the conduct part of a 

business process, structure or arrangement 

that was designed or implemented with the 

intent to prevent or shield the Respondent 

from having such actual knowledge, or was 

the conduct part of a business process, 

structure or arrangement implemented for 

other legitimate reasons that consequently 

made it difficult or impossible for the 

Respondent to have actual knowledge? 

2. Reason to Know. If the Respondent did 

not have actual knowledge that the conduct 

took place, did the Respondent have reason 

to know, or should the Respondent 

reasonably have known, based on all readily 

available information and with the exercise 

of reasonable due diligence, that the conduct 

would or might take place? 

3. Management Involvement. In the case of 

an entity, was the conduct undertaken with 

the explicit or implicit knowledge of senior 

management, or was the conduct undertaken 

by personnel outside the knowledge of senior 

management? If the apparent violation was 

undertaken without the knowledge of senior 

management, was there oversight intended to 

detect and prevent violations, or did the lack 

of knowledge by senior management result 

from disregard for its responsibility to 

comply with applicable regulations and 

laws? 

C. Harm to Regulatory Program Objectives: 

The actual or potential harm to regulatory 

program objectives caused by the conduct 

giving rise to the apparent violation. This 

factor is present where the conduct in 

question, in purpose or effect, substantially 

implicates national security, foreign policy or 

other essential interests protected by the U.S. 

export control system. Among other things, 

OEE may consider such factors as the reason 

for controlling the item to the destination in 

question; the sensitivity of the item; the 

prohibitions or restrictions against the 

recipient of the item; and the licensing policy 

concerning the transaction (such as 

presumption of approval or denial). OEE, in 

its discretion, may consult with other U.S. 

agencies or with licensing and enforcement 

authorities of other countries in making its 

determination. Among the factors OEE may 

consider in evaluating the harm to regulatory 

program objectives are: 

1. Implications for U.S. National Security: 

The impact that the apparent violation had 

or could potentially have on the national 

security of the United States. For example, if 

a particular export could undermine U.S. 

military superiority or endanger U.S. or 

friendly military forces or be used in a 

military application contrary to U.S. 

interests, OEE would consider the 

implications of the apparent violation to be 

significant. 

2. Implications for U.S. Foreign Policy: The 

effect that the apparent violation had or 

could potentially have on U.S. foreign policy 

objectives. For example, if a particular export 

is, or is likely to be, used by a foreign regime 

to monitor communications of its population 

in order to suppress free speech and 

persecute dissidents, or otherwise used to 

enable human rights abuses, OEE would 

consider the implications of the apparent 

violation to be significant. 

D. Failure to disclose a significant 

apparent violation. If a firm (as that term is 

defined in § 772.1 of the EAR) deliberately 

chooses not to disclose a significant apparent 

violation that it has identified, OEE will 

consider that non-disclosure to be an 

aggravating factor when assessing what 

administrative sanctions, if any, will be 

sought. A deliberate decision not to disclose 

occurs when a firm uncovers a significant 

apparent violation that they have committed 

but then chooses not to file a VSD. 

General Factors 

E. Individual Characteristics: The 

particular circumstances and characteristics 

of a Respondent. Among the factors OEE may 

consider in evaluating individual 

characteristics are: 

1. Commercial Sophistication: The 

commercial sophistication and experience of 

the Respondent. Is the Respondent an 

individual or an entity? If an individual, was 

the conduct constituting the apparent 

violation for personal or business reasons? 

2. Size and Sophistication of Operations: 

The size of a Respondent’s business 

operations, where such information is 

available and relevant. At the time of the 

violation, did the Respondent have any 

previous export experience and was the 

Respondent familiar with export practices 

and requirements? Qualification of the 

Respondent as a small business or 

organization for the purposes of the Small 

Business Regulatory Enforcement Fairness 

Act, as determined by reference to the 

applicable standards of the Small Business 

Administration, may also be considered. 

3. Volume and Value of Transactions: The 

total volume and value of transactions 

undertaken by the Respondent on an annual 

basis, with attention given to the volume and 

value of the apparent violations as compared 

with the total volume and value of all 

transactions. Was the quantity and/or value 

of the exports high, such that a greater 

penalty may be necessary to serve as an 

adequate penalty for the violation or 

deterrence of future violations, or to make the 

penalty proportionate to those for otherwise 

comparable violations involving exports of 

lower quantity or value? 

4. Regulatory History: The Respondent’s 

regulatory history, including OEE’s issuance 

of prior penalties, warning letters, or other 

administrative actions (including 

settlements). OEE will consider a 

Respondent’s past regulatory history, 

including OEE’s issuance of prior penalties, 

warning letters, or other administrative 

actions (including settlements). When an 

acquiring firm takes reasonable steps to 


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uncover, correct, and voluntarily disclose or 

cause the voluntary self-disclosure to OEE of 

conduct that gave rise to violations by an 

acquired business before the acquisition, OEE 

typically will not take such violations into 

account in applying these factors in settling 

other violations by the acquiring firm. 

5. Other illegal conduct in connection with 

the export. Was the transaction in support of 

other illegal conduct, for example the export 

of firearms as part of a drug smuggling 

operation, or illegal exports in support of 

intellectual property theft, economic 

espionage or money laundering? 

6. Criminal Convictions. Has the 

Respondent previously been convicted of a 

criminal violation or otherwise entered into 

a resolution with the Department of Justice 

or other prosecutorial authority related to a 

criminal violation? 

Note: Where necessary to effective 

enforcement, the prior involvement in export 

violation(s) of a Respondent’s owners, 

directors, officers, partners, or other related 

persons may be imputed to a Respondent in 

determining whether these criteria are 

satisfied. 

F. Compliance Program: The existence, 

nature and adequacy of a Respondent’s riskbased BIS compliance program at the time of 

the apparent violation. OEE will take account 

of the extent to which a Respondent complies 

with the principles set forth in BIS’s Export 

Compliance Guidelines. Information about 

the Export Compliance Guidelines can be 

accessed through the BIS website at http://

www.bis.gov/. OEE will also consider 

whether a Respondent’s export compliance 

program uncovered a problem, thereby 

preventing further violations, and whether 

the Respondent has taken steps to address 

compliance concerns raised by the violation, 

to include the submission of a VSD and steps 

to prevent reoccurrence of the violation that 

are reasonably calculated to be effective. 

Conversely, OEE will also consider whether 

a firm has deliberately failed to voluntarily 

disclose a significant apparent violation 

uncovered by a company’s export 

compliance program. 

Mitigating Factors 

G. Remedial Response. The Respondent’s 

corrective action taken in response to the 

apparent violation. Among the factors OEE 

may consider in evaluating the remedial 

response are: 

1. The steps taken by the Respondent upon 

learning of the apparent violation. Did the 

Respondent immediately stop the conduct at 

issue? Did the Respondent undertake to file 

a VSD? 

2. In the case of an entity, the processes 

followed to resolve issues related to the 

apparent violation. Did the Respondent 

discover necessary information to ascertain 

the causes and extent of the apparent 

violation, fully and expeditiously? Was 

senior management fully informed? If so, 

when? 

3. In the case of an entity, whether it 

adopted new and more effective internal 

controls and procedures to prevent the 

occurrence of similar apparent violations. If 

the entity did not have a BIS compliance 

program in place at the time of the apparent 

violation, did it implement one upon 

discovery of the apparent violation? If it did 

have a BIS compliance program, did it take 

appropriate steps to enhance the program to 

prevent the recurrence of similar violations? 

Did the entity provide the individual(s) and/ 

or managers responsible for the apparent 

violation with additional training, and/or 

take other appropriate action, to ensure that 

similar violations do not occur in the future? 

4. Where applicable, whether the 

Respondent undertook a thorough review to 

identify other apparent violations. 

H. Exceptional Cooperation with OEE: The 

nature and extent of the Respondent’s 

cooperation with OEE, beyond those actions 

set forth in Factor F. Among the factors OEE 

may consider in evaluating exceptional 

cooperation are: 

1. Did the Respondent provide OEE with 

all relevant information regarding the 

apparent violation at issue in a timely, 

comprehensive and responsive manner 

(whether or not voluntarily self-disclosed), 

including, if applicable, overseas records? 

2. Did the Respondent research and 

disclose to OEE relevant information 

regarding any other apparent violations 

caused by the same course of conduct? 

3. Did the Respondent provide substantial 

assistance in another OEE investigation of 

another person who may have violated the 

EAR? 

4. Has the Respondent previously made 

substantial voluntary efforts to provide 

information (such as providing tips that led 

to enforcement actions against other parties) 

to Federal law enforcement authorities in 

support of the enforcement of U.S. export 

control regulations? Has the Respondent 

previously disclosed information regarding 

the conduct of others that led to enforcement 

action by OEE? 

5. Did the Respondent enter into a statute 

of limitations tolling agreement, if requested 

by OEE (particularly in situations where the 

apparent violations were not immediately 

disclosed or discovered by OEE, in 

particularly complex cases, and in cases in 

which the Respondent has requested and 

received additional time to respond to a 

request for information from OEE)? If so, the 

Respondent’s entering into a tolling 

agreement may be deemed a mitigating 

factor. 

Note: A Respondent’s refusal to enter into 

a tolling agreement will not be considered by 

OEE as an aggravating factor in assessing a 

Respondent’s cooperation or otherwise under 

the Guidelines. 

I. License Was Likely To Be Approved. 

Would an export license application have 

likely been approved for the transaction had 

one been sought? Would the export have 

qualified for a License Exception? Some 

license requirements sections in the EAR also 

set forth a licensing policy (i.e., a statement 

of the policy under which license 

applications will be evaluated), such as a 

general presumption of denial or case by case 

review. OEE may also consider the licensing 

history of the specific item to that destination 

and if the item or end-user has a history of 

export denials. 

Other Relevant Factors Considered on a 

Case-by-Case Basis 

J. Related Violations. Frequently, a single 

export transaction can give rise to multiple 

violations. For example, an exporter who 

inadvertently misclassifies an item on the 

Commerce Control List may, as a result of 

that error, export the item without the 

required export license and file Electronic 

Export Information (EEI) to the Automated 

Export System (AES) that both misstates the 

applicable Export Control Classification 

Number (ECCN) and erroneously identifies 

the export as qualifying for the designation 

‘‘NLR’’ (no license required) or cites a license 

exception that is not applicable. In so doing, 

the exporter commits three violations: one 

violation of § 764.2(a) of the EAR for the 

unauthorized export and two violations of 

§ 764.2(g) of the EAR for the two false 

statements on the EEI filing to the AES. OEE 

will consider whether the violations 

stemmed from the same underlying error or 

omission, and whether they resulted in 

distinguished or separate harm. OEE 

generally does not charge multiple violations 

on a single export, and would not consider 

the existence of such multiple violations as 

an aggravating factor in and of itself. It is 

within OEE’s discretion to charge separate 

violations and settle the case for a penalty 

that is less than would be appropriate for 

unrelated violations under otherwise similar 

circumstances, or to charge fewer violations 

and pursue settlement in accordance with 

that charging decision. OEE generally will 

consider inadvertent, compounded clerical 

errors as related and not separate infractions 

when deciding whether to bring charges and 

in determining if a case is egregious. 

K. Multiple Unrelated Violations. In cases 

involving multiple unrelated violations, OEE 

is more likely to seek a denial of export 

privileges and/or a greater monetary penalty 

than OEE would otherwise typically seek. 

For example, repeated unauthorized exports 

could warrant a denial order, even if a single 

export of the same item to the same 

destination under similar circumstances 

might warrant just a civil monetary penalty. 

OEE takes this approach because multiple 

violations may indicate serious compliance 

problems and a resulting greater risk of future 

violations. OEE may consider whether a 

Respondent has taken effective steps to 

address compliance concerns in determining 

whether multiple violations warrant a denial 

order in a particular case. 

L. Other Enforcement Action. Other 

enforcement actions taken by Federal, State, 

or local agencies against a Respondent for the 

apparent violation or similar apparent 

violations, including whether the settlement 

of alleged violations of BIS regulations is part 

of a comprehensive settlement with other 

Federal, State, or local agencies. Where an 

administrative enforcement matter under the 

EAR involves conduct giving rise to related 

criminal or civil charges, OEE may take into 

account the related violations, and their 

resolution, in determining what 

administrative sanctions are appropriate 

under part 766 of the EAR (15 CFR part 766). 

A criminal conviction indicates serious, 

willful misconduct and an accordingly high 

risk of future violations, absent effective 


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Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Rules and Regulations 75489 

administrative sanctions. However, entry of a 

guilty plea can be a sign that a Respondent 

accepts responsibility for complying with the 

EAR and will take greater care to do so in the 

future. In appropriate cases where a 

Respondent is receiving substantial criminal 

penalties, OEE may find that sufficient 

deterrence may be achieved by lesser 

administrative sanctions than would be 

appropriate in the absence of criminal 

penalties. Conversely, OEE might seek greater 

administrative sanctions in an otherwise 

similar case where a Respondent is not 

subjected to criminal penalties. The presence 

of a related criminal or civil disposition may 

distinguish settlements among civil penalty 

cases that appear otherwise to be 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, and may therefore be 

of limited utility as precedent for future 

cases, particularly those not involving a 

global settlement. 

M. Future Compliance/Deterrence Effect. 

The impact an administrative enforcement 

action may have on promoting future 

compliance with the regulations by a 

Respondent and similar parties, particularly 

those in the same industry sector. 

N. Other Factors That OEE Deems 

Relevant. On a case-by-case basis, in 

determining the appropriate enforcement 

response and/or the amount of any civil 

monetary penalty, OEE will consider the 

totality of the circumstances to ensure that its 

enforcement response is proportionate to the 

nature of the violation. 

IV. Civil Penalties 

A. Determining What Sanctions Are 

Appropriate in a Settlement 

OEE will review the facts and 

circumstances surrounding an apparent 

violation and apply the Factors Affecting 

Administrative Sanctions in section III of this 

supplement in determining the appropriate 

sanction or sanctions in an administrative 

case, including the appropriate amount of a 

civil monetary penalty where such a penalty 

is sought and imposed. Penalties for 

settlements reached after the initiation of 

litigation will usually be higher than those 

described by these guidelines. 

B. Amount of Civil Penalty 

1. Determining Whether a Case is 

Egregious. In those cases in which a civil 

monetary penalty is considered appropriate, 

the OEE Director will make a determination 

as to whether a case is deemed ‘‘egregious’’ 

for purposes of the base penalty calculation. 

If a case is determined to be egregious, the 

OEE Director also will also determine the 

appropriate base penalty amount within the 

range of base penalty amounts prescribed in 

paragraphs IV.B.2.a.iii and iv of this 

supplement. These determinations will be 

based on an analysis of the applicable factors. 

In making these determinations, substantial 

weight will generally be given to Factors A 

(‘‘willful or reckless violation of law’’), B 

(‘‘awareness of conduct at issue’’), C (‘‘harm 

to regulatory program objectives’’), and D 

(‘‘individual characteristics’’), with particular 

emphasis on Factors A, B, and C. 

A case will be considered an ‘‘egregious 

case’’ where the analysis of the applicable 

factors, with a focus on Factors A, B, and C, 

indicates that the case represents a 

particularly serious violation of the law 

calling for a strong enforcement response. 

2. Monetary Penalties in Egregious Cases 

and Non-Egregious Cases. The civil monetary 

penalty amount shall generally be calculated 

as follows, except that neither the base 

penalty amount nor the penalty amount will 

exceed the applicable statutory maximum: 

a. Base Category Calculation and 

Voluntary Self-Disclosures. 

i. In a non-egregious case, if the apparent 

violation is disclosed through a voluntary 

self-disclosure, the base penalty amount shall 

be up to one-half of the transaction value. 

ii. In a non-egregious case, if the apparent 

violation comes to OEE’s attention by means 

other than a voluntary self-disclosure, the 

base penalty amount shall be up to the 

transaction value. 

iii. In an egregious case, if the apparent 

violation is disclosed through a voluntary 

self-disclosure, the base penalty amount shall 

be an amount up to one-half of the statutory 

maximum penalty applicable to the violation. 

iv. In an egregious case, if the apparent 

violation comes to OEE’s attention by means 

other than a voluntary self-disclosure, the 

base penalty amount shall be an amount up 

to the statutory maximum penalty applicable 

to the violation. 

v. The applicable statutory maximum civil 

penalty per violation of the Export Control 

Reform Act (ECRA) of 2018 is a fine defined 

in ECRA and adjusted in accordance with 

U.S. law, e.g., the Federal Civil Penalties 

Inflation Adjustment Act Improvements Act 

of 2015 (Pub. L. 114–74, sec. 701), which in 

2024 was $364,992, or an amount that is 

twice the value of the transaction that is the 

basis of the violation with respect to which 

the penalty is imposed, whichever is greater. 

The following matrix represents the base 

penalty amount of the civil monetary penalty 

for each category of violation: 

BASE PENALTY MATRIX

Voluntary self-disclosure? 

Egregious case? 

NO YES 

YES ...................................... (1) Up to One-Half of the Transaction Value .................. (3) Up to One-Half of the Applicable Statutory Maximum. 

NO ........................................ (2) Up to the Transaction Value ..................................... (4) Up to the Applicable Statutory Maximum. 

b. Adjustment for Applicable Relevant 

Factors. The base penalty amount of the civil 

monetary penalty will be adjusted to reflect 

applicable Factors for Administrative Action 

set forth in section III of these guidelines. 

The Factors may result in a penalty amount 

that is lower or higher than the base penalty 

amount depending upon whether they are 

aggravating or mitigating and how they, in 

the discretion of OEE, apply in combination 

in a particular case. 

C. Settlement Procedures 

The procedures relating to the settlement 

of administrative enforcement cases are set 

forth in § 766.18 of the EAR. 

Thea D. Rozman Kendler, 

Assistant Secretary for Export 

Administration. 

[FR Doc. 2024–21013 Filed 9–12–24; 8:45 am] 

BILLING CODE 3510–33–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Part 862 

[Docket No. FDA–2024–N–4058] 

Medical Devices; Clinical Chemistry 

and Clinical Toxicology Devices; 

Classification of the Clozapine Test 

System 

AGENCY: Food and Drug Administration, 

HHS. 

ACTION: Final amendment; final order. 

SUMMARY: The Food and Drug 

Administration (FDA, Agency, or we) is 


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