Document ID: BIS-2015-0051-0001
Agency: bis
Document Type: Proposed Rule
Title: Guidance on Charging and Penalty Determinations in Settlement of Administrative Enforcement Cases,
Posted Date: 2015-12-28T05:00Z

[Federal Register Volume 80, Number 248 (Monday, December 28, 2015)]
[Proposed Rules]
[Pages 80710-80718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32606]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 766

[Docket No. 151204999-5999-01]
RIN 0694-AG73

Guidance on Charging and Penalty Determinations in Settlement of 
Administrative Enforcement Cases, Revision of Supplement No. 1 to Part 
766 of the Export Administration Regulations

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise Bureau of Industry and 
Security's (BIS) guidance regarding administrative enforcement cases 
based on violations of the Export Administration Regulations (EAR). The 
rule would rewrite Supplement No. 1 to part 766 of the EAR, setting 
forth the factors BIS considers when setting penalties in settlements 
of administrative enforcement cases and when deciding whether to pursue 
administrative charges or settle allegations of EAR violations. This 
proposed rule would not apply to alleged violations of part 760--
Restrictive Trade Practices and Boycotts, which would continue to be 
subject to Supplement No. 2 to part 766. BIS is proposing these changes 
to make administrative penalties more predictable to the public and 
aligned with those promulgated by the Department of the Treasury, 
Office of Foreign Assets Control (OFAC).

DATES: Comments must be received no later than February 26, 2016.

ADDRESSES: You may submit comments by any of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov. The 
identification number for this rulemaking is BIS-2015-0051.
    By email directly to: publiccomments@bis.doc.gov. Include RIN 0694-
AG73 in the subject line.
    By mail or delivery to Regulatory Policy Division, Bureau of 
Industry and Security, U.S. Department of Commerce, Room 2099B, 14th 
Street and Pennsylvania Avenue NW., Washington, DC 20230. Refer to RIN 
0694-AG73.

FOR FURTHER INFORMATION CONTACT: Norma Curtis, Assistant Director, 
Office of Export Enforcement, Bureau of Industry and Security. Tel: 
(202) 482-5036, or by email at norma.curtis@bis.doc.gov.

SUPPLEMENTARY INFORMATION:

Background

    The mission of the Office of Export Enforcement (OEE) at BIS is to 
enforce the provisions of the Export Administration Regulations (EAR), 
secure America's trade, and preserve America's technological advantage 
by detecting, investigating, preventing, and deterring the unauthorized 
export and reexport of U.S.-origin items to parties involved with: (1) 
Weapons of mass destruction programs; (2) threats to national security 
or regional stability; (3) terrorism; or (4) human rights abuses. 
Export Enforcement at BIS is the only federal law enforcement agency 
exclusively dedicated to the enforcement of export control laws and the 
only agency constituted to do so with both administrative and criminal 
export enforcement authorities. OEE's criminal investigators and 
analysts leverage their subject-matter expertise, unique and 
complementary administrative enforcement tools, and relationships with 
other federal agencies and industry to protect our national security 
and promote our foreign policy interests. OEE protects legitimate 
exporters from being put at a competitive disadvantage by those who do 
not comply with the law. It works to educate parties to export 
transactions on how to improve export compliance practices, supporting 
American companies' efforts to be reliable trading partners and 
reputable stewards of U.S. national and economic security. BIS also 
discourages, and in some circumstances prohibits, U.S. companies from 
furthering or supporting any unsanctioned foreign boycott (including 
the Arab League boycott of Israel).
    OEE at BIS may refer violators of export control laws to the U.S. 
Department of Justice for criminal prosecution, and/or to BIS's Office 
of Chief Counsel for administrative prosecution. In cases where there 
has been a willful violation of the EAR, violators may be subject to 
both criminal fines and administrative penalties. Administrative 
penalties may also be imposed when there is no willful intent, allowing 
administrative cases to be brought in a much wider variety of 
circumstances than criminal cases. BIS has a unique combination of 
administrative enforcement authorities including both civil penalties 
and denials of export privileges. BIS may also place individuals and 
entities on lists that restrict or prohibit their involvement in 
exports, reexports, and transfers (in-country).
    In this rule, BIS is proposing to amend the EAR to update its 
Guidance on Charging and Penalty Determinations in Settlement of 
Administrative Enforcement Cases (the ``Guidelines'') found in 
Supplement No. 1 to part 766 of the EAR in order to make civil penalty 
determinations more predictable and transparent to the public and 
aligned with those promulgated by the Treasury Department's Office of 
Foreign Assets Control (OFAC). OFAC administers most of its sanctions 
programs under the International Emergency Economic Powers Act (IEEPA), 
the same statutory authority by which BIS implements the EAR. OFAC uses 
the transaction value as the starting point for determining civil 
penalties pursuant to its Economic Sanctions Enforcement Guidelines. 
Under IEEPA, criminal penalties can reach 20 years imprisonment and $1 
million per violation, and administrative monetary penalties can reach 
$250,000 or twice the value of the transaction, whichever is greater. 
Both agencies coordinate and cooperate on investigations involving 
violations of export controls that each agency enforces, including 
programs relating to weapons of mass destruction, terrorism, Iran, 
Sudan, Specially Designated Nationals and Specially Designated Global 
Terrorists. This guidance would not apply to civil administrative 
enforcement cases for violations under part 760 of the EAR--Restrictive 
Trade Practices and Boycotts. Supplement No. 2 to Part 766 continues to 
apply to enforcement cases involving part 760 violations.
    The Guidelines would provide factors by which violations could be 
characterized as either egregious or non-egregious and describe the 
difference in the base penalty amount likely to apply in an enforcement 
case. The base penalty would depend on whether the violation is 
egregious or non-egregious and whether or not the case resulted from a 
voluntary self-disclosure that satisfies all the requirements of Sec.  
764.5 of the EAR. Base penalty amounts would be described in terms of 
the applicable statutory maximum, the transaction value, or the 
applicable schedule amount. The terms ``transaction value'' and 
``applicable schedule amount'' would be defined in the Guidelines. The 
``statutory maximum'' would be the maximum permitted by Sec.  
764.3(a)(1) of the EAR

[[Page 80711]]

(15 CFR 764.3(a)(1)) subject to adjustment under the Federal Civil 
Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461). Additional 
information about the changes proposed here and how they differ from 
the current Guidelines set forth in Supplement No. 1 to Part 766 is 
described below.
    Once the base penalty amount has been determined, Factors set forth 
in these Guidelines would be applied to determine whether the base 
penalty amount should be adjusted downward or, subject to the statutory 
maximum, upward. Factors set forth in the current Guidelines would be 
reorganized into the following categories: (1) Aggravating Factors 
(e.g., willfulness or recklessness); (2) General Factors that could be 
considered either aggravating or mitigating depending upon the 
circumstances (e.g., the absence or presence and adequacy of an 
internal compliance program); (3) Mitigating Factors (e.g., remedial 
measures taken); and (4) other Relevant Factors on a case-by-case basis 
(e.g., additional violations or other enforcement actions). Voluntary 
self-disclosures (VSDs) would no longer be listed as mitigating factors 
in and of themselves, but credit accorded to VSDs would be built into 
the determination of the base penalty amount. This credit would no 
longer be characterized as constituting ``great weight'' mitigation, 
but violations disclosed in a complete and timely VSD may be afforded a 
deduction of 50 percent of the transaction value or, in egregious 
cases, the statutory maximum in determining the base penalty amount. 
Mitigating Factors would also be assigned specific percentages off the 
base penalty amount, as further described below. Mitigating Factors may 
be combined for a greater reduction in penalty but mitigation will 
generally not exceed 75 percent of the base penalty.
    Willfulness, recklessness and concealment would be set forth as 
Aggravating Factor A--Willful or Reckless Violation of Law in the 
revised Guidelines. The degree to which these actions are present would 
determine the degree of aggravation factored into the penalty 
calculation. Aggravating Factor B--Awareness of Conduct at Issue would 
be listed as a separate factor in the revised Guidelines to address 
situations where the Respondent knew or had reason to know of the 
violation(s), and took no action to address them. Currently, knowing 
violations are subsumed within consideration of the ``Degree of 
Willfulness.'' Harm to regulatory program objectives would be listed as 
Aggravating Factor C--Harm to Regulatory Program Objectives. This 
factor would take into account all of the following: The destination 
involved, the end use and end user, and the sensitivity and control 
level of the item(s) involved in the transaction. Aggravating Factors 
A-C would be considered key in determining whether a violation was 
egregious or not, as further discussed below. Other aggravating facts, 
whether relating to the General Factors or Other Relevant Factors 
discussed below, may also be pertinent in determining whether a 
violation was egregious.
    Under this proposed rule, General Factors could either be 
mitigating or aggravating depending upon the circumstances. Two General 
Factors would be set forth in the revised Guidelines: General Factor D, 
involving an assessment of the individual characteristics of a 
Respondent; and General Factor E, assessing the presence and adequacy 
of a compliance program. General Factor D--Individual Characteristics--
would encompass an evaluation of the Respondent's commercial 
sophistication, exporting experience, volume and value of transactions, 
and regulatory history. General Factor E--Compliance Program--would 
involve a determination of whether or not the Respondent had an 
effective risk-based BIS compliance program in place at the time of the 
apparent violation, including an assessment of the extent to which it 
complied with BIS's Export Management System (EMS) Guidelines. Under 
General Factor E, if the Respondent's compliance program served to 
uncover the violation and led to prompt and comprehensive remedial 
measures taken to ensure against future violations, additional 
mitigation may be accorded to the Respondent under Mitigating Factor F, 
Remedial Response. That factor looks at whether the Respondent took 
corrective action in response to the apparent violation, such as 
stopping the conduct at issue.
    Mitigating Factor G--Exceptional Cooperation with OEE may result in 
a 25 percent to 40 percent reduction of the base penalty amount. This 
level of cooperation goes beyond what would be considered minimally 
necessary to address a violation and take corrective measures. In cases 
not involving a VSD, the Respondent must have provided substantial 
additional information regarding the apparent violation and/or other 
apparent violations caused by the same course of conduct. Exceptional 
cooperation in cases involving VSDs may also be considered as a further 
mitigating factor.
    Transactions that would likely have received a license had one been 
sought, as set forth in Mitigating Factor H--License Was Likely To Be 
Approved also may result in up to a 25 percent reduction of the base 
penalty amount. First offenses, addressed in the context of calculation 
of the base penalty amount, may also result in a reduction of that 
amount by up to 25 percent.
    Finally, proposed Factors I-M pertain to factors that may be 
relevant in certain circumstances and considered on a case-by-case 
basis. Factor I--Related Violations would address situations in which a 
single export transaction can give rise to multiple violations. Factor 
J--Multiple Unrelated Violations would address situations where 
multiple unrelated violations, as described in this proposed rule, 
could warrant a stronger enforcement response, including a denial 
order. Factor K--Other Enforcement Action would provide that 
corresponding enforcement action taken by federal, state, or local 
agencies in response to the apparent violation or similar apparent 
violations may be considered, particularly with regard to global 
settlements or criminal convictions and/or plea agreements.
    Factor L--Future Compliance/Deterrence Effect would address the 
impact that the administrative action may have with regard to promoting 
future compliance and deterring such conduct by other similar parties, 
particularly in the same industry sector. Factor M--Other Factors That 
BIS Deems Relevant would serve as a ``catch-all'' category to retain 
flexibility to consider factors not already specifically addressed in 
the Guidelines, whether proposed by the Respondent or BIS.
    Consideration of these Factors would not dictate a particular 
outcome in any particular case, but rather is intended to identify 
those Factors most relevant to BIS's decision and to guide the agency's 
exercise of its discretion. The Guidelines would provide sufficient 
flexibility to allow for the consideration of the Factors most relevant 
to a particular case. Penalties for settlements reached after the 
initiation of an enforcement proceeding and litigation through the 
filing of a charging letter will usually be higher than those described 
by these Guidelines.
    In accordance with OEE's existing posture that enhanced maximum 
civil penalties authorized by the International Emergency Economic 
Powers Enhancement Act (Enhancement Act) (Pub. L. 110-96, 50 U.S.C. 
1701, et seq.) should be reserved for the most serious cases, the 
Guidelines would formally account for the substantial

[[Page 80712]]

increase in the maximum penalties for violations of IEEPA and 
distinguish between egregious and non-egregious civil monetary penalty 
cases. Egregious cases would be those involving the most serious 
violations, based on an analysis of all applicable Factors, with 
substantial weight given to considerations of willfulness or 
recklessness, awareness of the conduct giving rise to an apparent 
violation, and harm to the regulatory program objectives, taking into 
account the individual characteristics of the parties involved. As 
described below, the Guidelines generally would provide for 
significantly higher civil penalties for egregious cases. OEE 
anticipates that the majority of apparent violations investigated by 
OEE will fall in the non-egregious category. OEE does not expect that 
adoption of these guidelines will increase the number of cases that are 
charged administratively rather than closed with a warning letter.
    The Guidelines define the ``transaction value'' to mean the dollar 
value of a subject transaction. Where the dollar value cannot be 
determined with certainty, the Guidelines would provide sufficient 
flexibility to allow for the determination of an appropriate 
transaction value in a wide variety of circumstances. The applicable 
schedule amounts, which would provide for a graduated series of 
penalties based on the underlying transaction values, reflect 
appropriate starting points for penalty calculations in non-egregious 
cases not involving VSDs. The base penalty amount for a non-egregious 
case involving a VSD would equal one-half of the transaction value, 
capped at $125,000, for an apparent violation of the EAR. Such 
calculation would ensure that the base penalty for a VSD case will not 
be more than one-half of the base penalty for a similar case that is 
not voluntarily self-disclosed. This difference is intended to serve as 
an additional incentive for the submission of VSDs. In the interest of 
providing greater transparency and predictability to BIS administrative 
enforcement actions, BIS would also allot penalty reductions--all from 
the base penalty amount--of between 25 and 40 percent for exceptional 
cooperation, and up to an additional 25 percent for first offenses and 
for transactions where a license was likely to be approved.
    BIS encourages the submission of VSDs by persons who believe they 
may have violated the EAR. The purpose of an enforcement action 
includes raising awareness, increasing compliance, and deterring future 
violations, not merely punishing past conduct. VSDs are a compelling 
indicator of a person's present intent and future commitment to comply 
with U.S. export control requirements. The purpose of mitigating the 
enforcement response in voluntary self-disclosure cases is to encourage 
the notification to OEE of apparent violations about which OEE would 
not otherwise have learned. OEE's longstanding policy of encouraging 
the submission of VSDs involving apparent violations is reflected by 
the fact that, over the past several years, on average only three 
percent of VSDs submitted have resulted in a civil penalty. The 
majority of cases brought to the attention of OEE through VSDs result 
in the issuance of warning letters, containing a finding that a 
violation may have taken place. With respect to VSDs generally, OEE 
will issue warning letters in cases involving inadvertent violations 
and cases involving minor or isolated compliance deficiencies, absent 
the presence of aggravating factors.
    Finally, in appropriate cases in the context of settlement 
negotiations, BIS may suspend or defer payment of a civil penalty, 
taking into account whether the Respondent has demonstrated a limited 
ability to pay, whether the matter is part of a global settlement with 
other U.S. government agencies, and/or whether the Respondent will 
apply a portion or all of the funds suspended or deferred for purposes 
of improving its internal compliance program.
    Cases will continue to be processed in accordance with the 
enforcement guidelines and precedents currently in existence until the 
new Guidelines are issued in final form after review of public 
comments.

Rulemaking Requirements

    1. Executive Orders 13563 and 12866 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, distribute impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated a ``significant regulatory 
action,'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, the rule has been reviewed by the 
Office of Management and Budget (OMB).
    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 (PRA), unless that 
collection of information displays a currently valid OMB Control 
Number. This rule does not contain any collections of information.
    3. This rule does not contain policies with Federalism implications 
as that term is defined in Executive Order 13132.
    4. The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 
601 et seq., generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to the notice and comment 
rulemaking requirements under the Administrative Procedure Act (5 
U.S.C. 553) or any other statute. Under section 605(b) of the RFA, 
however, if the head of an agency certifies that a rule will not have a 
significant impact on a substantial number of small entities, the 
statute does not require the agency to prepare a regulatory flexibility 
analysis. Pursuant to section 605(b), the Chief Counsel for Regulation, 
Department of Commerce, certified to the Chief Counsel for Advocacy, 
Small Business Administration that this proposed rule, if promulgated, 
will not have a significant impact on a substantial number of small 
entities.

Number of Small Entities

    Under the Regulatory Flexibility Act, the term ``small entities'' 
encompasses small businesses, small (not for profit) organizations and 
small governmental jurisdictions. The Bureau of Industry and Security 
(BIS) does not collect data on the size of entities that apply for and 
are issued export licenses pursuant to the Export Administration 
Regulations (EAR). However, in this instance, no small entities would 
be impacted by this rule because this rule would not require any person 
to change its behavior, nor would it alter any rights that any person 
has pursuant to the EAR. Only BIS would be directly affected by this 
proposed rule and BIS is not a small entity for purposes of the 
Regulatory Flexibility Act.

Economic Impact

    This proposed rule would revise Bureau of Industry and Security's 
guidance regarding administrative enforcement cases based on violations 
of the EAR. The rule would set forth the factors BIS would consider 
when setting penalties in the settlement of administrative enforcement 
cases, when deciding whether to pursue administrative charges or settle 
allegations of EAR violations, and when

[[Page 80713]]

deciding what level of penalty to seek in settlements of administrative 
cases. As with the existing guidelines, consideration of these factors 
would not dictate the outcome in a particular case. Instead the 
guidelines are intended to identify those factors most relevant to 
BIS's decision and to guide BIS in the exercise of its discretion. The 
guidelines themselves would provide sufficient flexibility for 
consideration of the factors most relevant in a particular case. 
Publication of this proposed rule and any resulting final rule is 
intended to make BIS decisions related to administrative enforcement of 
the Export Administration Regulations more transparent and predictable 
to the public. The rule would not require any party other than BIS to 
alter its behavior, nor would it alter any right that any person 
(including any small entity) currently has under the Export 
Administration Regulations. BIS is not a small entity for purposes of 
the Regulatory Flexibility Act.

Export Administration Act

    Although the Export Administration Act expired on August 20, 2001, 
the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 
2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 
8, 2013, 78 FR 16129 (March 13, 2013), and as extended by the Notice of 
August 7, 2015, (80 FR 48233 (Aug. 11, 2015)), has continued the Export 
Administration Regulations in effect under the International Emergency 
Economic Powers Act. BIS continues to carry out the provisions of the 
Export Administration Act, as appropriate and to the extent permitted 
by law, pursuant to Executive Order 13222 as amended by Executive Order 
13637.

List of Subjects in 15 CFR Part 766

    Administrative practice and procedure, Confidential business 
information, Exports, Law Enforcement, Penalties.

    Accordingly, this proposed rule proposes to amend part 766 of the 
Export Administration Regulations (15 CFR parts 730-774) (EAR) as 
follows:

PART 766--[AMENDED]

0
1. The authority citation for part 766 continues to read as follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 
7, 2015, 80 48233 (August 11, 2015).

0
2. 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 Bureau of Industry and Security 
(BIS) responds to apparent violations of the Export Administration 
Regulations (EAR) and, specifically, how BIS 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. BIS carefully considers each settlement offer in 
light of the facts and circumstances of the case, relevant precedent, 
and BIS's objective to achieve in each case an appropriate penalty and 
deterrent effect. In settlement negotiations, BIS 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 BIS may seek in litigating a case or what 
posture BIS may take toward settling a case. Parties do not have a 
right to a settlement offer or particular settlement terms from BIS, 
regardless of settlement positions BIS has taken in other cases.

I. Definitions

    Note: See also: Definitions contained in Sec.  766.2 of the EAR.

    Apparent violation means conduct that constitutes an actual or 
possible violation of the Export Administration Act of 1979, the 
International Emergency Economic Powers Act, the EAR, other statutes 
administered or enforced by BIS, as well as executive orders, 
regulations, orders, directives, or licenses issued pursuant thereto.
    Applicable schedule amount means:
    1. $1,000 with respect to a transaction valued at less than $1,000;
    2. $10,000 with respect to a transaction valued at $1,000 or more 
but less than $10,000;
    3. $25,000 with respect to a transaction valued at $10,000 or more 
but less than $25,000;
    4. $50,000 with respect to a transaction valued at $25,000 or more 
but less than $50,000;
    5. $100,000 with respect to a transaction valued at $50,000 or more 
but less than $100,000;
    6. $170,000 with respect to a transaction valued at $100,000 or 
more but less than $170,000;
    7. $250,000 with respect to a transaction valued at $170,000 or 
more.
    Transaction value means the U.S. dollar value of a subject 
transaction, as demonstrated by commercial invoices, bills of lading, 
signed Customs declarations, or similar documents. Where the 
transaction value is not otherwise ascertainable, BIS 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 self-initiated notification to 
OEE of an apparent violation as described in and satisfying the 
requirements of Sec.  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 has occurred, OEE investigations 
may lead to 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,

[[Page 80714]]

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 in response 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 represents a final determination as to the 
apparent violation, unless OEE later learns of additional information 
regarding the same or similar transactions or other relevant facts.
    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 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 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 Sec.  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 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 determination as to whether a violation has occurred.
    C. Administrative enforcement case. If BIS 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, BIS may initiate an administrative 
enforcement case. The issuance of a charging letter under Sec.  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 Sec.  766.18 of the EAR. BIS may prepare a 
proposed charging letter which could result in a case being settled 
before issuance of an actual charging letter. See Sec.  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. 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 Sec.  764.3(a)(1), subject to adjustments under 
the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 
2461), which are codified at 15 CFR 6.4. BIS 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 Sec.  766.3 of the EAR.
    D. Civil Monetary Penalty. BIS may seek a civil monetary penalty if 
BIS 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.
    E. Criminal Referral. In appropriate circumstances, BIS 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.
    F. Other Administrative Sanctions or Actions. In addition to or in 
lieu of other administrative actions, BIS may seek sanctions listed in 
Sec.  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 Sec. Sec.  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 Sec.  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 Sec.  
766.18(c).
    Exclusion from practice. Under Sec.  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. In those cases, OEE may suspend 
or defer a portion or all of the penalty amount if the suspended amount 
is applied to comply with such requirements.
    G. 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 Sec.  764.3(a)(1)(iii) of the EAR. In determining 
whether suspension or deferral is appropriate, BIS 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 impact of the 
penalty consistent with the impact of penalties on other parties who 
committed similar violations. BIS may also take into account when 
determining whether or not to suspend or defer a civil penalty whether 
the Respondent will apply a portion or all of the funds suspended or 
deferred to audit, compliance, or training that may be required under a 
settlement agreement and order, or the matter is part of a ``global 
settlement'' as discussed in more detail below.

[[Page 80715]]

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 warning letter. 
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.
    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, 
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 Sec.  764.2(e) or 
the definition of ``knowledge'' in Sec.  772.1, or other provisions of 
parts 764 and 772 of the EAR.
    As a general matter, BIS 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 
BIS'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 below. 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 the agency's discretion.

Aggravating Factors

    A. Willful or Reckless Violation of Law: BIS 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 BIS 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 BIS, 
federal, state, or foreign regulators, or other parties involved in the 
conduct, about an apparent violation?

    Note: Failure to voluntarily disclose an apparent violation to 
OEE does not constitute concealment.

    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?
    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 BIS 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 would be present where the 
conduct in question, in purpose or effect, substantially implicated 
national security or other essential interests (e.g., foreign policy, 
nonproliferation) protected by the U.S. export control system, in view 
of 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). BIS, 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 BIS may consider in 
evaluating the harm to regulatory program objectives are:

[[Page 80716]]

    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, BIS 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, BIS would 
consider the implications of the apparent violation to be significant.

General Factors

    D. Individual Characteristics: The particular circumstances and 
characteristics of a Respondent. Among the factors BIS 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 BIS's issuance of prior penalties, warning letters, or other 
administrative actions (including settlements), other than with respect 
to antiboycott matters under part 760 of the EAR. BIS will generally 
only consider a Respondent's regulatory history for the five years 
preceding the date of the transaction giving rise to the apparent 
violation. When an acquiring firm takes reasonable steps to 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, BIS 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 money laundering?
    6. Criminal Convictions: Has the Respondent has been convicted of 
an export-related 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.

    E. Compliance Program: The existence, nature and adequacy of a 
Respondent's risk-based BIS compliance program at the time of the 
apparent violation. BIS will take account of the extent to which a 
Respondent complies with the principles set forth in BIS's Export 
Management System (EMS) Guidelines. Information about the EMS 
Guidelines can be accessed through the BIS Web site at www.bis.doc.gov. 
In this context, BIS 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, including steps to prevent 
reoccurrence of the violation, that are reasonably calculated to be 
effective.

Mitigating Factors

    F. Remedial Response: The Respondent's corrective action taken in 
response to the apparent violation. Among the factors BIS 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?
    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 possible violations.
    G. 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 BIS 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. 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 will be deemed a mitigating factor.

[[Page 80717]]

    Note: A Respondent's refusal to enter into a tolling agreement 
will not be considered by BIS as an aggravating factor in assessing 
a Respondent's cooperation or otherwise under the Guidelines.

    H. License Was Likely To Be Approved: Would an export license 
application have likely been approved for the transaction had one been 
sought? 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. BIS 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

    I. 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 Sec.  764.2(a) of the EAR 
for the unauthorized export and two violations of Sec.  764.2(g) of the 
EAR for the two false statements on the EEI filing to the AES. It is 
within the discretion of BIS to charge three separate violations and 
settle the case for a penalty that is less than would be appropriate 
for three unrelated violations under otherwise similar circumstances, 
or to charge fewer than three violations and pursue settlement in 
accordance with that charging decision.
    J. Multiple Unrelated Violations: In cases involving multiple 
unrelated violations, BIS is more likely to seek a denial of export 
privileges and/or a greater monetary penalty than BIS 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. BIS takes this approach because multiple violations 
may indicate serious compliance problems and a resulting greater risk 
of future violations. BIS may consider whether a Respondent has taken 
effective steps to address compliance concerns in determining whether 
multiple violations warrant a denial in a particular case.
    K. 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. A criminal conviction indicates serious, willful 
misconduct and an accordingly high risk of future violations, absent 
effective administrative sanctions. However, entry of a guilty plea can 
be a sign that a 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, BIS may find that sufficient deterrence may be achieved by 
lesser administrative sanctions than would be appropriate in the 
absence of criminal penalties. Conversely, BIS might seek greater 
administrative sanctions in an otherwise similar case where a 
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.
    L. 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.
    M. Other Factors That BIS Deems Relevant: On a case-by-case basis, 
in determining the appropriate enforcement response and/or the amount 
of any civil monetary penalty, BIS 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 above 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, OEE will make a 
determination as to whether a case is deemed ``egregious'' for purposes 
of the base penalty calculation. This determination will be based on an 
analysis of the applicable Factors. In making the egregiousness 
determination, 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. A determination by 
OEE that a case is ``egregious'' must have the concurrence of the 
Assistant Secretary of Commerce for Export Enforcement.
    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 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 amount shall be one-half 
of the transaction value, capped at a maximum base amount of $125,000 
per violation.
    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 amount shall be the ``applicable schedule amount,'' as defined 
above

[[Page 80718]]

(capped at a maximum base amount of $250,000 per violation).
    iii. In an egregious case, if the apparent violation is disclosed 
through a voluntary self-disclosure, the base amount shall be 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 
amount shall be the statutory maximum penalty applicable to the 
violation.
    The following matrix represents the base amount of the civil 
monetary penalty for each category of violation:
[GRAPHIC] [TIFF OMITTED] TP28DE15.020

b. Adjustment for Applicable Relevant Factors
    The base amount of the civil monetary penalty may be adjusted to 
reflect applicable Factors for Administrative Action set forth in 
Section III of these Guidelines. A Factor may result in a lower or 
higher penalty amount depending upon whether it is aggravating or 
mitigating or otherwise relevant to the circumstances at hand. 
Mitigating factors may be combined for a greater reduction in penalty, 
but mitigation will generally not exceed 75 percent of the base 
penalty. Subject to this limitation, as a general matter, in those 
cases where the following Mitigating Factors are present, BIS will 
adjust the base penalty amount in the following manner:
    In cases involving exceptional cooperation with OEE as set forth in 
Mitigating Factor G, but no voluntary self-disclosure as defined in 
Sec.  764.5 of the EAR, the base penalty amount generally will be 
reduced between 25 and 40 percent. Exceptional cooperation in cases 
involving voluntary self-disclosure may also be considered as a further 
mitigating factor.
    In cases involving a Respondent's first violation, the base penalty 
amount generally will be reduced by up to 25 percent. An apparent 
violation generally will be considered a ``first violation'' if the 
Respondent has not been convicted of an export-related criminal 
violation or been subject to a BIS final order in five years, or a 
warning letter in three years, preceding the date of the transaction 
giving rise to the apparent violation. A group of substantially similar 
apparent violations addressed in a single Charging Letter shall be 
considered as a single violation for purposes of this subsection. In 
those cases where a prior Charging Letter or warning letter within the 
preceding five years involved conduct of a substantially different 
nature from the apparent violation at issue, OEE may consider the 
apparent violation at issue a ``first violation.'' In determining the 
extent of any mitigation for a first violation, OEE may consider any 
prior enforcement action taken with respect to the Respondent, 
including any warning letters issued, or any civil monetary settlements 
entered into with BIS. When an acquiring firm takes reasonable steps to 
uncover, correct, and disclose or cause to be disclosed to OEE conduct 
that gave rise to violations by an acquired business before the 
acquisition, OEE typically will not take such violations into account 
as an aggravating factor in settling other violations by the acquiring 
firm.
    iii. In cases involving charges pertaining to transactions where a 
license would likely have been approved had one been sought as set 
forth in Mitigating Factor H, the base penalty amount generally will be 
reduced by up to 25 percent.
    In all cases, the penalty amount will not exceed the applicable 
statutory maximum. Similarly, while mitigating factors may be combined 
for a greater reduction in penalty, mitigation will generally not 
exceed 75 percent of the base penalty.

C. Settlement Procedures

    The procedures relating to the settlement of administrative 
enforcement cases are set forth in Sec.  766.18 of the EAR.

    Dated: December 22, 2015.
David W. Mills,
Assistant Secretary for Export Enforcement.
[FR Doc. 2015-32606 Filed 12-24-15; 8:45 am]
 BILLING CODE 3510-33-P