Federal Direction to Export Enforcement Employees: Get Harsher and More Public

In a June 30, 2022, internal memorandum that was made public three weeks later, Matthew S. Axelrod, the U.S. Department of Commerce’s Assistant Secretary for Export Enforcement told the department’s export enforcement employees to toughen up when investigating and penalizing export violations. Here is what these possible policy changes mean for your company:

#1: Announcing Ongoing Investigations.

Instead of waiting until violation charges are resolved, charging letters are going to be made public when filed with the Administrative Law Judge. This is predicted to make errant companies “try to resolve matter[s] quickly” and to inform other companies earlier on how they should upgrade their compliance efforts.

#2: Increased Penalties:

Department employees are to see “Significantly Higher Penalties” within the existing regulatory and statutory limits. They will do this by (i) expanding the designation of cases as “egregious,” which will allow more significant penalties, and (2) more uniformly applying aggravating penalty factors again allowing higher penalties.

#3 Alternative Resolution of Less Serious Violations:

Non-monetary, but potentially far-reaching, resolution of less serious violations will be encouraged. This could include suspended denial orders that require future mitigation actions, which, if not performed, could go way beyond the harm that a monetary penalty may have imposed.

#4 Eliminating Settlements That Don’t Require an Admission of Guilt:

In one of the potentially most disruptive policy changes, the Commerce Department is eliminating “No Admit, No Deny” settlements. Now the department will require that companies can only “earn [a] reduced penalty” by admitting the underlying, wrongful action occurred. Such a policy choice is going to extend investigations, reduce settlements as companies choose not to admit what they are disputing, and ultimately bring fewer successful investigations by the Department and more substantial, final enforcement consequences to exporters.

#5 New Dual Track for Handling Self-disclosures:

Finally, through what is mostly a technical adjustment, voluntary self-disclosures will now enter a two-track system. The “minor or technical infractions” will be put on a fast track to a warning letter or no action letter within 60 days of the final self-disclosure admission. The other track is mostly described as one where a field agent and potentially attorneys from both the Commerce Department and the Justice Departments will be assigned. No time frame is suggested for this second track.

The Department believes that all these policy changes outlined in the June 30th memorandum, will allow its administrative enforcement program to deliver its compliance message “clearly and loudly.” Whether such a noisier approach also enhances enforcement remains to be seen.

Information in this post was sourced from an internal memorandum that was made by Matthew S. Axelrod, the U.S. Department of Commerce’s Assistant Secretary for Export Enforcement.

To Download and Read the Original Memorandum, Click Here: Axelrod Memorandum

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