Commerce Pursuing More Multilateral Export Control Enforcement, Official Says
The Commerce Department is working with allies to create a new multilateral export control enforcement coordination mechanism to better tighten gaps in global export control regimes, said Matthew Axelrod, the agency’s lead export enforcement official. Axelrod said more enforcement cooperation can strengthen the effectiveness of the controls, particularly for Russia-related restrictions.
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An enforcement coordination mechanism “doesn't currently exist,” Axelrod said during The Wall Street Journal’s May 10 Risk & Compliance Forum. “It's something that we at the Commerce Department are working to try to work with partners to make happen.”
But setting up such a mechanism has been “tricky,” Axelrod said, particularly because other governments are structured differently. “When I talk to my colleagues overseas, depending on how that country is organized, my colleague can be in the customs unit as opposed to the commerce or trade bureau,” he said, calling it an “added challenge.” He said “getting everyone together to focus on this issue I think is important and something we’ll continue to work on.”
But Axelrod also said he has had a “number of very productive bilateral conversations” with enforcement officials in different countries to make sure “we stay synched up.” Commerce is also continuing to closely monitor nations who haven’t imposed similar Russia export controls to make sure they are not helping to backfill restricted goods, Axelrod said.
So far, the agency hasn’t seen any indication of “broad backfilling,” Axelrod said (see 2203300039). Most of the foreign manufacturers that could backfill rely heavily on U.S. goods, he said, and they are wary of becoming subject to sanctions themselves. “We will cut off those exports if we have reason to believe that the companies are evading our controls and backfilling,” Axelrod said.
“Most people are [complying] so far, but you're never going to bat 1,000,” he said. “When we have indications and intelligence and information that people are violating the controls, we’ll take action.”
Axelrod also recognized that some companies, particularly smaller businesses, may be struggling to comply with U.S. export controls, particularly because export compliance programs can be costly. “In-house compliance teams are facing challenges like never before in terms of the sheer volume of different things they need to be paying attention to,” Axelrod said.
He said Commerce is “here to help” and urged companies to reach out to their nearest export enforcement field office to “get to know their export enforcement agent.” He also pointed to the Russia guidance on the Bureau of Industry and Security’s website, saying the agency “would much rather prevent items from going overseas that shouldn't go in the first place than enforce on the back end.”
He said many companies, including larger businesses, are failing to properly screen their customers. Although they may screen a customer during the onboarding process, they don’t continue to screen that customer at “all points through the sale cycle,” Axelrod said, and may miss an update to a U.S. restricted party list.
“Especially with Russia, the regulations are coming out at a pace” that is “a little different than normal,” Axelrod said. “So from the time you sign the customer up to the time you’re actually sending the item overseas, something could have changed in the interim.”
Axelrod stressed that small and medium-sized companies “need” to have an export compliance program if they’re shipping overseas. “The risks are too high not to have one,” he said, adding that companies should continue to expect more restrictions. “I think you're going to continue to see additional sanctions and export controls roll out,” Axelrod said. “It's not like we've done all that we're going to do.”