BIS Revises Guidance for Penalty Determinations of Anti-Boycott Violations
The Bureau of Industry and Security revised how it assesses penalties in settlements involving anti-boycott violations, according to a final rule, which, effective Oct. 7, amends a supplement to the Export Administration Regulations to clarify and change the agency’s guidance on anti-boycott charging practices to allow it to better address more serious violations.
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BIS specifically revised how it categorizes violations “by the seriousness of the alleged violations.” The agency said certain violations listed under Categories A (which warrant the most stringent penalties) and Category B “do not accurately reflect BIS’s current anti-boycott enforcement priorities and practices or the agency’s assessment of the seriousness of the alleged violations,” the rule said.
Category A now includes only “violations deemed the most serious” and will “warrant the maximum penalty available” under the Anti-Boycott Act of 2018, BIS said. Category B was revised to include only violations that “most commonly and currently arise in commercial transactions in a boycott context.” BIS said the revisions to Category B reflect “shifting trends in boycott activity” and will be the “focus” of the Treasury Department’s Office of Foreign Assets Controls’ anti-boycott enforcement. They will be “subject to enhanced penalties to discourage cooperation with boycott-related requirements and to promote awareness, accountability and deterrence,” BIS said.
The rule specifically moves the second “form” of “refusing to do business” from Category A to B: “knowingly agreeing to refuse to do business.” BIS will still classify the first form as Category A: “refusing to do business.” The agency also made “clarifying additions” to Category B by adding “specific references to the two other forms that Section 760.2(a)(1) may take, namely, requiring, or knowingly agreeing to require, any other person to refuse to do business.” The agency said these additions “reflect BIS’s longstanding assessment of these two forms of the prohibition as Category B violations.”
Other revisions include moving “furnishing information about associations with charitable or fraternal organizations which support a boycotted country” from Category B to A, and moving “implementing letters of credit” from Category A to B. BIS also moved “furnishing information about business relationships with boycotted countries or blacklisted persons” from Category A to B.
BIS said the changes will “better comport with current boycott-related activity” and align the agency’s penalties with its “view of the seriousness” of the violations. “These revisions and clarifications are intended to increase transparency and add clarity to the administrative enforcement process with respect to violations of the anti-boycott provisions of the EAR and, in turn, to incentivize compliance and strengthen deterrence,” the agency said.
The rule also made a technical revision to the EAR’s anti-boycott supplement to update an outdated reference. The change replaces the reference to the Export Administration Act of 1979 with a reference to the Export Control Reform Act of 2018.
Matthew Axelrod, BIS’s top export enforcement official, said in May the agency was working to update its administrative enforcement policies for anti-boycott violations (see 2205160062). Axelrod in June announced several policy changes designed to strengthen export control enforcement, including higher penalties for more serious violations; a revision to its policies surrounding its no-admit, no-deny settlements; settlement agreements that don’t include fines; and a revision to how the agency processes voluntary disclosures (see 2206300069).