BIS Imposes 20-Year Denial Order; Former Agent Says More to Come
The Bureau of Industry and Security this week announced a 20-year export denial order against a Montana resident and his two companies for violating U.S. export controls against Iran. BIS in June charged Kenneth Scott and his companies, Scott Communications and Mission Communications, with shipping export-controlled radios knowing they would be delivered to Iran, failing to maintain export records, making false statements to FBI and BIS agents and more (see 2206100053).
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Matthew Axelrod, the top BIS export enforcement official, said the agency “will not tolerate exporters using third countries as transshipment points to prohibited destinations such as Iran and providing false statements to law enforcement agents to cover up such illicit activities.” BIS will “impose severe administrative penalties as appropriate,” he said, “such as extensive export denial orders on persons and companies to prevent future violations of our controls.” Scott couldn't be reached for comment.
A 20-year denial order isn’t unprecedented, but it is a “serious hit,” said Don Pearce, a former agent with the BIS Office of Export Enforcement and now a senior adviser with Torres Trade Advisory. “It keeps this person out of the game for literally a generation.” BIS has more commonly imposed 10-year denial orders for export violations, but Pearce said that “attitude” may be changing, even for lower-level items.
Scott and his companies tried to ship Motorola XTS radios, which Pearce noted isn’t as sensitive as other items listed in the Export Administration Regulations but could be “reverse engineered" to allow Iranians to intercept or decrypt communications. “When you think about it in those terms,” Pearce said, “20 years doesn’t seem all that bad.”
He said the lengthy 20-year denial order likely resulted from recently revised BIS administrative enforcement policies. Axelrod revised those policies in June to set higher penalties for more serious violations, among other changes (see 2206300069).
Companies should expect to see more of these administrative enforcement cases, Pearce said, including in instances where BIS in the past may have issued a warning letter. He also said he’s expecting “closer scrutiny” of disclosures submitted to BIS. “I think you're going to see an uptick in activity,” Pearce said.
Axelrod in March said the agency plans to increase penalties it issues against corporations for export violations this year (see 2303030035), and lawyers are already seeing a rise in outreaches from BIS agents (see 2303240060).