U.S. to Penalize Companies for Staying Quiet About Export-Control Issues
Export controls are are administered by the Commerce Department’s Bureau of Industry and Security. Photo: Bill ClarkCQ-Roll Call, Inc/Getty Images By David Smagalla April 18, 2023 5:04 pm ET The U.S. Commerce Department is cracking down on companies that discover potential export-control violations but choose not to disclose them to the government. Export controls restrict where U.S. companies can sell technologies with both commercial and military uses. The rules aim to prevent adversaries such as China, Russia and Iran from boosting their capabilities with advanced Western technology. They are administered by the Commerce Department’s Bureau of Industry and Security, which can bring civil penalties against companies that allow such “dual use” items to fall into the wrong hands.
Export controls are are administered by the Commerce Department’s Bureau of Industry and Security.
Photo: Bill ClarkCQ-Roll Call, Inc/Getty Images
The U.S. Commerce Department is cracking down on companies that discover potential export-control violations but choose not to disclose them to the government.
Export controls restrict where U.S. companies can sell technologies with both commercial and military uses. The rules aim to prevent adversaries such as China, Russia and Iran from boosting their capabilities with advanced Western technology. They are administered by the Commerce Department’s Bureau of Industry and Security, which can bring civil penalties against companies that allow such “dual use” items to fall into the wrong hands.
Matthew Axelrod, assistant secretary for export enforcement at the Bureau of Industry and Security.
Photo: The Wall Street Journal
Businesses that discover significant possible violations—but choose not to voluntarily disclose that information to the government—risk having the government consider that an “aggravating factor” in any penalties imposed, Matthew Axelrod, assistant secretary for export enforcement at the BIS, said in a memo seen by The Wall Street Journal.
The Commerce Department can reduce penalties for companies that own up to possible export-control violations.
“When someone submits a [voluntary self-disclosure document], they receive concrete and identifiable benefits under our guidelines,” Mr. Axelrod said in the memo. “By the same token, however, when someone uncovers a significant possible violation but then affirmatively chooses not to file a VSD…the decision not to disclose will be considered an aggravating factor under our existing guidelines.”
The change in policy, according to Mr. Axelrod, applies to situations in which the Commerce Department has determined “there is a deliberate nondisclosure of significant possible violations.” Previously, companies were rewarded for coming forward, but not penalized if they didn’t.
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Subscribe NowThe Justice Department said in February that it would launch a partnership with the Commerce Department to bolster efforts to prevent countries such as China and Russia from obtaining sensitive data and technologies. The partnership, dubbed the Disruptive Technology Strike Force, will pair federal prosecutors with Commerce Department agents to investigate and prosecute criminal violations of U.S. export-control laws.
Earlier this month, Corp. agreed to pay more than $3 million in fines for allegedly violating U.S. sanctions on Russia and other countries after its software and services ended up in the hands of blacklisted companies and people in the Crimea region of Ukraine, which was annexed by Russia in 2014. The U.S. Treasury and Commerce Departments said they had reached a joint settlement with Microsoft over the apparent violations of U.S. sanctions and export-control rules, which the software company voluntarily disclosed.
Write to David Smagalla at [email protected]
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