U.S. exporters and others involved in global trade should take note: reflecting the increasing focus on national security and anti-terrorism in the enforcement of U.S. export controls and trade sanctions, President Bush this week signed into law dramatic increases in the maximum penalties for violations of these rules.
The International Emergency Economic Powers Enhancement Act authorizes greatly increased civil and criminal penalties, and the new penalty amounts can be applied retroactively to prior conduct. The law amends the International Emergency Economic Powers Act, which is the statutory basis for the Commerce Department's Export Administration Regulations (EAR), which regulate exports of "dual use" items, and the Treasury Department's Office of Foreign Assets Control sanctions rules (e.g., prohibitions on trade with Iran and Sudan). As recently as March 2006, the maximum civil penalty per violation of these rules was increased from $11,000 to $50,000. The law enacted this week increases civil penalties to the greater of $250,000 or twice the amount of the underlying transaction, per violation. Criminal violations can now be penalized by a fine of up to $1 million (increased from $500,000) and up to 20 years in prison. The controversial retroactive provision in the new law would allow the civil penalty amounts to apply in enforcement actions already pending. As radical as these increases may be, the Administration and members of Congress are proposing a further increase for EAR violations—up to $500,000 per civil violation—under separate pending legislation (Export Enforcement Act of 2007).
These penalty increases highlight the importance for companies involved in global trade to review their trade compliance policies and practices.