BIS Issues Final Rule Setting Deadline for Completing Voluntary Self-Disclosures

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The U.S. Bureau of Industry and Security (BIS) recently issued a final rule to revise the Export Administration Regulations (EAR) governing Voluntary Self-Disclosures (VSDs) by imposing a 180-day deadline for submission of the final, comprehensive narrative account that must be filed after submission of the initial VSD filing. This 180-day filing deadline will apply to initial VSDs received by BIS on or after September 9, 2013, the effective date of the final rule. Initial VSDs submitted to BIS prior to that date would not be subject to the new filing deadline. The new final rule implements the rule initially proposed by BIS on November 7, 2012. (More information on the proposed rule is available here).

Section 764.5 of the EAR (15 C.F.R. § 764.5) outlines the current procedures by which a party that believes it may have violated the EAR may voluntarily disclose the potential violations to the BIS Office of Export Enforcement (OEE). BIS stated in its final rule that imposing a 180-day deadline to complete the VSD is consistent with the practices of other agencies, such as the U.S. Department of State's Directorate of Defense Trade Controls (DDTC) and the Department of the Treasury's Office of Foreign Assets Control (OFAC), which both set deadlines for submission of the final VSD narrative account. BIS also stated that the new deadline is designed to be consistent with the existing requirement under the EAR that an initial VSD be submitted as soon as possible after potential violations are discovered.

The final rule also authorizes OEE to extend the 180-day deadline if the disclosing party shows that more time is "reasonably necessary" to complete the final narrative account. In response to public comments received after issuance of the proposed rule in November 2012, BIS revised the final rule to include greater detail about what a request to extend the 180-day deadline should contain. A request for such an extension should show specifically that the party making the request: (1) began its review promptly after discovering the violations; (2) has been conducting the review and preparation of the narrative account as expeditiously as can be expected; (3) reasonably needs the requested extension, despite having acted consistently with (1) and (2); and (4) has considered whether interim compliance or other corrective measures may be needed and has implemented such measures as appropriate in order to prevent recurring or additional violations.

A request for an extension should also provide a proposed timeline for completion and submission of the final narrative account and designate a contact person. The extension request may also include additional information that the requestor reasonably believes is pertinent to the request under the applicable facts and circumstances.

Like the proposed rule, the final rule provides several examples of circumstances that might warrant additional time, including the need to obtain records or information from multiple sources, corporate bankruptcy, large layoffs, acquisition/restructuring or delays in obtaining a BIS classification request or Commodity Jurisdiction determination from the DDTC. However, these example circumstances outlined in the final rule are not "an exclusive list" and consideration of extension requests "will, of necessity, be made on a case-by-case basis." BIS also stated that a statute of limitations tolling agreement will be required prior to an extension being granted, in most circumstances.

The final rule also states that a request for an extension should be submitted to OEE as soon as possible once the disclosing party determines that it will be unable to meet the 180-day deadline. BIS cautioned against submitting an extension request shortly before the 180-day deadline, as the disclosing party could run the risk that OEE will be unable to properly consider and communicate a decision before the deadline. The agency also stated that it expects it will be rare for parties to request an extension in their initial disclosure because it would be unlikely that disclosing parties will have all pertinent information needed to request an extension at the time of the initial VSD filing. In addition, BIS said it is unlikely to grant an extension request that appears to be a "boilerplate" request not based on facts and circumstances specific to the initial VSD, or to grant repeated requests or requests that appear to be submitted on a routine, "it can't hurt to ask" basis.

Note that BIS's 180-day deadline for completing a VSD is more generous than the 60-day deadline imposed by the Directorate of Defense Trade Controls for submission of the final disclosure report for issues arising under the International Traffic in Arms Regulations (ITAR).

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