The US Department of Energy (DOE) published a final rule imposing financial penalties for unintentional violations of 10 CFR Part 810 (Part 810). Up to this point, DOE could impose monetary penalties for willful violations only. The rule, published on January 12, 2023, sets a maximum penalty of $112,131 per violation, per day. When DOE identifies a continuing violation, however, it will not mechanistically apply daily penalties. The rule takes effect on February 13, 2023, and is not retroactive. It is in line with the US government’s increased focus on the transfer of nuclear technology.

Background

Part 810 controls the export of unclassified, nonpublic nuclear technology and assistance. The regulations have been in place for decades, and explicitly include criminal penalties. However, Part 810 has been silent about civil monetary penalties because DOE was uncertain whether it had authority to impose such penalties.

After Congress clarified that authority through the National Defense Authorization Act for Fiscal Year 2019, which amended Section 234.a of the Atomic Energy Act (AEA), DOE published a notice of proposed rulemaking (NOPR) in the October 3, 2019, Federal Register. The NOPR comment period closed on December 4, 2019.

PROCESS FOR IMPOSING CIVIL PENALTIES

In the final rule, DOE largely is consistent with the procedures for imposing civil penalties set forth in the NOPR. The process would begin with a written notice of violation (NOV) from the deputy administrator for Defense Nuclear Nonproliferation to the person suspected of violating Part 810. The person would have 30 days to respond in writing to the NOV. If there is no response, then the NOV would become final and the penalty would be due within 30 days. If the person submits a response, the deputy administrator would consider this response before issuing a final NOV and setting the amount of the penalty, if applicable.

If DOE imposed a monetary penalty, then the violator would be entitled to request a hearing before a DOE administrative law judge (ALJ) to challenge the finding and the penalty amount. A hearing must be held within 180 days unless both parties agree to an extension. Before the hearing, either party can request formal discovery, including depositions, interrogatories, requests for production, and requests for inspection. The ALJ would have the authority to issue subpoenas. Testimony at the hearing would be under oath or affirmation, and the hearing would be closed to the public.

After the hearing, the ALJ would then issue a recommended decision within 180 days of the receipt of the hearing transcript, to the undersecretary for Nuclear Security, who would make the final determination.

SIGNIFICANT CHANGES AND IMPORTANT CLARIFICATIONS

In the final rule, DOE made only a few significant revisions to the proposed process, and provided clarifications about its expectations for how the process would be implemented.

Maximum Penalty Amount

DOE determined that the maximum penalty of a per-day violation would be $112,131. This amount is based on the $100,000 maximum civil penalty per violation contained in the AEA, adjusted for inflation from the date of publication of the NOPR. This maximum penalty amount will be adjusted to account for inflation on an annual basis pursuant to the Federal Civil Penalties Inflation Adjustment Act.

DOE decided that it was not required to include additional alternative upward adjustments to the AEA’s $100,000 maximum civil penalty that were potentially contemplated in the NOPR.

Clarification of What Constitutes a Continuing Violation

Although the maximum civil penalty is set at $112,131, the final rule maintains the proposed implementation of the maximum penalty on a per-day basis for a continuing violation. The final rule explains in Section 810.15(c) that, if a violation is “continuing,” DOE shall consider “each day from the point at which the violating activity began to the point at which a violating activity was suspended” as a separate violation (emphasis added). As DOE clarifies in the final rule, “In this case, ‘violating activity’ refers to any action by a person that violates section 57.b.”

DOE provides two examples in the final rule to illustrate how it will determine whether a violation is continuing. In example one, the violating activity was sending a single email containing Part 810–controlled information to a foreign national without authorization. This would constitute a single violation. In the second example, a US company grants a foreign national access to a facility for five successive days and the foreign national has access to Part 810–controlled information at the facility for all five days. In this example, DOE would evaluate noncompliance as a continuing violation (even if there were only one erroneous decision: to grant the foreign national access to the facility).

Importantly, DOE stated that when it identifies a continuing violation, it will not mechanistically apply daily penalties. Rather, DOE “will use the factors described in Section 810.15(c)(5) to determine the appropriate penalty that may be equal to or less than the maximum.”

Ability to Retroactively Impose Civil Penalties

The final rule clarifies that “DOE can only impose civil penalties for violations that occur after this final rule enters into force” (i.e., February 13). For any continuing violation, DOE clarified that it would only impose a civil monetary penalty for the “period of the continuing violation that followed the effective date of the rule.”

Burden of Proof at Hearing

In the NOPR, DOE proposed that the company that is alleged to have violated Part 810 would “have the burden of going forward and of demonstrating that the decision to impose a civil penalty is not supported by substantial evidence.”

In response to comments that this burden is inconsistent with the Administrative Procedure Act (APA), DOE revised the final rule such that “DOE shall have the burden of proving the violation(s) as set forth in the final notice of violation by a preponderance of the evidence.” Once DOE has met this standard, the burden of proving any affirmative defenses switches to the company alleged to have violated Part 810, which must be provided by a preponderance of the evidence.”

Notably, the final rule expressly provides that the ALJ shall adopt the amount of the penalty assessed in the NOV, unless not supported by the facts, i.e., the amount of the penalty will not be litigated at the hearing.

Use of Pre-Decisional Enforcement Conferences and ADR

A number of commenters ask DOE to consider using pre-decisional enforcement conferences and alternative dispute resolution (ADR) processes. In the final rule, DOE agreed that these processes “are potentially useful tools” and that the final rule does not prevent DOE from using these processes before issuing an NOV. However, DOE refrained from incorporating these processes into the text of the final rule.

Confidentiality of Hearings

DOE confirmed that it will maintain the procedures for hearings to protect classified information and other information protected from public disclosure by law or regulation, which would include company proprietary information.

Statute of Limitations

DOE confirmed that the statute of limitations for violations subject to civil penalties is five years pursuant to 28 USC § 2462, although as stated above, the final rule is not retroactive prior to February 13, 2023.

CONCLUSION

Several commenters on the NOPR requested that DOE issue additional guidance on Part 810 generally and the civil penalty regime within Part 810 specifically, including with respect to the voluntary self-disclosure of violations and the criteria DOE plans to use to calculate the amount of a monetary penalty. In the final rule, DOE responded that it was not publishing additional guidance at this time but may issue additional guidance in the future.

In sum, the final rule represents a major change in how DOE encourages and enforces compliance with Part 810.

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