Regulatory intelligence for US exporters

China-Related Enforcement Penalties Significantly Rising This Year, BIS Official Says

U.S. penalties for illegal exports to China have risen dramatically this year compared with last, with about $6 million in fines handed out already, said Jeremy Pelter, the acting undersecretary for the Bureau of Industry and Security. Pelter told a bipartisan congressional commission this week that the agency during the 2021 fiscal year has issued about $1.86 million in criminal fines and more than $4 million in civil fines, skyrocketing past 2020’s penalties, which totaled about $60,000.

It has “already started off as a banner year,” Pelter told the U.S.-China Economic and Security Review Commission Sept. 8. He also said BIS handed out 80 months of prison time for illegal exports to China during the 2020 fiscal year, compared with 226 months so far in FY21. “It has been a good year for enforcement,” Pelter said.

In written testimony, Pelter pointed specifically to one of BIS’s most recent enforcement actions, a $469,060 fine against U.S. semiconductor manufacturer Dynatex International, which illegally exported chipmaking equipment to Chinese companies on the Entity List (see 2108180009). “Our enforcement analysts and special agents continue to target illicit procurement actors who seek to obfuscate end uses and end users to circumvent export control restrictions to steal sensitive U.S. technology or acquire sensitive items,” Pelter said.

Pelter, the temporary head of BIS as nominee Alan Estevez awaits his confirmation hearing (see 2107280063), said he isn’t sure what has spurred the rise in penalties. He said he will “get back” to the commission about the reason for the penalty increase. “I guess a year that required zero enforcement might be the best outcome for the United States government and the taxpayer, but the Office of Export Enforcement team is working very hard, and they're chasing down every lead,” Pelter said.

Pelter added that OEE agents conducted 658 enforcement outreach visits in 2020 and began 75 leads under its Project Guardian, a project in which BIS contacts U.S. exporters of proliferation-related goods to identify suspicious purchase requests. He also said BIS’s Office of Exporter Services has been especially busy so far this year, saying it fielded more than 16,000 calls and 4,000 emails through the first seven months of 2021.