The Bureau of Industry and Security's recent shift in enforcement policies and strategy could “significantly” increase risks for companies, law firms said, especially those based in the U.S. The changes could cause businesses to invest more in compliance, they said, and could lead to a more aggressive BIS enforcement posture.
Although China hasn’t yet implemented its anti-foreign-sanctions law in Hong Kong, it may only be a matter of time, said Jessica Bartlett, the global head of financial crime legal at Barclays, speaking during a July 6 event hosted by the Center for Strategic and International Studies. She said multinational companies are continuing to face a “challenging” sanctions compliance environment in Hong Kong, which could grow more difficult depending on how the government decides whether and if to penalize firms for complying with foreign sanctions.
The State Department published its spring 2022 regulatory agenda, including a new mention of a final rule that will expand the types of defense items and services that can be sent to Australia, the U.K. and Canada. The rule would specifically amend the International Traffic in Arms Regulations to expand certain trade under existing defense trade treaties between the countries, and would also amend the Canadian exemptions. Other changes will make “clarifying amendments and conforming updates” to Supplement No. 1 to part 126 of the ITAR, specifically to U.S. Munitions List Categories IV(i), manufacturing know-how, and Category XII, night vision entries. The agency hopes to issue the rule this month.
The Bureau of Industry and Security is still reviewing export controls on facial recognition software, surveillance-related products and other goods controlled for crime-control reasons, but it may move forward on the rule soon, a Commerce Department official said.
The Bureau of Industry and Security has received very few license applications and questions related to its cybersecurity export control rule since it took effect in March (see 2110200036 and 2201110025) but is open to issuing more guidance to industry if needed (see 2205050023), a Commerce Department official said during the BIS annual update conference last week.
The Bureau of Industry and Security plans to add more attorneys to its chief counsel's office to keep pace with its Russia-related export controls, a Commerce Department official said during the BIS annual update conference last week. The counsel has about 15 lawyers but expects to add more “in the coming months,” said the official, speaking on background as part of a conference policy for career staff. “It really has been unprecedented times over the past six months,” the official said, adding that the counsel’s office wants “to make sure that we can match” the rest of the agency “as the amount and intensity of work continues.”
The Bureau of Industry and Security is using recently received funding to expand its U.S. field offices and send more officers overseas, said Matthew Axelrod, the agency’s top enforcement official. Axelrod said BIS soon will launch a field office in Phoenix and has sent export control officers to the U.S. Embassy in Helsinki and the American Institute of Taiwan in Taipei. BIS also recently sent its first intelligence analyst abroad to work with the Canadian Border Services Agency.
The U.S. needs to build a new multilateral export control forum to “institutionalize” the licensing and enforcement coordination of the last several months, said Don Graves, the Commerce Department’s deputy secretary. Although Bureau of Industry and Security officials said they are unsure whether the cooperation will lead to a new, formal export control regime (see 2206290032), Graves was critical of the existing ones, saying the U.S. needs a more modern approach to respond to Russia and other global crises in the future.
The U.S. and its allies should be sharing more export control information to better align their licensing decisions, said Thea Kendler, the Bureau of Industry and Security's assistant secretary for export administration. Although the U.S. is already sharing some of that information through the U.S.-EU Trade and Technology Council to keep Russia from acquiring sensitive technologies and other items for its military, Kendler said more can be done.
The State Department’s Directorate of Defense Trade Controls is preparing to publish several new export control rules, including one that will request feedback on U.S. Munitions List categories and another that will consolidate exemptions under the International Traffic in Arms Regulations. DDTC is also starting to review a more complex set of Ukraine-related export licenses after moving through some of the more straightforward applications earlier this year.