Antiboycott Penalty Guidelines, 37517-37525 [06-5917]

Agencies

• DEPARTMENT OF COMMERCE
• Bureau of Industry and Security
• Industry and Security Bureau

[Federal Register Volume 71, Number 126 (Friday, June 30, 2006)]
[Proposed Rules]
[Pages 37517-37525]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-5917]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 764 and 766

[Docket No 060511128-6128-01]
RIN 0694-AD36


Antiboycott Penalty Guidelines

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would set forth BIS policy concerning 
voluntary self disclosures of violations of part 760 (Restrictive Trade 
Practices or Boycotts) of the Export Administration Regulations (EAR) 
and violations of part 762 (Recordkeeping) of the EAR that relate to 
part 760. This proposed rule also would set forth the factors that the 
Bureau of Industry and Security (BIS) considers when deciding whether 
to pursue administrative charges or settle allegations of such 
violations as well as the factors that BIS considers when deciding what 
level of penalty to seek in administrative cases.

DATES: Comments must be received by August 29, 2006.

ADDRESSES: Comments may be made via the Federal e-Rulemaking portal at, 
https://www.regulations.gov, by e-mail directly to BIS at 
publiccomments@bis.doc.gov, via fax at (202) 482-3355 or to U.S. 
Department of Commerce, Bureau of Industry and Security, Regulatory 
Policy Division, Room 2703, 14th Street and Pennsylvania Avenue, NW., 
Washington, DC 20230. Please refer to RIN 0694-AD36 in all comments.

FOR FURTHER INFORMATION CONTACT: Edward O. Weant III, Acting Director, 
Office of Antiboycott Compliance, Bureau of Industry and Security, 
United States Department of Commerce, at (202) 482-2381.

SUPPLEMENTARY INFORMATION: 

Background

    Part 760 of the EAR--Restrictive Trade Practices or Boycotts--
prohibits U.S. persons from taking or knowingly agreeing to take 
certain actions with intent to comply with, further, or support an 
unsanctioned foreign boycott. Part 760 of the EAR also requires U.S. 
persons who are recipients of requests ``* * * to take any action which 
has the effect of furthering or supporting a restrictive trade practice 
or boycott fostered or imposed by a foreign country against a country 
friendly to the United States or against any United States person * * 
*'' to report receipt of those requests and whether they took the 
requested action. Part 762 of the EAR--Recordkeeping--requires, inter 
alia, retention of certain documents that contain information related 
to the prohibitions or reporting requirements of part 760. Collectively 
these provisions of the EAR are referred to in this notice as the 
antiboycott provisions. BIS administers and enforces the antiboycott 
provisions through its Office of Antiboycott Compliance (OAC). This 
proposed rule would: Set forth specific procedures for voluntary self 
disclosures of violations to OAC, provide guidance about how OAC 
responds to violations of the antiboycott provisions, and describe how 
OAC makes penalty determinations in the settlement of administrative 
enforcement cases related to the antiboycott provisions.
    This rule would not address disclosure provisions or penalty 
determination factors in any other matters such as criminal 
prosecutions for violations of the antiboycott provisions or tax 
penalties that the Department of Treasury may impose for antiboycott 
violations that arise pursuant to the Ribicoff Amendment to the Tax 
Reform Act of 1976, as implemented by Section 999 of the Internal 
Revenue Code. Voluntary self-disclosure provisions and guidance on 
charging and penalty determinations in settlement of administrative 
enforcement cases that are not related to the antiboycott provisions 
are stated elsewhere in the EAR.

Proposed Changes to the EAR in This Rule

    This rule would create a new Sec.  764.8 setting forth the 
procedures for voluntary self-disclosure of violations of the 
antiboycott provisions. It would also create a new supplement No. 2 to 
part 764 that would describe how BIS responds to violations of the 
antiboycott provisions and how BIS makes penalty determinations in the 
settlement of administrative enforcement cases. The rule would also 
make technical and conforming changes to part 766.
    This rule would provide specific criteria with respect to what 
constitutes a voluntary self-disclosure and how voluntary self-
disclosures relate to other

[[Page 37518]]

sources of information that OAC may have concerning violations of the 
antiboycott provisions. The rule would also inform the public of the 
factors that OAC usually considers to be important when settling 
antiboycott administrative enforcement cases. BIS believes that 
publishing this information in the EAR will tend to place all potential 
respondents and their counsel on a more equal footing because 
procedures for making voluntary disclosures, information about how OAC 
responds to violations and how OAC makes penalty determinations in the 
settlement of administrative enforcement cases will all be matters of 
public record. BIS also believes such publication will make settlement 
of administrative cases more efficient, as respondents and OAC will be 
able to focus on the important factors in administrative enforcement 
cases and because OAC generally expends fewer resources to obtain 
information received through voluntary self-disclosure than information 
obtained by other means.

Creation of Sec.  764.8--Voluntary Self-Disclosure of Boycott 
Violations

    The proposed new Sec.  764.8 would both define what constitutes a 
voluntary self-disclosure and provide the procedures for making such 
disclosures. Compliance with the provisions of Sec.  764.8 would be 
important as a voluntary self-disclosure ``satisfying the requirements 
of Sec.  764.8'' would be designated as a mitigating factor of ``GREAT 
WEIGHT'' in the settlement of administrative cases as set forth in the 
proposed new Supplement No. 2 to part 764. Supplement No. 2 would 
provide that such factors ``will ordinarily be given considerably more 
weight than a factor that is not so designated.'' In addition to 
providing such an incentive for the submission of voluntary self-
disclosures, BIS anticipates that proposed Sec.  764.8 will promote 
more effective use of OAC resources, as the receipt of voluntary self-
disclosures will reduce the time that OAC must spend identifying and 
investigating possible violations. The rule provides the benefit of a 
mitigating factor to those who self-disclose before OAC has invested 
resources to investigate violations based on information it might 
receive from another source.
    Proposed Sec.  764.8 requires, among other things, that voluntary 
self-disclosures be in writing and that they be received by OAC before 
OAC learns of the same or substantially similar information from 
``another source'' and has commenced an investigation or inquiry in 
connection with that information. The proposed Sec.  764.8 would 
provide that persons may make an initial written notification followed 
by submission of a more detailed narrative account and supporting 
documents. For purposes of determining whether a voluntary self-
disclosure was received before OAC learned of the same or substantially 
similar information from another source, the date of the voluntary 
self-disclosure will be deemed to be the date that OAC received the 
initial notification if the person making the disclosure subsequently 
submits the required narrative account and supporting documentation.
    BIS believes that requiring voluntary self-disclosures to be in 
writing reduces the possibility of confusion as to whether a particular 
communication was intended to be a voluntary self-disclosure and is 
likely to produce more complete disclosures than would oral 
disclosures.
    BIS recognizes that two features of its existing regulations and 
practices may impact the requirement that a voluntary self-disclosure 
be received before OAC learns of the same or substantially similar 
information from another source. The first such feature is the set of 
reporting requirements in Sec.  760.5. The second such feature is OAC's 
practice of encouraging persons with questions about the regulations to 
contact OAC by telephone or e-mail for advice.
    Section 760.5 of the EAR, requires any ``U.S. person who receives a 
request to take any action that would have the effect of furthering or 
supporting a restrictive trade practice or boycott fostered or imposed 
by a foreign country against a country friendly to the United States or 
against any United States person'' to report to OAC both receipt of the 
request and the action that the person took in response to that 
request. In some instances, taking the requested action would be a 
violation of Sec.  760.2. BIS recognizes that, in such instances, the 
reporting requirements of Sec.  760.5 would have the effect of 
requiring a person to disclose a violation that it had committed. The 
proposed rule provides that reports filed pursuant to Sec.  760.2 
constitute ``information received from another source.'' Thus, a person 
who wishes to make a voluntary self-disclosure of a violation that is 
based on an action that Sec.  760.5 requires that person to report 
would have to make sure that OAC receives the written initial 
notification portion of the voluntary self-disclosure before OAC began 
an investigation or inquiry based on the information received in the 
required report. The report itself would not serve as the initial 
notification. However, if OAC received the report and the initial 
notification simultaneously, it would be deemed to have received the 
initial notification before it had begun an investigation or inquiry 
based on the report. That person would then have to comply with the 
remaining requirements of Sec.  764.8, but once that person complied 
with those requirements, the voluntary disclosure would be treated as 
having been received at the time that the initial notification was 
received.
    OAC has, for a number of years, provided advice about the 
antiboycott provisions to persons requesting such advice via telephone 
or e-mail. In some instances, the person requesting such advice may 
disclose that it has committed a violation. OAC's practice has been to 
encourage such persons to make voluntary self-disclosures. OAC wants to 
continue to encourage persons with questions about the antiboycott 
provisions to fully disclose all relevant facts when making telephone 
or e-mail inquiries for advice concerning the antiboycott provisions. 
Therefore, OAC will not treat violations revealed in telephone or e-
mail requests for advice concerning the antiboycott provisions as 
information received from another source. However, to meet the 
requirements of Sec.  764.8, the person wishing to make a voluntary 
self-disclosure would have to make a written disclosure pursuant to 
Sec.  764.8. The information provided over the telephone or via e-mail 
while seeking advice would not constitute a voluntary self-disclosure 
or even an initial notification of a voluntary self-disclosure. OAC's 
practice is to inform people who reveal violations in the course of 
seeking such advice of their opportunity to make a voluntary 
disclosure.
    Proposed Sec.  764.8 also provides that for a firm to be deemed to 
have made a voluntary self-disclosure under that section, the 
individual making the disclosure must do so with the ``full knowledge 
and authorization of the firm's senior management.'' OAC believes that 
this requirement is needed to make clear that a firm may not claim the 
benefits of a voluntary self-disclosure when a subordinate employee 
acting on his or her own initiative disclosed wrongdoing by the firm's 
management.

Creation of Supplement No. 2 to Part 764

    This rule would also create a new supplement to part 764 to set 
forth publicly BIS's practice with respect to violations of the 
antiboycott provisions. The proposed supplement describes the ways that 
BIS responds to violations,

[[Page 37519]]

the types of administrative sanctions that may be imposed for 
violations, the factors that BIS considers in determining what 
sanctions are appropriate, the factors that BIS considers in 
determining the appropriate scope of the denial or exclusion order 
sanctions, and the factors BIS considers when deciding whether to 
suspend a sanction.
    Paragraph (a) of the proposed supplement contains introductory 
material that defines the scope and limitations of the supplement as 
well as sets forth BIS's policy of encouraging any party in settlement 
negotiations with BIS to provide all information that the party 
believes is relevant to the application of the guidance in the 
supplement as well as information that is relevant to determining 
whether a violation has, in fact, occurred and whether the party has a 
defense to any potential charges.
    Paragraph (b) of the proposed supplement sets forth the three 
actions that OAC may take in response to a violation, which are: Issue 
a warning letter, pursue an administrative case, and refer a case to 
the Department of Justice for criminal prosecution. This paragraph also 
lists the factors that often cause OAC to issue a warning letter. It 
also notes OAC's ability to issue proposed administrative charging 
letters rather than actual administrative charging letters. Proposed 
charging letters are issued informally to provide an opportunity for 
settlement before initiation of a formal administrative proceeding. As 
noted in paragraph (b), OAC is not required to issue a proposed 
charging letter. Finally paragraph (b) notes that OAC may refer a case 
to the Department of Justice for criminal prosecution in addition to 
pursuing an administrative enforcement action.
    Paragraph (c) of the proposed supplement lists the types of 
administrative sanctions that may be imposed in administrative cases. 
Those sanctions are: A monetary penalty, a denial of export privileges 
and an order excluding the party from practice before BIS.
    Paragraph (d) provides information about how OAC determines what 
sanctions are appropriate in settlement of administrative enforcement 
cases. The paragraph describes the general factors that BIS believes 
are important in cases concerning violations of the antiboycott 
provisions. The paragraph then describes specific mitigating and 
aggravating factors. OAC generally looks to the presence or absence of 
these specific factors in determining what sanctions should apply in a 
given settlement.
    Paragraph (d) begins by listing seven general factors to which OAC 
looks in determining what administrative sanctions are appropriate in 
each settlement. Those seven general factors are: degree of 
seriousness, category of violation, whether multiple violations arise 
from related transactions, whether multiple violations arise from 
unrelated transactions, the timing of a settlement, whether there are 
related civil or criminal violations, and the party's familiarity with 
the antiboycott provisions. The supplement provides general guidance on 
how OAC applies each of these seven general factors.
    Paragraph (d) then addresses the role of eight specific mitigating 
and nine specific aggravating factors whose presence or absence OAC 
generally considers when determining what sanctions should apply. The 
listed factors are not exhaustive and OAC may consider other factors as 
well in a particular case. However, the listed factors are those that 
OAC's experience indicates are commonly relevant to penalty 
determinations in cases that are settled. Factors identified by the 
phrase ``GREAT WEIGHT'' will ordinarily be given considerably more 
weight than other factors.
    The eight specific mitigating factors in paragraph (d) are: 
Voluntary self disclosure, effective compliance program, limited 
business with or in boycotting countries, history of compliance with 
the antiboycott provisions, exceptional cooperation with the 
investigation, (lack of) clarity of request to furnish prohibited 
information or take prohibited action, violations arising out of a 
party's ``passive'' refusal to do business in connection with an 
agreement, and isolated occurrence or good faith misinterpretation.
    The nine specific aggravating factors in paragraph (b) are: 
concealment or obstruction, serious disregard for compliance 
responsibilities, history of (lack of) compliance with the antiboycott 
provisions, familiarity with the type of transaction at issue in the 
violations, prior history of business with or in boycotted countries or 
boycotting countries, long duration or high frequency of violations, 
clarity of request to furnish prohibited information or take prohibited 
action, violations relating to information concerning a specific 
individual or entity, and violations relating to ``active'' conduct 
concerning an agreement to refuse to do business.
    The specific mitigating and aggravating factors are set forth in 
more detail in the supplement. BIS believes that in most cases 
evaluating these factors provides a fair basis for determining the 
penalty that is appropriate when settling an administrative case. 
However, these mitigating and aggravating factors are not exclusive. 
BIS may consider other factors that are relevant in a particular case 
and respondents in settlement negotiations may submit other relevant 
factors for BIS's consideration.
    Paragraph (e) sets forth the factors that OAC considers to be 
particularly relevant when deciding whether to impose a denial or 
exclusion order in the settlement of administrative cases. Certain 
factors in paragraph (d)--the four factors that are given great weight, 
degree of seriousness, and history of prior violations and their 
seriousness--are included in paragraph (f). In addition, BIS considers 
the extent to which a firm's senior management participated in or was 
aware of the conduct that gave rise to the violation, the likelihood of 
future violations, and whether a monetary penalty could be expected to 
have a sufficient deterrent effect to be particularly relevant in 
determining whether a monetary penalty is appropriate.
    Paragraph (f) provides examples of factors that OAC may consider in 
deciding whether to suspend or defer a monetary penalty, or suspend an 
order denying export privileges or an order providing an exclusion from 
practice. With respect to suspension or deferral of monetary penalties 
OAC may consider whether the party has demonstrated a limited ability 
to pay a penalty that would be appropriate for such violation, so that 
suspended or deferred payment can be expected to have sufficient 
deterrent value, and whether the impact of the penalty would be 
consistent with the impact of penalties on other parties who commit 
similar violations. When deciding whether to suspend denial or 
exclusion orders OAC may consider the adverse economic consequences of 
the order on the party, its employees, and other persons, as well as on 
the national interest in the competitiveness of U.S. businesses. 
However, such orders will be suspended for adverse economic 
consequences only if future violations are unlikely and if there are 
adequate measures (usually a substantial civil penalty) to achieve the 
necessary deterrent effect.

Rulemaking Requirements

    1. This rule has been determined to be not significant for purposes 
of Executive Order 12866.
    2. Notwithstanding any other provision of law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply

[[Page 37520]]

with a collection of information, subject to the requirements of the 
Paperwork Reduction Act, unless that collection of information displays 
a currently valid Office of Management and Budget Control Number. If 
adopted as a final rule, this proposed rule would expand the scope of 
information collected pursuant to Office of Management and Budget 
Control Number 0694-0058. Such an expansion would be subject to the 
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) requiring 
Office of Management and Budget authorization before implementation. 
BIS will prepare documentation for presentation to OMB to obtain 
authorization for this expansion. Send comments about this collection, 
including suggestions for reducing the burden, to David Rostker, Office 
of Management and Budget (OMB), by e-mail to David--
Rostker@omb.eop.gov, or by fax to (202) 395-7285; and to the Office of 
Administration, Bureau of Industry and Security, Department of 
Commerce, 14th and Pennsylvania Avenue, NW., Room 6883, Washington, DC 
20230.
    3. This rule does not contain policies with Federalism implications 
as that term is defined in Executive Order 13132.
    4. The Chief Counsel for Regulation of the Department of Commerce 
has certified to the Counsel for Advocacy that this proposed rulemaking 
is not expected to have a significant economic impact on a substantial 
number of small entities.

Number of Small Entities

    As a strictly legal matter, the antiboycott provisions of the 
Export Administration Regulations apply to any activities in the 
interstate or foreign commerce of the United States by any individual, 
or any association or organization, public or private who meets the 
regulatory definition of ``United States Person.'' Pursuant to this 
standard, virtually any small entity located in the United States could 
be subject to these provisions and affected by this proposed rule. 
However, the rule addresses self-disclosure of violations of the 
antiboycott provisions and OAC's practices in administrative 
settlements of alleged or self-disclosed violations of those 
provisions. In practice, conduct that would be a violation of the 
antiboycott provisions almost always occurs among international banks 
and among companies that export to or provide services in the Middle 
East. Violations of the antiboycott provisions generally occur in 
response to a request to take an action the antiboycott provisions 
prohibit or require to be reported or both. Such requests usually arise 
in connection with trade in the Middle East. Entities whose business 
does not involve transactions originating in the Middle East (or, in 
the case of banks, a correspondence relationship with another bank that 
deals with transactions originating in the Middle East) are unlikely to 
encounter circumstances in which a violation of the antiboycott 
provisions could occur. OAC has no information as to what percentage of 
small entities are engaged in such transactions, but expects that it 
would be only a small fraction of such entities. For example, entities 
such as local retailers, gas stations, farm labor contractors, or 
entities engaged in local services such as dry cleaning or trash 
removal are extremely unlikely to encounter the kind of commercial 
transactions in which a violation of the antiboycott provisions is 
possible. Furthermore, the absolute numbers of enforcement cases are 
small.
    OAC opened investigations on 33 entities during the period from 
October 2, 2004 through May 16, 2006. Based on the criteria in the 
Small Business Administration Table of Small Business Size Standards 
effective as of January 5, 2006, OAC believes that 18 of these entities 
would qualify as small entities and 15 wold not qualify.
    Even assuming that the number of small entities impacted by this 
rule is deemed to be significant, the economic impact of this rule 
would not impose a significant burden on such entities.

Economic Impact

    This proposed rule addresses procedures to be followed in 
connection with voluntary self-disclosures of violations of the 
antiboycott provisions of the Export Administration Regulations and 
describes OAC's practices in settling administrative enforcement cases. 
The penalties for violations of the antiboycott provisions can include 
civil monetary penalties, denial of export privileges, exclusion from 
practice before BIS criminal fine and jail sentences.
    Apart from a written initial notification generally describing the 
violations and a subsequent written narrative describing the violation 
in more detail, the documents that this rule would require persons 
making voluntary self disclosures to provide to OAC are documents that 
the preexisting recordkeeping requirements of the Export Administration 
Regulations require such persons to keep. These documents are currently 
collected either by request or pursuant to a subpoena in the course of 
enforcement investigations. Under the proposed rule, the documents 
would be submitted by the person or organization making the voluntary 
self-disclosure as part of that disclosure in advance of a specific 
request by OAC. Such voluntary self-disclosures benefit the government 
because investigations initiated through voluntary self-disclosures 
typically require fewer enforcement staff hours to complete. The rule 
recognizes this benefit to the government by treating voluntary 
disclosures made in accordance with the provisions of the rule as one 
of two possible mitigating factors of ``great weight.'' By the terms of 
the rule such factors ``will ordinarily be given considerably more 
weight than a factor that is not so designated.'' Thus, a firm that 
elected to make a voluntary disclosure under the proposed rule would 
likely incur a lesser penalty than a firm that commits a similar 
violation that OAC discovers through other means, although both firms 
would be likely to incur similar costs in connection with supplying 
documents to OAC.
    OAC estimates that voluntary disclosures can take require as little 
as one staff hour or as much as fifty staff hours to prepare and submit 
with the average being about ten staff hours. At an average costs of 
$40 per hour, the estimated range of costs is from $40 if one hour is 
required to $2,000 if 50 hours are required. The projected average cost 
would be $400 per disclosure. However, as noted above, the cost of 
supplying documents to OAC in course of an investigation likely would 
be incurred by the firm even without this rule or even if the firm 
makes no voluntary self-disclosure. Moreover, this rule would reduce 
uncertainty for entities that become involved in administrative 
enforcement proceedings with BIS regardless of whether the entity made 
a voluntary self disclosure because the rule would set forth as a 
matter of public record the factors that BIS typically considers in 
settling administrative enforcement cases.
    This proposed rule would not alter the elements of the offense with 
respect to any violation of the EAR, it would not expand scope of the 
information that OAC collects when it conducts individual enforcement 
investigations and it would not authorize OAC to collect this 
information in situations other than individual enforcement 
investigations. The effect of this proposed rule would be to reduce 
uncertainty for persons contemplating voluntary self-disclosures and 
for persons engaged in administrative

[[Page 37521]]

enforcement settlement negotiations with OAC.
    Accordingly, the Chief Counsel for Regulation of the Department of 
Commerce has certified to the Chief Counsel of Advocacy that this 
proposed rule will not have a significant economic impact on a 
substantial number of small entities.
    BIS will consider all comments received on or before August 29, 
2006. BIS will consider comments received after that date if possible 
but cannot assure such consideration. All public comments on this 
proposed rule must be in writing (including fax or e-mail) and will be 
a matter of public record, available for public inspection and copying. 
The Office of Administration, Bureau of Industry and Security, U.S. 
Department of Commerce, displays these public comments on BIS's Freedom 
of Information Act (FOIA) Web site at https://www.bis.doc.gov/foia. This 
office does not maintain a separate public inspection facility. If you 
have technical difficulties accessing this web site, please call BIS's 
Office of Administration at (202) 482-0637 for assistance.

List of Subjects

15 CFR Part 764

    Administrative practice and procedure, Exports, Law enforcement, 
Penalties.

15 CFR Part 766

    Administrative practice and procedure, Confidential business 
information, Exports, Law enforcement, Penalties.

    For the reasons discussed in the preamble, this proposed rule would 
amend the Export Administration Regulations 15 CFR Parts 764 and 766 as 
follows:

PART 764--[AMENDED]

    1. The authority citation for part 764 continues to read as 
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 
2, 2005, 70 FR 45273 (August 5, 2005).

    2. Add a new Sec.  764.8 to read as follows:


Sec.  764.8  Voluntary self-disclosures for boycott violations.

    This section sets forth procedures for disclosing violations of 
part 760 of the EAR--Restrictive Trade Practices or Boycotts and 
violations of part 762--Recordkeeping--with respect to records related 
to part 760. In this section, these provisions are referred to 
collectively as the antiboycott provisions. This section also describes 
BIS's policy regarding such disclosures.
    (a) General policy. BIS strongly encourages disclosure to the 
Office of Antiboycott Compliance if you believe that you may have 
violated the antiboycott provisions. Voluntary self-disclosures are a 
mitigating factor with respect to any enforcement action that OAC might 
take.
    (b) Limitations. (1) This section does not apply to disclosures of 
violations relating provisions of the EAR other than the antiboycott 
provisions. Section 764.5 of this part describes how to prepare 
disclosures of violations of the EAR other than the antiboycott 
provisions.
    (2) The provisions of this section apply only when information is 
provided to OAC for its review in determining whether to take 
administrative action under part 766 of the EAR for violations of the 
antiboycott provisions.
    (3) Timing: The provisions of this section apply only if OAC 
receives the voluntary self-disclosure as described in paragraph (c)(2) 
of this section and commences an investigation or inquiry in connection 
with that information before it receives the same or substantially 
similar information from another source.
    (i) Mandatory Reports. For purposes of this section, OAC's receipt 
of a report required to be filed under Sec.  760.5 of the EAR that 
discloses that a person took an action prohibited by part 760 of the 
EAR is receipt of information from another source.
    (ii) Requests for Advice. For purposes of this section, a violation 
that is revealed to OAC by a person who is seeking advice, either by 
telephone or e-mail, about the antiboycott provisions is not receipt of 
information from another source. Such revelation also is not a 
voluntary disclosure or initial notification of a voluntary disclosure 
for purposes of this section.
    (4) Although a voluntary self-disclosure is a mitigating factor in 
determining what administrative sanctions, if any, will be sought by 
OAC, it is a factor that is considered together with all other factors 
in a case. The weight given to voluntary self-disclosure is solely 
within the discretion of OAC, and the mitigating effect of voluntary 
self-disclosure may be outweighed by aggravating factors. Voluntary 
self-disclosure does not prevent transactions from being referred to 
the Department of Justice for criminal prosecution. In such a case, OAC 
would notify the Department of Justice of the voluntary self-
disclosure, but the consideration of that factor is within the 
discretion of the Department of Justice.
    (5) A firm will not be deemed to have made a disclosure under this 
section unless the individual making the disclosure did so with the 
full knowledge and authorization of the firm's senior management.
    (6) The provisions of this section do not, nor should they be 
relied on to, create, confer, or grant any rights, benefits, 
privileges, or protection enforceable at law or in equity by any 
person, business, or entity in any civil, criminal, administrative, or 
other matter.
    (c) Information to be provided--(1) General. Any person wanting to 
disclose information that constitutes a voluntary self-disclosure 
should, in the manner outlined below, initially notify OAC as soon as 
possible after violations are discovered, and then conduct a thorough 
review of all transactions where violations of the antiboycott 
provisions are suspected.
    (2) Initial notification. The initial notification must be in 
writing and be sent to the address in Sec.  764.8(c)(7) of this part. 
The notification should include the name of the person making the 
disclosure and a brief description of the suspected violations. The 
notification should describe the general nature and extent of the 
violations. If the person making the disclosure subsequently completes 
the narrative account required by Sec.  764.8(c)(3) of this part, the 
disclosure will be deemed to have been made on the date of the initial 
notification for purposes of Sec.  764.8(b)(3) of this part.
    (3) Narrative account. After the initial notification, a thorough 
review should be conducted of all business transactions where possible 
antiboycott provision violations are suspected. OAC recommends that the 
review cover a period of five years prior to the date of the initial 
notification. If your review goes back less than five years, you risk 
failing to discover violations that may later become the subject of an 
investigation. Any violations not voluntarily disclosed do not receive 
the same mitigation as the violations voluntarily self-disclosed under 
this section. However, the failure to make such disclosures will not be 
treated as a separate violation unless some other section of the EAR or 
other provision of law requires disclosure. Upon completion of the 
review, OAC should be furnished with a narrative account that 
sufficiently describes the suspected violations so that their nature 
and gravity can be assessed. The narrative account should also describe 
the nature of the review conducted and measures

[[Page 37522]]

that may have been taken to minimize the likelihood that violations 
will occur in the future. The narrative account should include:
    (i) The kind of violation involved, for example, the furnishing of 
a certificate indicating that the goods supplied did not originate in a 
boycotted country;
    (ii) An explanation of when and how the violations occurred, 
including a description of activities surrounding the violations (e.g., 
contract negotiations, sale of goods, implementation of letter of 
credit, bid solicitation);
    (iii) The complete identities and addresses of all individuals and 
organizations, whether foreign or domestic, involved in the activities 
giving rise to the violations; and
    (iv) A description of any mitigating factors.
    (4) Supporting documentation. (i) The narrative account should be 
accompanied by copies of documents that explain and support it, 
including:
    (A) Copies of boycott certifications and declarations relating to 
the violation, or copies of documents containing prohibited language or 
prohibited requests for information;
    (B) Other documents relating to the violation, such as letters, 
facsimiles, telexes and other evidence of written or oral 
communications, negotiations, internal memoranda, purchase orders, 
invoices, bid requests, letters of credit and brochures;
    (ii) Any relevant documents not attached to the narrative account 
must be retained by the person making the disclosure until the latest 
of the following: The documents are supplied to OAC, OAC issues a 
warning letter for the violation, BIS issues an order that constitutes 
the final agency action in the matter and all avenues for appeal are 
exhausted; or the documents are no longer required to be kept under 
part 762 of the EAR.
    (5) Certification. A certification must be submitted stating that 
all of the representations made in connection with the voluntary self-
disclosure are true and correct to the best of that person's knowledge 
and belief. Certifications made by a corporation or other organization 
should be signed by an official of the corporation or other 
organization with the authority to do so. Section 764.2(g) of this part 
relating to false or misleading representations applies in connection 
with the disclosure of information under this section.
    (6) Oral presentations. OAC believes that oral presentations are 
generally not necessary to augment the written narrative account and 
supporting documentation. If the person making the disclosure believes 
otherwise, a request for a meeting should be included with the 
disclosure.
    (7) Where to make voluntary self-disclosures. The information 
constituting a voluntary self-disclosure or any other correspondence 
pertaining to a voluntary self-disclosure should be submitted to: 
Office of Antiboycott Compliance, 14th and Pennsylvania Ave., NW., Room 
6098, Washington, DC 20230, Tel: (202) 482-2381, Facsimile: (202) 482-
0913.
    (d) Action by the Office of Antiboycott Compliance. After OAC has 
been provided with the required narrative and supporting documentation, 
it will acknowledge the disclosure by letter, provide the person making 
the disclosure with a point of contact, and take whatever additional 
action, including further investigation, it deems appropriate. As 
quickly as the facts and circumstances of a given case permit, OAC may 
take any of the following actions:
    (1) Inform the person making the disclosure that, based on the 
facts disclosed, it plans to take no action;
    (2) Issue a warning letter;
    (3) Issue a proposed charging letter pursuant to Sec.  766.18 of 
the EAR and attempt to settle the matter;
    (4) Issue a charging letter pursuant to Sec.  766.3 of the EAR if a 
settlement is not reached; and/or
    (5) Refer the matter to the Department of Justice for criminal 
prosecution.
    (e) Criteria. Supplement No. 2 to part 766 describes how BIS 
typically exercises its discretion regarding whether to pursue an 
administrative enforcement case under part 766 and what administrative 
sanctions to seek in settling such a case.
    (f) Treatment of unlawful transactions after voluntary self-
disclosure. Any person taking certain actions with knowledge that a 
violation of the EAA or the EAR has occurred has violated Sec.  
764.2(e) of this part. Any person who has made a voluntary self-
disclosure knows that a violation may have occurred. Therefore, at the 
time that a voluntary self-disclosure is made, the person making the 
disclosure may request permission from BIS to engage in the activities 
described in Sec.  764.2(e) of this part that would otherwise be 
prohibited. If the request is granted by Office of Exporter Services in 
consultation with OAC, future activities with respect to those items 
that would otherwise violate Sec.  764.2(e) of this part will not 
constitute violations. However, even if permission is granted, the 
person making the voluntary self-disclosure is not absolved from 
liability for any violations disclosed.
    3. The authority citation for part 766 continues to read as 
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 
2, 2005, 70 FR 45273 (August 5, 2005).

PART 766--[AMENDED]

    4. In Sec.  766.3, paragraph (a) the second sentence is revised to 
read as follows:


Sec.  766.3  Institution of administrative enforcement proceedings.

    (a) Charging letters. * * * Supplements numbers 1 and 2 to this 
part describe how BIS typically exercises its discretion regarding the 
issuance of charging letters. * * *
    5. In Sec.  766.18 paragraph (f) is revised to read as follows:


Sec.  766.18  Settlement.

* * * * *
    (f) Supplements Numbers 1 and 2 to this part describe how BIS 
typically exercises its discretion regarding the terms under which it 
is willing to settle particular cases.
    6. Add a Supplement No. 2 to part 766 to read as follows:

Supplement No. 2 to Part 766--Guidance on Charging and Penalty 
Determinations in Settlement of Administrative Enforcement Cases 
Involving Antiboycott Matters

    (a) Introduction--(1) Scope. This Supplement describes how the 
Office of Antiboycott Compliance responds to violations of part 760 
of the EAR ``Restrictive Trade Practices or Boycotts'' and to 
violations of part 762 ``Recordkeeping'' when the recordkeeping 
requirement pertains to part 760 (together referred to in this 
supplement as the ``antiboycott provisions''). It also describes how 
OAC makes penalty determinations in the settlement of administrative 
enforcement cases brought under parts 764 and 766 of the EAR 
involving violations of the antiboycott provisions. This supplement 
does not apply to enforcement cases for violations of other 
provisions of the EAR.
    (2) Policy Regarding Settlement. Because many administrative 
enforcement cases are resolved through settlement, the process of 
settling such cases is integral to the enforcement program. OAC 
carefully considers each settlement offer in light of the facts and 
circumstances of the case, relevant precedent, and OAC's objective 
to achieve in each case an appropriate level of penalty and 
deterrent effect. In settlement negotiations, OAC encourages parties 
to provide, and will give serious consideration to, information and 
evidence that the parties believe is relevant to the application of 
this guidance to their cases, to whether a violation has in fact 
occurred, and to whether they have a defense to potential charges.
    (3) Limitation. OAC's policy and practice is to treat similarly 
situated cases similarly, taking into consideration that the facts 
and

[[Page 37523]]

combination of mitigating and aggravating factors are different in 
each case. However, this guidance does not confer any right or 
impose any obligation regarding what penalties BIS may seek in 
litigating a case or what posture OAC may take toward settling a 
case. Parties do not have a right to a settlement offer, or 
particular settlement terms, from OAC, regardless of settlement 
postures OAC has taken in other cases.
    (b) Responding to Violations. OAC within BIS investigates 
possible violations of Section 8 of the Export Administration Act of 
1979, as amended (``Foreign Boycotts''), the antiboycott provisions 
of EAR, or any order or authorization related thereto. When OAC has 
reason to believe that such a violation has occurred, OAC may issue 
a warning letter or initiate an administrative enforcement 
proceeding. A violation may also be referred to the Department of 
Justice for criminal prosecution.
    (1) Issuing a warning letter. Warning letters represent OAC's 
belief that a violation has occurred. In the exercise of its 
discretion, OAC may determine in certain instances that issuing a 
warning letter, instead of bringing an administrative enforcement 
proceeding, will fulfill the appropriate enforcement objective. A 
warning letter will fully explain the violation.
    (i) OAC often issues warning letters where:
    (A) The investigation commenced as a result of a voluntary self-
disclosure satisfying the requirements of Sec.  764.8 of the EAR; or
    (B) The party has not previously committed violations of the 
antiboycott provisions.
    (ii) OAC may also consider the category of violation as 
discussed in paragraph (d)(2) of this supplement in determining 
whether to issue a warning letter or initiate an enforcement 
proceeding. A violation covered by Category C (failure to report or 
late reporting of receipt of boycott requests) might warrant a 
warning letter rather than initiation of an enforcement proceeding.
    (iii) OAC will not issue a warning letter if it concludes, based 
on available information, that a violation did not occur.
    (iv) OAC may reopen its investigation of this matter should it 
receive additional evidence or if it appears that information 
previously provided to OAC during the course of its investigation 
was incorrect.
    (2) Pursuing an administrative enforcement case. The issuance of 
a charging letter under Sec.  766.3 of this part initiates an 
administrative proceeding.
    (i) Charging letters may be issued when there is reason to 
believe that a violation has occurred. Cases may be settled before 
or after the issuance of a charging letter. See Sec.  766.18 of this 
part.
    (ii) Although not required to do so by law, OAC may send a 
proposed charging letter to a party to inform the party of the 
violations that BIS has reason to believe occurred and how OAC 
expects that those violations would be charged. Issuance of the 
proposed charging letter provides an opportunity for the party and 
OAC to consider settlement of the case prior to the initiation of 
formal enforcement proceedings.
    (3) Referring for criminal prosecution. In appropriate cases, 
OAC may refer a case to the Department of Justice for criminal 
prosecution, in addition to pursuing an administrative enforcement 
action.
    (c) Types of administrative sanctions. Administrative 
enforcement cases generally are settled on terms that include one or 
more of three administrative sanctions:
    (1) A monetary penalty may be assessed for each violation. The 
maximum such penalty is stated in Sec.  764.3(a)(1) of the EAR, and 
is subject to adjustments under the Federal Civil Penalties 
Adjustment Act of 1990 (28 U.S.C. 2461, note (2000)), which are 
codified at 15 CFR 6.4;
    (2) An order denying a party's export privileges may be issued, 
under Sec.  764.3(a)(2) of the EAR; or
    (3) Exclusion from practice under Sec.  764.3(a)(3) of the EAR.
    (d) How BIS determines what sanctions are appropriate in a 
settlement--(1) General Factors. OAC looks to the following general 
factors in determining what administrative sanctions are appropriate 
in each settlement.
    (i) Degree of seriousness. In order to violate the antiboycott 
provisions of the EAR, a U.S. person does not need to have actual 
``knowledge'' or a reason to know, as that term is defined in Sec.  
772.1 of the EAR, of relevant U.S. laws and regulations. Typically, 
in cases that do not involve knowing violations, OAC will seek a 
settlement for payment of a civil penalty (unless the matter is 
resolved with a warning letter). However, in cases involving knowing 
violations, conscious disregard of the antiboycott provisions, or 
other such serious violations (e.g., furnishing prohibited 
information in response to a boycott questionnaire with knowledge 
that such furnishing is in violation of the EAR), OAC is more likely 
to seek a denial of export privileges or an exclusion from practice, 
and/or a greater monetary penalty as OAC considers such violations 
particularly egregious.
    (ii) Category of violations. In connection with its activities 
described in paragraph (a)(1) of this supplement, BIS recognizes 
three categories of violations under the antiboycott provisions of 
the EAR. (See Sec.  760.2, Sec.  760.4 and Sec.  760.5 of the EAR 
for examples of each type of violation other than recordkeeping). 
These categories reflect the relative seriousness of a violation, 
with Category A violations typically warranting the most stringent 
penalties, including up to the maximum monetary penalty, and/or a 
denial order and exclusion order. Through providing these categories 
in this penalty guidelines notice, BIS hopes to give parties a 
general sense of how it views the seriousness of various violations. 
This guidance, however, does not confer any right or impose any 
obligation as to what penalties BIS may impose based on its review 
of the specific facts of a case.
    (A) The category A violations and the sections of the EAR that 
set forth their elements are:
    (1) Discriminating against U.S. persons on the basis of race, 
religion, sex, or national origin--Sec.  760.2(b);
    (2) Refusing to do business or agreeing to refuse to do 
business--Sec.  760.2(a);
    (3) Furnishing information about race, religion, sex, or 
national origin of U.S. persons including, but not limited to, 
providing information in connection with a boycott questionnaire 
about the religion of employees--Sec.  760.2(c);
    (4) Evading the provisions of part 760--Sec.  760.4;
    (5) Furnishing information about business relationships with 
boycotted countries or blacklisted persons--Sec.  760.2(d); and
    (6) Implementing letters of credit--Sec.  760.2(f).
    (B) The category B violations and the provisions of the EAR that 
set forth their elements are:
    (1) Furnishing information about associations with charitable or 
fraternal organizations which support a boycotted country--Sec.  
760.2(e); and
    (2) Making recordkeeping violations--part 762.
    (C) The category C violation and the section of the EAR that 
sets forth its elements is--Failing to report timely receipt of 
boycott requests--Sec.  760.5.
    (iii) Violations arising out of related transactions. 
Frequently, a single transaction can give rise to multiple 
violations. Depending on the facts and circumstances, OAC may choose 
to impose a smaller or greater penalty per violation. In exercising 
its discretion, OAC typically looks to factors such as whether the 
violations resulted from conscious disregard of the requirements of 
the antiboycott provisions; whether they stemmed from the same 
underlying error or omission; and whether they resulted in 
distinguishable or separate harm. The three scenarios set forth 
below are illustrative of how OAC might view transactions that lead 
to multiple violations.
    (A) First scenario. An exporter enters into a sales agreement 
with a company in a boycotting country. In the course of the 
negotiations, the company sends the exporter a request for a signed 
statement certifying that the goods to be supplied do not originate 
in a boycotted country. The exporter provides the signed 
certification. Subsequently, the supplier fails to report the 
receipt of the request. The supplier has committed two violations of 
the antiboycott provisions, first, a violation of Sec.  760.2(d) for 
furnishing information concerning the past or present business 
relationships with or in a boycotted country, and second, a 
violation of Sec.  760.5 for failure to report the receipt of a 
request to engage in a restrictive trade practice or boycott. 
Although the supplier has committed two violations, OAC may impose a 
smaller mitigated penalty on a per violation basis than if the 
violations had stemmed from two separate transactions.
    (B) Second scenario. An exporter receives a boycott request to 
provide a statement that the goods at issue in a sales transaction 
do not contain raw materials from a boycotted country and to include 
the signed statement along with the invoice. The goods are shipped 
in ten separate shipments. Each shipment includes a copy of the 
invoice and a copy of the signed boycott-related statement. Each 
signed statement is a certification that has been furnished in 
violation of Sec.  760.2(d)'s bar on the furnishing of prohibited 
business information. Technically, the exporter has committed ten

[[Page 37524]]

separate violations of Sec.  760.2(d) and one violation of Sec.  
760.5 for failure to report receipt of the boycott request. Given 
that the violations arose from a single boycott request, however, 
OAC may treat the violations as related and impose a smaller penalty 
than it would if the furnishing had stemmed from ten separate 
requests.
    (C) Third scenario. An exporter has an ongoing relationship with 
a company in a boycotting country. The company places three separate 
orders for goods on different dates with the exporter. In connection 
with each order, the company requests the exporter to provide a 
signed statement certifying that the goods to be supplied do not 
originate in a boycotted country. The exporter provides a signed 
certification with each order of goods that it ships to the company. 
OAC has the discretion to penalize the furnishing of each of these 
three items of information as a separate violation of Sec.  760.2(d) 
of the EAR for furnishing information concerning past or present 
business relationships with or in a boycotted country.
    (iv) Multiple violations from unrelated transactions. In cases 
involving multiple unrelated violations, OAC is more likely to seek 
a denial of export privileges, an exclusion from practice, and/or a 
greater monetary penalty than in cases involving isolated incidents. 
For example, the repeated furnishing of prohibited boycott-related 
information about business relationships with or in boycotted 
countries during a long period of time could warrant a denial order, 
even if a single instance of furnishing such information might 
warrant only a monetary penalty. OAC takes this approach because 
multiple violations may indicate serious compliance problems and a 
resulting risk of future violations. OAC may consider whether a 
party has taken effective steps to address compliance concerns in 
determining whether multiple violations warrant a denial or 
exclusion order in a particular case.
    (v) Timing of settlement. Under Sec.  766.18 of this part, 
settlement can occur before a charging letter is served, while a 
case is before an administrative law judge, or while a case is 
before the Under Secretary for Industry and Security under Sec.  
766.22 of this part. However, early settlement--for example, before 
a charging letter has been served--has the benefit of freeing 
resources for OAC to deploy in other matters. In contrast, for 
example, the OAC resources saved by settlement on the eve of an 
adversary hearing under Sec.  766.13 of this part are fewer, insofar 
as OAC has already expended significant resources on discovery, 
motions practice, and trial preparation. Given the importance of 
allocating OAC resources to maximize enforcement of the EAR, OAC has 
an interest in encouraging early settlement and will take this 
interest into account in determining settlement terms.
    (vi) Related criminal or civil violations. Where an 
administrative enforcement matter under the antiboycott provisions 
involves conduct giving rise to related criminal charges, OAC may 
take into account the related violations, and their resolution, in 
determining what administrative sanctions are appropriate under part 
766 of the EAR. A criminal conviction indicates serious, willful 
misconduct and an accordingly high risk of future violations, absent 
effective administrative sanctions. However, entry of a guilty plea 
can be a sign that a party accepts responsibility for complying with 
the antiboycott provisions and will take greater care to do so in 
the future. In appropriate cases where a party is receiving 
substantial criminal penalties, OAC may find that sufficient 
deterrence may be achieved by lesser administrative sanctions than 
would be appropriate in the absence of criminal penalties. 
Conversely, OAC might seek greater administrative sanctions in an 
otherwise similar case where a party is not subjected to criminal 
penalties. The presence of a related criminal or civil disposition 
may distinguish settlements among civil penalty cases that appear to 
be otherwise similar. As a result, the factors set forth for 
consideration in civil penalty settlements will often be applied 
differently in the context of a ``global settlement'' of both civil 
and criminal cases, or multiple civil cases involving other 
agencies, and may therefore be of limited utility as precedent for 
future cases, particularly those not involving a global settlement.
    (vii) Familiarity with the Antiboycott Provisions. Given the 
scope and detailed nature of the antiboycott provisions, OAC will 
consider whether a party is an experienced participant in the 
international business arena who may possess (or ought to possess) 
familiarity with the antiboycott laws. In this respect, the size of 
the party's business, the presence or absence of a legal division or 
corporate compliance program, and the extent of prior involvement in 
business with or in boycotted or boycotting countries, may be 
significant.
    (2) Specific mitigating and aggravating factors. In addition to 
the general factors described in paragraph (d)(1) of this 
supplement, OAC also generally looks to the presence or absence of 
the specific mitigating and aggravating factors in this paragraph in 
determining what sanctions should apply in a given settlement. These 
factors describe circumstances that, in BIS's experience, are 
commonly relevant to penalty determinations in settled cases. 
However, this listing of factors is not exhaustive and, in 
particular cases, OAC may consider other factors that may further 
indicate the blameworthiness of a party's conduct, the actual or 
potential harm associated with a violation, the likelihood of future 
violations, and/or other considerations relevant to determining what 
sanctions are appropriate. The assignment of mitigating or 
aggravating factors will depend upon the attendant circumstances of 
the party's conduct. Thus, for example, one prior violation should 
be given less weight than a history of multiple violations, and a 
previous violation reported in a voluntary self-disclosure by a 
party whose overall compliance efforts are of high quality should be 
given less weight than previous violation(s) not involving such 
mitigating factors. Some of the mitigating factors listed in this 
paragraph are designated as having ``great weight.'' When present, 
such a factor should ordinarily be given considerably more weight 
than a factor that is not so designated.
    (i) Mitigating factors--(A) Voluntary self-disclosure. (GREAT 
WEIGHT) The party has made a voluntary self-disclosure of the 
violation, satisfying the requirements of Sec.  764.8 of the EAR.
    (B) Effective compliance program (GREAT WEIGHT)--(1) General 
policy or program pertaining to Antiboycott Provisions. In the case 
of a party that has done previous business with or in boycotted 
countries or boycotting countries, the party has an effective 
antiboycott compliance program and its overall antiboycott 
compliance efforts have been of high quality. The focus is on the 
party's demonstrated compliance with the antiboycott provisions. 
Whether a party has an effective export compliance program covering 
other provisions of the EAR is not relevant as a mitigating factor. 
OAC may deem it appropriate to review the party's internal business 
documents relating to antiboycott compliance (e.g,. corporate 
compliance manuals, employee training materials). In this context, 
OAC will also consider whether a party's antiboycott compliance 
program uncovered a problem, thereby preventing further violations, 
and whether the party has taken steps to address compliance concerns 
raised by the violation, including steps to prevent recurrence of 
the violation, that are reasonably calculated to be effective.
    (2) Compliance with reporting and recordkeeping requirements. In 
the case of a party that has received reportable boycott requests in 
the past, OAC may examine whether the party complied with the 
reporting and recordkeeping requirements of the antiboycott 
provisions. With respect to recordkeeping, whether records were 
destroyed deliberately or intentionally may be an issue.
    (C) Limited business with or in boycotted or boycotting 
countries. The party has had little to no previous experience in 
conducting business with or in boycotted or boycotting countries. 
Prior to the current enforcement proceeding, the party had not 
engaged in business with or in such countries, or had only 
transacted such business on isolated occasions. OAC may examine the 
volume of business that the party has conducted with or in boycotted 
or boycotting countries as demonstrated by the size and dollar 
amount of transactions or the percentage of a party's overall 
business that such business constitutes.
    (D) History of compliance with the Antiboycott Provisions of the 
EAR and export-related laws and regulations.
    (1) OAC will consider it to be a mitigating factor if:
    (i) The party has never been convicted of a criminal violation 
of the antiboycott provisions;
    (ii) In the past 5 years, the party has never entered into a 
settlement or been found liable in a boycott-related administrative 
enforcement case with BIS or another U.S. government agency;
    (iii) In the past 3 years, the party has not received a warning 
letter from BIS; or
    (iv) In the past 5 years, the party has never otherwise violated 
the antiboycott provisions.
    (2) Where necessary to ensure effective enforcement, the prior 
involvement in

[[Page 37525]]

violations of the antiboycott provisions of a party's owners, 
directors, officers, partners, or other related persons may be 
imputed to a party in determining whether these criteria are 
satisfied.
    (3) When an acquiring firm takes reasonable steps to uncover, 
correct, and disclose to OAC conduct that gave rise to violations 
that the acquired business committed before the acquisition, OAC 
typically will not take such violations into account in applying 
this factor in settling other violations by the acquiring firm.
    (E) Exceptional cooperation with the investigation. The party 
has provided exceptional cooperation to OAC during the course of the 
investigation.
    (F) Clarity of request to furnish prohibited information or take 
prohibited action. The party responded to a request to furnish 
information or take action that was ambiguously worded or vague.
    (G) Violations arising out of a party's ``passive'' refusal to 
do business in connection with an agreement. The party has 
acquiesced in or abided by terms or conditions that constitute a 
prohibited refusal to do business (e.g., responded to a tender 
document that contains prohibited language by sending a bid). See 
``active'' agreements to refuse to do business in paragraph 
(d)(2)(ii)(I) of this supplement.
    (H) Isolated occurrence of violation. The violation was an 
isolated occurrence. (Compare to long duration or high frequency of 
violations as an aggravating factor in paragraph (d)(2)(ii)(F) of 
this supplement.)
    (ii) Specific Aggravating Factors--(A) Concealment or 
obstruction. The party made a deliberate effort to hide or conceal 
the violation. [GREAT WEIGHT]
    (B) Serious disregard for compliance responsibilities. [GREAT 
WEIGHT] There is evidence that the party's conduct demonstrated a 
serious disregard for responsibilities associated with compliance 
with the antiboycott provisions (e.g.: knowing violation of party's 
own compliance policy or evidence that a party chose to treat 
potential penalties as a cost of doing business rather than develop 
a compliance policy).
    (C) History of compliance with the Antiboycott Regulations and 
export-related laws and regulations.
    (1) OAC will consider it to be an aggravating factor if:
    (i) The party has been convicted of a criminal violation of the 
antiboycott provisions;
    (ii) In the past 5 years, the party has entered into a 
settlement or been found liable in a boycott-related administrative 
enforcement case with BIS or another U.S. government agency;
    (iii) In the past 3 years, the party has received a warning 
letter from OAC; or
    (v) In the past 5 years, the party has otherwise violated the 
antiboycott provisions.
    (2) Where necessary to ensure effective enforcement, the prior 
involvement in violations of the antiboycott provisions of a party's 
owners, directors, officers, partners, or other related persons may 
be imputed to a party in determining whether these criteria are 
satisfied.
    (3) When an acquiring firm takes reasonable steps to uncover, 
correct, and disclose to OAC conduct that gave rise to violations 
that the acquired business committed before the acquisition, OAC 
typically will not take such violations into account in applying 
this factor in settling other violations by the acquiring firm.
    (D) Familiarity with the type of transaction at issue in the 
violation. For example, in the case of a violation involving a 
letter of credit or related financial document, the party routinely 
pays, negotiates, confirms, or otherwise implements letters of 
credits or related financia