Time Limit for Completion of Voluntary Self-Disclosures and Revised Notice of the Institution of Administrative Enforcement Proceedings, 66777-66780 [2012-27206]

Agencies

• DEPARTMENT OF COMMERCE
• Bureau of Industry and Security

[Federal Register Volume 77, Number 216 (Wednesday, November 7, 2012)]
[Proposed Rules]
[Pages 66777-66780]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-27206]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 764 and 766

[Docket No. 120207107-2565-01]
RIN 0694-AF59


Time Limit for Completion of Voluntary Self-Disclosures and 
Revised Notice of the Institution of Administrative Enforcement 
Proceedings

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would require that the final, comprehensive 
narrative account required in voluntary self-disclosures (VSDs) of 
violations of the Export Administration Regulations (EAR) be submitted 
to the Office of Export Enforcement within 180 days of the initial VSD 
notification. This proposed rule also would authorize the use of 
delivery services other than registered or certified mail for providing 
notice of the issuance of a charging letter instituting an 
administrative enforcement proceeding under the EAR. It also would 
remove the phrase ``if delivery is refused'' from a provision relating 
to determining the date of service of notice of a charging letter's 
issuance based on an attempted delivery to the respondent's last known 
address. The Bureau of Industry and Security is proposing these changes 
to be better able to resolve administrative enforcement proceedings in 
a timely manner and provide more efficient notice of administrative 
charging letters.

DATES: Comments must be received no later than January 7, 2013.

ADDRESSES: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
The identification number for this rulemaking is BIS-2012-0043.
     By email directly to publiccomments@bis.doc.gov. Include 
RIN 0694-AF59 in the subject line.
     By mail or delivery to Regulatory Policy Division, Bureau 
of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th 
Street and Pennsylvania Avenue NW., Washington, DC 20230. Refer to RIN 
0694-AF59.

FOR FURTHER INFORMATION CONTACT: Special Agent Kirk Flashner, Office of 
Export Enforcement, Bureau of Industry and Security, U.S. Department of 
Commerce, Room H4514, 14th Street and Pennsylvania Avenue NW., 
Washington, DC 20230. Tel: (202) 482-1208. Facsimile: (202) 482-5889.

SUPPLEMENTARY INFORMATION: 

Background

    The Bureau of Industry and Security (BIS), Office of Export 
Enforcement (OEE), investigates possible violations of the Export 
Administration Regulations (EAR) and orders, licenses, and 
authorizations issued thereunder. These investigations may result in 
allegations of violations that may be settled, adjudicated in an 
administrative enforcement proceeding, or referred to the Department of 
Justice for possible criminal prosecution. This rule proposes three 
changes to the EAR. One change addresses voluntary self-disclosures in 
connection with OEE's conduct of investigations. The other two changes 
address service of notice in administrative enforcement proceedings.

Proposed Change Regarding Voluntary Self-Disclosures

    Section 764.5 of the EAR provides a procedure whereby parties that 
believe that they may have committed a violation of the EAR can 
voluntarily disclose the facts of the potential violations to OEE. Such 
disclosures that meet the requirements of Sec.  764.5 typically are 
afforded ``great weight'' by BIS, relative to other mitigating factors, 
in determining what administrative sanctions, if any, to seek. Section 
764.5 requires an initial notification, which is to include a 
description of the general nature and extent of the suspected 
violations, and is followed at a later date by a thorough review and 
narrative account of the suspected violations, including all relevant 
supporting documentation. If the person making the initial notification 
subsequently completes the narrative account, the disclosure is deemed 
to have been submitted to OEE on the date of the initial notification. 
The date of the initial notification may be significant because 
information provided to OEE may only be considered a voluntary 
disclosure if the information ``is received by OEE for review prior to 
the time that OEE or another United States Government agency has 
learned of the same or substantially similar information from another 
source and has commenced an investigation or inquiry in connection with 
that information.'' 15 CFR 764.5(b)(3).
    Currently, Sec.  764.5 of the EAR does not include a specific time 
limit within which a narrative account must be submitted to OEE. Too 
often, initial notifications are not promptly followed by comprehensive 
narrative accounts, and as a result, OEE must maintain open files on 
voluntary disclosures for extended periods of time without making 
sufficient progress towards resolving the matter disclosed. To address 
these situations and promote expeditious resolution of self-disclosed 
violations, BIS proposes to set a 180-day deadline for persons who have 
submitted an initial notification to complete and submit the final 
narrative report to OEE. The Director of OEE could extend this 180-day 
time deadline, at his or her discretion, if U.S. Government interests 
would be served by an extension or upon a showing by the party making 
the disclosure that more time is reasonably necessary to complete the 
narrative account. Some illustrative examples of circumstances that 
might warrant additional time include the following.
     Records or information from multiple entities and/or 
jurisdictions are

[[Page 66778]]

needed to complete the narrative account.
     Material changes occur in the business, such as a 
bankruptcy, large layoffs, or a corporate acquisition or restructuring, 
and present difficulties in gaining access to, or analysis of, 
information needed to complete the narrative account.
     A pending U.S. Government determination (such as a 
commodity jurisdiction determination or a classification request) is 
needed to complete the narrative account.
    The Director of OEE may place conditions on his or her approval of 
an extension. For example, while BIS generally obtains an agreement to 
toll the statute of limitations at the time that an initial 
notification is filed, in response to a request for an extension of the 
180-day deadline, the Director of OEE may require a tolling agreement, 
if one has not already been obtained, to cover any violations disclosed 
in the initial notification or discovered during the review conducted 
to prepare the narrative account. The Director of OEE also has 
discretion to require the disclosing person to undertake specific 
interim remedial compliance measures as a condition of granting an 
extension to the 180-day deadline.
    Failure to meet either the 180-day deadline or an extended deadline 
granted by the Director of OEE would not be an additional violation of 
the EAR. However, that failure may reduce or eliminate the mitigating 
impact of the voluntary disclosure. The 180-day deadline serves as an 
incentive to the disclosing party, as meeting the deadline will allow 
information contained in the narrative account to be credited by OEE as 
having been voluntarily disclosed on the date of the initial 
notification, even if the information was not explicitly described in 
that initial notification. This new rule is consistent with the notion 
of an initial notification, which rewards promptness and which 
acknowledges that a disclosing party might not be able to identify all 
of the possible violations of the EAR at the time an initial 
notification was made.
    Imposing a deadline to complete voluntary disclosures is consistent 
with the practices of other agencies. The International Traffic in Arms 
Regulations imposes a 60-day deadline (22 CFR 127.12(c)). Similarly, 
the Department of the Treasury's Office of Foreign Assets Control also 
imposes time constraints by requiring that disclosures be made within a 
reasonable time following the initial notification. Based on its 
experience with voluntary self-disclosures, BIS believes that 180 days 
is ample time to complete the narrative account in most instances and 
that requests for extensions will normally not be necessary or 
justified.

Proposed Changes Regarding Providing Notice of the Institution of 
Administrative Enforcement Proceedings

    Section 766.3 of the EAR sets forth the procedures for instituting 
administrative enforcement proceedings. Those procedures include 
issuing a charging letter, which constitutes the formal administrative 
complaint. The charging letter sets forth the essential facts about the 
alleged violations and certain other information about the case, and 
informs the respondent that failure to answer the charges will be 
treated as a default. Respondents must be notified of the issuance of a 
charging letter by one of the methods listed in Sec.  766.3(b) of EAR. 
One allowable method is mailing a copy of the letter by registered or 
certified mail to the respondent's last known address. BIS proposes to 
add as an authorized method of notification, sending a copy of the 
charging letter to the respondent's last known address by express mail 
or by a commercial courier or delivery service. BIS is proposing to 
make this change to facilitate the process of notifying the respondent 
in cases where the respondent's last known address is in a country with 
a postal service that is inefficient or unreliable or in which postal 
delivery tracking information is not available. It will also allow BIS 
to select an efficient and effective method of notifying the respondent 
of the issuance of the charging letter. Moreover, unlike registered and 
certified mail, reputable commercial courier or delivery services and 
the U.S. Postal Service's express mail use point-by-point tracking or 
similar electronic tracking methods to provide detailed records of a 
parcel's delivery or attempted delivery. The use of services that 
provide detailed tracking information for parcels sent outside the 
United States will enable BIS to track and monitor the delivery status 
of pending notifications more efficiently and effectively.
    Respondents are required to answer a charging letter within 30 days 
of being served with notice of its issuance. Currently the date of 
service of notice is determined under Sec.  766.3(c) by the date of 
delivery, or of attempted delivery if delivery is refused. BIS proposes 
to remove the phrase ``if delivery is refused'' from Sec.  766.3(c) of 
the EAR. This proposed rule eliminates the requirement that an 
attempted delivery must involve documentation that the delivery was 
``refused.'' The phrase ``is refused'' focuses on registered and 
certified mail, which include a postcard-sized hard-copy receipt that 
is returned to the sender after delivery or attempted delivery. This 
proposed rule provides for the use of reliable mail or delivery 
services that do not use such a hard-copy return receipt system and can 
efficiently and effectively track deliveries and attempted deliveries. 
In addition, BIS has found that in some instances foreign postal 
services do not return the receipt even though the parcel or package 
has been not been returned, including in situations where the 
respondent subsequently contacts BIS about the charging letter. 
Moreover, some foreign postal services do not list ``refused'' as an 
option on a pre-printed return receipt or do not record other 
information when the package containing the charging letter is 
returned, including in situations when the package has been returned 
opened. This proposed change to Sec.  766.3(c) would better enable BIS 
to determine the date of service of notice of issuance of charging 
letters sent to entities located in foreign countries.
    Since August 21, 2001, the Export Administration Act of 1979, as 
amended, has been in lapse and the President, through Executive Order 
13222 of August 17, 2001 (3 CFR, 2001 Comp. 783 (2002)), as extended 
most recently by the Notice of August 15, 2012, 77 FR 49699 (August 16, 
2012), has continued the EAR in effect under the International 
Emergency Economic Powers Act (50 U.S.C. 1701 et seq.). BIS continues 
to carry out the provisions of the Export Administration Act, as 
appropriate and to the extent permitted by law, pursuant to Executive 
Order 13222.

Rulemaking Requirements

    1. Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). This rule 
is consistent with the goals of Executive Order 13563. This rule has 
been determined not to be a significant rule 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 with, a collection of information subject to the 
requirements of the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 
3501, et seq., unless that collection of

[[Page 66779]]

information displays a currently valid Office of Management and Budget 
(OMB) control number. This proposed rule involves an approved 
information collection entitled ``Procedure for Voluntary Self-
Disclosure of Violations'' (OMB control number 0694-0058). BIS believes 
that the changes to the voluntary disclosure procedures that this rule 
proposes would have no material effect on the burden imposed by this 
collection. Send comments regarding this burden estimate or any other 
aspect of this collection of information, including suggestions for 
reducing the burden to Jasmeet Seehra, Office of Management and Budget 
(OMB), by email to jseehra@omb.eop.gov or by fax to (202) 395-7285; and 
to the Regulatory Policy Division, Bureau of Industry and Security, 
Department of Commerce, Room 2099B, 14th Street and Pennsylvania Ave. 
NW., Washington, DC 20230 or by email to publiccomments@bis.doc.gov 
referencing RIN 0694-AF59 in the subject line.
    3. The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 601 et 
seq., generally requires an agency to prepare a regulatory flexibility 
analysis of any rule subject to the notice and comment rulemaking 
requirements under the Administrative Procedure Act (5 U.S.C. 553) or 
any other statute. Under section 605(b) of the RFA, however, if the 
head of an agency certifies that a rule will not have a significant 
impact on a substantial number of small entities, the statute does not 
require the agency to prepare a regulatory flexibility analysis. 
Pursuant to section 605(b), the Chief Counsel for Regulations, 
Department of Commerce, submitted a memorandum to the Chief Counsel for 
Advocacy, Small Business Administration, certifying that this proposed 
rule will not have a significant impact on a substantial number of 
small entities.
    This proposed rule would make three changes to the EAR. The first 
change would require that parties making voluntarily self-disclosures 
of violations of the EAR complete the process within 180 days of making 
the initial notification or obtain an extension from OEE. The second 
change would add delivery by express mail and commercial couriers and 
delivery services as an acceptable method of serving administrative 
charging letters on respondents. The third change would remove the 
words ``if delivery is refused'' from one section to account for 
carriers with electronic tracking capabilities. The legal and factual 
background for these changes is detailed in the preamble to this 
proposed rule and not repeated here.
    The first proposed change would merely set a deadline of 180 days 
from the initial disclosure for parties to submit the narrative account 
that completes the disclosure as part of a voluntary self-disclosure. 
It makes no changes to the volume or nature of the information that an 
entity making a voluntary self-disclosure must submit to BIS. It does 
not create any new substantive requirements, but merely places a 
reasonable deadline on parties seeking to obtain the benefits of 
voluntary self-disclosure. If the disclosing party needs more than 180 
days, the party may request an extension of time from the Director of 
OEE. Although this proposed change may place some additional burden on 
parties making voluntary self-disclosures, that burden would not be 
significant.
    The second proposed change would allow BIS to use delivery services 
other than certified or registered mail to effect service of charging 
letters, or amendments and supplements thereto. This rule makes no 
changes to any of the actions that any small entity or any entity must 
make in response to an administrative charging letter or any supplement 
or amendment thereto. The only potential impact on members of the 
public is the method by which they would receive notification, and this 
cannot be considered a significant impact on any entity outside of BIS.
    The third proposed change would remove the words ``if delivery is 
refused'' from Sec.  766.3(c). This change is being made to update the 
EAR to allow the use of carriers that track shipments, which in turn 
better enables BIS to determine the date of service notifying 
respondents, foreign entities in particular, that a charging letter has 
been issued. Like the previous proposed change, this would not impose 
any burden on a member of the public.
    Although BIS cannot state with certainty the number of small 
entities that would be affected by this rule, any economic impact would 
be negligible. This rule does not increase any of the information that 
any party must provide in connection with a voluntary self-disclosure 
of an EAR violation. It merely requires the disclosing party to 
complete the comprehensive narrative account of the violations within 
180 days of submitting the initial notification. BIS believes that 180 
days would be an adequate amount of time for most voluntary self-
disclosures. In those instances where additional time is needed to 
complete the narrative account, the rule provides that the Director of 
OEE may extend the 180-day deadline. In addition, BIS believes that the 
proposed change to allow for delivery by a commercial courier or 
delivery service is necessary in some cases to effect service abroad. 
Similarly, the proposed removal of the requirement that an attempted 
delivery is insufficient absent documentation that the respondent 
``refused'' the delivery is necessary because express mail and 
reputable commercial courier or delivery services provide detailed 
tracking information concerning deliveries and attempted deliveries, 
and because some foreign postal delivery services may not document a 
refusal. Because none of these proposed changes would have a 
significant impact on a substantial number of small entities, an 
initial regulatory flexibility analysis is not required and none has 
been prepared.

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 stated in the preamble, parts 764 and 766 of the 
Export Administration Regulations (15 CFR parts 730 through 774) are 
proposed to be amended as follows.

PART 764--[AMENDED]

    1. The authority citation paragraph 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 
15, 2012, 77 FR 49699 (August 16, 2012).

    2. Section 764.5 is amended by revising the last sentence of 
paragraph (c)(2)(i) and by adding three sentences immediately following 
that sentence to read as follows:


Sec.  764.5  Voluntary self-disclosure.

* * * * *
    (c) * * *
    (2) * * * (i) * * * If the person making the initial notification 
subsequently completes and submits to OEE the narrative account 
required by paragraph (c)(3) of this section such that OEE receives the 
narrative account within 180 days of its receipt of the initial 
notification, matters disclosed by the narrative account will be deemed 
to

[[Page 66780]]

have been disclosed to OEE on the date of the initial notification for 
purposes of paragraph (b)(3) of this section. The Director of OEE may 
extend this 180-day deadline upon a determination in his or her 
discretion that U.S. Government interests would be served by an 
extension or that the person making the initial notification has shown 
that more than 180 days is reasonably needed to complete the narrative 
account. The Director of OEE in his or her discretion may place 
conditions on the approval of an extension. For example, the Director 
of OEE may require that the disclosing person agree to toll the statute 
of limitations with respect to violations disclosed in the initial 
notification or discovered during the review to prepare the narrative 
account, and/or require the disclosing person to undertake specified 
interim remedial compliance measures. Failure to meet the deadline 
(either the initial 180-day deadline or an extended deadline granted by 
the Director of OEE) would not be an additional violation of the EAR, 
but such failure may reduce or eliminate the mitigating impact of the 
voluntary disclosure under Supp. No. 1 to this part.
* * * * *

PART 766--[AMENDED]

    3. The authority citation paragraph 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 
15, 2012, 77 FR 49699 (August 16, 2012).

    4. Section 766.3 is amended by revising paragraphs (b)(1) and (c) 
to read as follows:


Sec.  766.3  Institution of administrative enforcement proceedings.

* * * * *
    (b) * * *
    (1) By sending a copy by registered or certified mail or by express 
mail or commercial courier or delivery service addressed to the 
respondent at the respondent's last known address; * * *
    (c) The date of service of notice of the issuance of a charging 
letter instituting an administrative enforcement proceeding, or service 
of notice of the issuance of a supplement or amendment to a charging 
letter, is the date of its delivery, or of its attempted delivery by 
any means described in paragraph (b)(1) of this section.

    Dated November 2, 2012.
Kevin J. Wolf,
Assistant Secretary for Export Administration.
[FR Doc. 2012-27206 Filed 11-6-12; 8:45 am]
BILLING CODE 3510-33-P