How do you appeal a penalty from the Bureau of Industry and Security (BIS) for perceived violations of the Export Administration Regulations (EAR)? Companies and individuals rarely challenge the BIS, preferring to negotiate a settlement. The courts get involved generally only if there are criminal indictments. But there is a mechanism to challenge the BIS when it imposes civil penalties, and everyone, including the Bureau of Industry, agreed that would be done by appealing to the United States Court of Appeals for the District of Columbia Circuit (the DC Circuit). You may not have heard of the DC Circuit, but it is one of our nation’s most influential courts because it directly decides appeals from federal agencies, skipping an appellant’s need to first go through a federal district court.
That arrangement/hierarch, however, was revised in Micei International vs. Department of Commerce, 613 F3d 1147 (C.A.D.C. 2010). The BIS imposed on Micei a $125,000 fine and a five-year suspension of export privileges, and, following the BIS’s instructions, Micei appealed to the DC Circuit. Apparently on its initiative, the DC Circuit decided that, because of the Export Administration Regulations convoluted history and questionable legitimacy (and thanks to a recent amendment to the regulations that this case triggered), it had no jurisdiction over the appeal, and transferred the case to the federal district court. Why is this important? Well, there is the issue of finality. Having a district court decide a case adds another level of adjudication and thereby increases the amount of time and money it will take to finally decide an export penalty case.
The Bureau of Industry and Security (BIS) issued on August 2nd an interim final rule about Commodity Jurisdiction (CJ) determination requests. This interim final rule is a bit of a misnomer. While it adds a couple sections to the Export Administration Regulations, it does not really create any new rule, but instead clarifies how CJ determination requests work. It is mostly a warning to exporters to stop filing classification requests and requesting advisory opinions with the BIS to circumvent the filing of a CJ determination request with the State Department’s Directorate of Defense Trade Controls (DDTC).
The BIS is visible irked that exporters file and obtain from the BIS classifications and advisory opinions without first making sure that a State Department license is needed. Why would exporters do this? Time is one consideration. The DDTC takes several months at a minimum to respond to a CJ determination request. In contrast, the BIS has a much shorter turnaround time, often less than a month. Exporters may also fear the additional legal exposure from having to obtain a State Department license and from registering as an arms exporter. Apparently, exporters obtain BIS classifications or an advisory opinion from the BIS as a shield against any enforcement proceedings from the State Department or just to avoid getting a State Department license. The BIS has announced through this interim rule that this ploy will no longer shield an exporter against criminal penalties from the State Department.
However, the interim rule leaves unanswered questions. First, why is the BIS handing out classifications and advisory opinions for items it does not even have jurisdiction over? Why is the agency cutting itself slack when exporters get none? The BIS’s website warns, “If you are not completely sure of the export licensing jurisdiction of an item, you should request a CJ determination.” Shouldn’t the BIS shoulder an equal or greater burden of consulting with the State Department if it is unsure whether it has jurisdiction over an item? If some exporters are using the BIS to get around the State Department (is there even any proof of this?), why isn't the BIS revamping the way it handles classification requests and requests for advisory opinions?
Second, who authorized the BIS to speak for the State Department, much less the whole federal government? The interim rule says “Advisory opinions may not be relied upon or cited as evidence that the US Government has determined that items described in the advisory opinion are not subject to the export control jurisdiction of another agency of the US Government.” An exporter gets into trouble with the State Department, not with the BIS, for failing to obtain a requisite ITAR license. Let's hear it from the State Department if it does not like when exporters use the excuse "but the BIS let me do this."
Perhaps President Obama’s much anticipated overhaul of our nation’s export laws will answer some or all of these questions. In the meantime, you have until October 1, 2010 to submit a comment to the BIS regarding the interim final rule.
For now, exporters must take this interim rule to heart and should accommodate the warning in the rule. If you will be filing Commodity Jurisdiction determination requests, your exports may take many months to go through all the export compliance steps.
There is one other development in regards to CJ determination requests. On August 4, a final rule was issued that requires the electronic filing of CJ determination requests. There is one difference between this and the earlier notice, namely, this rule was issued by the State Department, the agency with actual jurisdiction over CJ determination requests.
Often the most direct and quickest way to have the Bureau of Industry and Security (BIS) respond to your export questions is through the telephone. Indeed, the BIS likes to tout the service as a wonderful benefit to the world.
There are drawbacks, however. If you are calling to the BIS's general counselor desk (agency does not list the contact information of all the various counselors and officials, so the general help desk is sometimes all you have) it can be a complete crap shoot. Some counselor will talk to you only if you identify both yourself and your company completely. The counselor may have only superficial or incorrect knowledge about your issue. Indeed, the information and advice given might be contradicted by the information and advice that another BIS officer may have offered. Worse still, unless you have taped the conversation (which may be illegal), you have no proof of what was said to you. If the export goes wrong or you are accused of violating the law, again, you will have no proof about what was to told to you.
Exporters should use the BIS's help desk, but should not rely on it unconditionally. You must make your own independent confirmation of the state of the law.
By the way, is emailing the BIS or filling out its online contact form any better? Sure. A written response is much better. There is a downside, however. You still need to identify yourself and your company, a condition that can compromise your ability to be frank. Ideally, you should hire a third party, preferably a lawyer, when you need to contact government officials.
Principal and a founding member of GRVR Attorneys.