Today, October 16, 2007, President George W. Bush signed into law the International Emergency Economic Powers Enhancement Act (Act), S. 1612, to increase the deterrent of export controls violations. The Act (attached for reference) amends the International Emergency Economic Powers Act (IEEPA) (50 U.S.C. 1705) to increase civil and criminal penalties for persons or entities. The Act increases civil penalties from $50,000 to $250,000 per violation, or an amount that is twice the amount of the violating transaction (the cap is the greater of these two). Also, the law increases criminal penalties to $1 million per violation (prison terms of up to 20 years remain unchanged).

For civil penalties, the new penalties apply to violations “with respect to which enforcement action is pending or commenced on or after the date of enactment” – October 16, 2007. For criminal penalties, the new penalties apply to violations “with respect to which enforcement action is commenced on or after the date of enactment.”

Prior to passage of the legislation, several members of Congress were concerned that the government would not take into account unintentional, accidental, or inadvertent violations. Therefore, the Departments of Commerce and Treasury assured Congress in writing that they will not abuse the new authority provided by the Act. Kevin I. Fromer, Assistant Treasury Secretary for Legislative Affairs, in a letter to Congressman Lantos dated September 25, 2007 addressed the Office of Foreign Asset Control’s (OFAC) implementation of the new penalties. “In a great number of instances, OFAC does not impose the maximum penalty per count, and it will continue to apply its authorities in a judicious and responsible manner under an increased penalty system.” Mr. Fromer also indicated that “OFAC’s goal is to use its penalty authorities to increase sanctions compliance and foster remediation.” OFAC’s enforcement guidelines are currently being updated to provide businesses and individuals greater guidance for compliance.

Mario Mancuso, Under Secretary of Commerce for Industry and Security, in a letter to Congressman Manzullo dated September 26, 2007 reinforced that the Bureau of Industry and Security (BIS) strives to have the penalty be appropriate to the violation. “Our intent is not to punish any business unfairly for minor, accidental violations.” Also, Under Secretary Mancuso assured the Congressman that small businesses will not be hindered inappropriately due to the new penalties. He indicated that recently issued BIS Penalty Guidelines “allow BIS to take into account company size and the nature of the specific violations in a way that would warrant smaller penalty amounts.”

The Act also makes it unlawful for a person “to violate, attempt to violate, conspire to violate, or cause a violation of any license, order, regulation, or prohibition issued under this title.” This amendment clarifies that EAR and OFAC violations based on IEEPA can include conspiracy, which was placed in legal jeopardy by the decision of the District Court of the District of Colombia in U.S. v. Quinn in 2005. (“. . .{T}he Court concludes that, even if the bulk of the EAR remained in effect by virtue of Executive Order 13,222, the conspiracy provisions of the EAR were rendered inoperative by the lapse of the EAA and could not be repromulgated by executive order under the general powers that IEEPA vests in the President.”)

For questions or additional information, contact:

Kay C. Georgi
georgi.kay@arentfox.com
202.857.6293