[Federal Register Volume 68, Number 180 (Wednesday, September 17, 2003)]
[Proposed Rules]
[Pages 54402-54405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-23499]



[[Page 54402]]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 764 and 766

[Docket No. 030909226-3226-01]
RIN 0694-AC92


Export Administration Regulations: Penalty Guidance in the 
Settlement of Administrative Enforcement Cases

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Proposed rule.

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SUMMARY: The Bureau of Industry and Security (BIS) proposes to amend 
the Export Administration Regulations by incorporating guidance on how 
BIS makes penalty determinations when settling administrative 
enforcement cases under part 766 of the Export Administration 
Regulations (EAR), 15 CFR 730-799 (2003). This guidance also addresses 
related aspects of how BIS responds to violations of the EAR, such as 
charging decisions. This rule also proposes to amend parts 764 and 766 
of the EAR to conform to this guidance.

DATES: Comments must be received by November 17, 2003.

ADDRESSES: Written comments should be addressed to: Chief Counsel for 
Industry and Security, Attention: Philip D. Golrick, Room H-3839, 
United States Department of Commerce, 14th Street and Constitution 
Avenue, NW., Washington, DC 20230. Please mark envelopes containing 
comments with the words ``Settlement Guidance.''

FOR FURTHER INFORMATION CONTACT: For further information regarding this 
proposed rule, contact Philip D. Golrick, Office of Chief Counsel for 
Industry and Security, United States Department of Commerce, at (202) 
482-5301.

SUPPLEMENTARY INFORMATION:

Background

    As an essential part of its administration of the export control 
system, BIS brings administrative enforcement actions for violations of 
the Export Administration Regulations (EAR). Many administrative 
enforcement cases are resolved through settlements between BIS and the 
respondent.
    The rule proposes to incorporate guidance in the EAR on how BIS 
determines what penalty is appropriate for the settlement of an 
administrative enforcement case. This guidance would appear in a new 
Supplement No. 1 to part 766 of the EAR. The proposed guidance 
identifies both general factors, such as the destination for the export 
and degree of willfulness involved in violations, and specific 
mitigating and aggravating factors which BIS typically takes into 
account in determining an appropriate penalty. The proposed guidance 
also describes factors that BIS's Office of Export Enforcement (OEE) 
typically considers in describing whether a violation should be 
addressed in a warning letter, rather than in an administrative 
enforcement case. The guidance would not apply to antiboycott matters 
arising under part 760 of the EAR.
    In part 764, the rule proposes to amend section 764.5(e) to state 
that Supplement No. 1 to part 766 describes how BIS typically exercises 
its discretion regarding whether to pursue an administrative 
enforcement case regarding violations reported in a voluntary self-
disclosure under section 764.5, and what administrative sanctions to 
seek in settling such a case.
    In part 766, the rule proposes to amend section 766.3(a) to state 
that Supplement No. 1 to part 766 describes how BIS typically exercises 
its discretion regarding the issuance of charging letters, other than 
in antiboycott matters under part 760. The rule proposes to amend 
section 766.18 to add a new paragraph (f), stating that Supplement No. 
1 to part 766 describes how BIS typically exercises its discretion 
regarding the terms under which it is willing to settle particular 
cases, other than antiboycott matters under part 760.
    This guidance is consistent with the objectives of section 223 of 
the Small Business Regulatory Enforcement Fairness Act (Title II, Pub. 
L. 104-121).

Rulemaking Requirements

    1. This proposed rule has been determined to be not significant for 
purposes of E.O. 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 (PRA), unless that 
collection of information displays a currently valid OMB Control 
Number. This rule involves a collection of information subject to the 
requirements of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et 
seq.). This collection has been approved by the Office of Management 
and Budget under Control Number 0694-0058, and carries an annual burden 
hour estimate of 800 hours and a cost to the public of approximately 
$32,000.
    3. This rule does not contain policies with Federalism implications 
as this term is defined in Executive Order 13132.
    4. Pursuant to 5 U.S.C. 553(b)(A), the provisions of the 
Administrative Procedure Act requiring a notice of proposed rulemaking 
and the opportunity for public comment are waived, because this 
regulation involves a general statement of policy and rule of agency 
procedure. No other law requires that a notice of proposed rulemaking 
and an opportunity for public comment be given for this rule. Because a 
notice of proposed rulemaking and an opportunity for public comment are 
not required to be given for this rule under the Administrative 
Procedure Act or by any other law, the analytical requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) are not applicable. 
However, in view of the importance of this proposed rule, which 
represents the first comprehensive statement of BIS's approach toward 
these issues, BIS is seeking public comments before the proposed rule 
takes effect. The period for submission of comments will close November 
17, 2003. BIS will consider all comments received before the close of 
the comment period in developing a final rule. Comments received after 
the end of the comment period will be considered if possible, but their 
consideration cannot be assured. BIS will not accept public comments 
accompanied by a request that a part or all of the material be treated 
confidentially because of its business proprietary nature or for any 
other reason. BIS will return such comments and materials to the 
persons submitting the comments and will not consider them in the 
development of the final rule. 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 http://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, Foreign trade, Law 
enforcement, Penalties.

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15 CFR Part 766

    Administrative practice and procedure, Confidential business 
information, Exports, Foreign trade.
    For the reasons discussed in the preamble, this proposed rule would 
amend Parts 764 and 766 of the EAR as follows:
    1. The authority citation for 15 CFR part 764 is amended 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 7, 2003 (68 FR 47833, August 11, 2003).

PART 764--[AMENDED]

    2. Section 764.5, paragraph (e) is revised to read as follows:


Sec.  764.5  Voluntary self-disclosure.

* * * * *
    (e) Criteria. Supplement No. 1 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.
    3. The authority citation for 15 CFR 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 7, 2003 (68 FR 47833, August 11, 2003).

PART 766--[AMENDED]

    4. Section 766.3, paragraph (a) is revised to read as follows:


Sec.  766.3  Institution of administrative enforcement proceedings.

    (a) Charging letters. The Director of the Office of Export 
Enforcement (OEE) or the Director of the Office of Antiboycott 
Compliance (OAC), as appropriate, or such other Department of Commerce 
official as may be designated by the Assistant Secretary of Commerce 
for Export Enforcement, may begin administrative enforcement 
proceedings under this part by issuing a charging letter in the name of 
BIS. Supplement No. 1 to this part describes how BIS typically 
exercises its discretion regarding the issuance of charging letters, 
other than in antiboycott matters under part 760. The charging letter 
shall constitute the formal complaint and will state that there is 
reason to believe that a violation of the EAA, the EAR, or any order, 
license or authorization issued thereunder, has occurred. It will set 
forth the essential facts about the alleged violation, refer to the 
specific regulatory or other provisions involved, and give notice of 
the sanctions available under part 764 of the EAR. The charging letter 
will inform the respondent that failure to answer the charges as 
provided in Sec.  766.6 of this part will be treated as a default under 
Sec.  766.7 of this part, that the respondent is entitled to a hearing 
if a written demand for one is requested with the answer, and that the 
respondent may be represented by counsel, or by other authorized 
representative who has a power of attorney to represent the respondent. 
A copy of the charging letter shall be filed with the administrative 
law judge, which filing shall toll the running of the applicable 
statute of limitations. Charging letters may be amended or supplemented 
at any time before an answer is filed, or, with permission of the 
administrative law judge, afterwards. BIS may unilaterally withdraw 
charging letters at any time, by notifying the respondent and the 
administrative law judge.
    5. Section 766.18 is amended by adding paragraph (f) to read as 
follows:


Sec.  766.18  Settlement.

* * * * *
    (f) Supplement No. 1 to this part describes how BIS typically 
exercises its discretion regarding the terms under which it is willing 
to settle particular cases, other than antiboycott matters under Part 
760.
    6. Part 766 is amended by adding Supplement No. 1 to read as 
follows:
    Supplement No. 1 to Part 766-Guidance on Charging and Penalty 
Determinations in Settlement of Administrative Enforcement Cases

Introduction

    This supplement describes how BIS responds to violations of the 
Export Administration Regulations (EAR), and specifically how BIS 
makes penalty determinations in the settlement of civil 
administrative enforcement cases under part 764 of the EAR. This 
guidance does not apply to enforcement cases for antiboycott 
violations under part 760 of the EAR.
    Because many administrative enforcement cases are resolved 
through settlement, the process of settling such cases is integral 
to the enforcement program. BIS carefully considers each settlement 
offer in light of the facts and circumstances of the case, relevant 
precedent, and BIS's objective to achieve in each case an 
appropriate level of penalty and deterrent effect. In settlement 
negotiations, BIS encourages parties to provide, and will give 
serious consideration to, information and evidence that parties 
believe is relevant to the application of this guidance to their 
cases, to whether a violation has in fact occurred, or to whether 
they have an affirmative defense to potential charges.
    This guidance does not confer any right or impose any obligation 
regarding what penalties BIS may seek in litigating a case or what 
posture BIS may take toward settling a case. Parties do not have a 
right to a settlement offer, or particular settlement terms, from 
BIS, regardless of settlement postures BIS has taken in other cases.

I. Responding to Violations

    The Office of Export Enforcement (OEE), among other 
responsibilities, investigates possible violations of the Export 
Administration Act of 1979, as amended, the EAR, or any order, 
license or authorization issued thereunder. When it appears that 
such a violation has occurred, OEE investigations may lead to a 
warning letter or a civil enforcement proceeding. A violation may 
also be referred to the Department of Justice for criminal 
prosecution. The type of enforcement action initiated by OEE will 
depend primarily on the nature of the violation.
    A. Issuing a warning letter: Warning letters represent OEE's 
conclusion that an apparent violation has occurred. In the exercise 
of its discretion, OEE may determine in certain instances that 
issuing a warning letter, instead of bringing an administrative 
enforcement proceeding, will achieve the appropriate enforcement 
result. A warning letter will fully explain the apparent violation 
and urge compliance. OEE often issues warning letters to first-time 
offenders for an apparent violation based on technicalities; where 
good faith efforts to comply with the law and cooperate with the 
investigation are present; where the investigation commenced as a 
result of a voluntary self-disclosure satisfying the requirements of 
Sec. 764.5; and where no aggravating factors exist. A warning letter 
does not constitute a final agency determination that a violation 
has occurred.
    B. Pursuing an administrative enforcement case: The issuance of 
a charging letter under Sec. 766.3 initiates an administrative 
enforcement proceeding. 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. BIS prepares a proposed charging letter when a case is 
settled before issuance of an actual charging letter. See Sec.  
766.18(a). In some cases, BIS also sends a proposed charging letter 
to a party in the absence of a settlement agreement, thereby 
informing the party of the violations that BIS has reason to believe 
occurred and how BIS expects that those violations would be charged.
    C. Referring for criminal prosecution: In appropriate cases, BIS 
may refer a case to the Department of Justice for criminal 
prosecution, in addition to pursuing an administrative enforcement 
action.

II. Types of Administrative Sanctions

    There are three types of administrative sanctions under section 
764.3(a) of the EAR: a civil penalty, a denial of export privileges, 
and an exclusion from practice before BIS. Administrative 
enforcement cases are generally settled on terms that include one or 
more of these sanctions.
    A. Civil penalty: A monetary penalty may be assessed for each 
violation. The maximum amount of such a penalty per violation is 
stated in section 764.3(a)(1), subject to adjustments under the 
Federal Civil Penalties

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Adjustment Act of 1990 (28 U.S.C. 2461, note (2000)), which are 
codified at 15 CFR 6.4.
    B. Denial of export privileges: An order denying a party's 
export privileges may be issued, as described in Sec.  764.3(a)(2). 
Such a denial may extend to all export privileges, as set out in the 
standard terms for denial orders in Supplement No. 1 to part 764, or 
may be narrower in scope (e.g., limited to exports of specified 
items or to specified destinations or customers).
    C. Exclusion from practice: Under Sec.  764.3(a)(3), any person 
acting as an attorney, accountant, consultant, freight forwarder or 
other person who acts in a representative capacity in any matter 
before BIS may be excluded from practicing before BIS.

III. How BIS Determines What Sanctions Are Appropriate in a 
Settlement

    A. General Factors: BIS usually looks to the following basic 
factors in determining what administrative sanctions are appropriate 
in each settlement:
    Degree of Willfulness: Many violations involve no more than 
simple negligence or carelessness. In most such cases, BIS typically 
will seek a settlement for payment of a civil penalty (unless the 
matter is resolved with a warning letter). In cases involving gross 
negligence, willful blindness to the requirements of the EAR, or 
knowing or willful violations, BIS is more likely to seek a denial 
of export privileges or an exclusion from practice, and/or a greater 
monetary penalty than BIS would otherwise typically seek. While some 
violations of the EAR have a degree of knowledge or intent as an 
element of the offense, see, e.g., Sec.  764.2(e) (acting with 
knowledge of a violation) and Sec.  764.2(f) (possession with intent 
to export illegally), BIS may regard a violation of any provision of 
the EAR as knowing or willful if the facts and circumstances of the 
case support that conclusion. In deciding whether a knowing 
violation has occurred, BIS will consider, in accordance with 
Supplement No. 3 to part 732, the presence of any red flags and the 
nature and result of any inquiry made by the party. A denial or 
exclusion order may also be considered even in matters involving 
simple negligence or carelessness, particularly if the violations(s) 
involved harm to national security or other essential interests 
protected by the export control system, if the violations are of 
such a nature and extent that a monetary fine alone represents an 
insufficient penalty or if the nature and extent of the violation(s) 
indicate that a denial or exclusion order is necessary to prevent 
future violations of the EAR.
    Destination Involved: BIS is more likely to seek a greater 
monetary penalty and/or denial of export privileges or exclusion 
from practice in cases involving:
    (1) Exports or reexports to countries subject to anti-terrorism 
controls, as described at Sec. 742.1(d).
    (2) Exports or reexports to destinations particularly implicated 
by the type of control that applies to the item in question--for 
example, export of items subject to nuclear controls to a country 
with a poor record of nuclear non-proliferation.
    Violations involving exports or reexports to other destinations 
may also warrant consideration of such sanctions, depending on 
factors such as the degree of willfulness involved, the nature and 
extent of harm to national security or other essential interests 
protected by the export control system, and what level of sanctions 
are determined to be necessary to deter or prevent future violations 
of the EAR.
    Related Violations: Frequently, a single export transaction can 
give rise to multiple violations. For example, an exporter who mis-
classifies an item on the Commerce Control List may, as a result of 
that error, export the item without the required export license and 
submit a Shipper's Export Declaration (SED) that both misstates the 
applicable Export Control Classification Number (ECCN) and 
erroneously identifies the export as qualifying for the designation 
``NLR'' (no license required). In so doing, the exporter committed 
three violations: one violation of Sec. 764.2(a) for the 
unauthorized export and two violations of Sec. 764.2(g) for the two 
false statements on the SED. It is within the discretion of BIS to 
charge three separate violations and settle the case for a penalty 
that is less than would be appropriate for three unrelated 
violations under otherwise similar circumstances, or to charge fewer 
than three violations and pursue settlement in accordance with that 
charging decision. In exercising such discretion, BIS typically 
looks to factors such as whether the violations resulted from 
knowing or willful conduct, willful blindness to the requirements of 
the EAR, or gross negligence; whether they stemmed from the same 
underlying error or omission; and whether they resulted in 
distinguishable or separate harm.
    Multiple Unrelated Violations: In cases involving multiple 
unrelated violations, BIS is more likely to seek a denial of export 
privileges, an exclusion from practice, and/or a greater monetary 
penalty than BIS would otherwise typically seek. For example, 
repeated unauthorized exports could warrant a denial order, even if 
a single export of the same item to the same destination under 
similar circumstances might warrant just a monetary penalty. BIS 
takes this approach because multiple violations may indicate serious 
compliance problems and a resulting risk of future violations. BIS 
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.
    Timing of Settlement: Under Sec. 766.18, 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. However, 
early settlement--for example, before a charging letter has been 
served--has the benefit of freeing resources for BIS to deploy in 
other matters. In contrast, for example, the BIS resources saved by 
settlement on the eve of an adversary hearing under Sec. 766.13 are 
fewer, insofar as BIS has already expended significant resources on 
discovery, motions practice, and trial preparation. Because the 
effective implementation of the U.S. export control system depends 
on the efficient use of BIS resources, BIS has an interest in 
encouraging early settlement and may take this interest into account 
in determining settlement terms.
    Related Criminal or Civil Violations: Where an administrative 
enforcement matter under the EAR involves conduct giving rise to 
related criminal or civil charges, BIS may take into account the 
related violations, and their resolution, in determining what 
administrative sanctions are appropriate under part 766. 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 EAR and will 
take greater care to do so in the future. In appropriate cases where 
a party is receiving substantial criminal penalties, BIS may find 
that sufficient deterrence may be achieved by lesser administrative 
sanctions than would be appropriate in the absence of criminal 
penalties. Conversely, BIS 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 otherwise to be 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, and may 
therefore be of limited utility as precedent for future cases, 
particularly those not involving a global settlement.
    B. Specific Mitigating and Aggravating Factors: In addition to 
the general factors described above, BIS also generally looks to the 
presence or absence of the following mitigating and aggravating 
factors in determining what sanctions should apply in a given 
settlement. Where a factor admits of degrees, it should accordingly 
be given more or less weight. 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 
an exporter whose overall export compliance efforts are of high 
quality should be given less weight than previous violation(s) not 
involving such mitigating factors.
    Some of the factors listed below 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.

Mitigating Factors

    1. The party made a voluntary self-disclosure of the violation, 
satisfying the requirements of Sec. 764.5. (GREAT WEIGHT)
    2. The party has an effective export compliance program and its 
overall export compliance efforts have been of high quality. In 
determining the presence of this factor, BIS will take account of 
the extent to which a party complies with the principles set forth 
in BIS's Export Management System (EMS) Guidelines. Information 
about the EMS Guidelines can be accessed through the BIS Web site at 
http://www.bis.doc.gov. In this context, BIS will also consider 
whether a party's export compliance program

[[Page 54405]]

uncovered a problem, thereby preventing further violations. (GREAT 
WEIGHT)
    3. The violation was an isolated occurrence or the result of a 
good-faith misinterpretation.
    4. Based on the facts of a case and under the applicable 
licensing policy, required authorization for the export transaction 
in question would likely have been granted upon request.
    5. Other than with respect to antiboycott matters under part 
760:
    a. The party has never been convicted of an export-related 
criminal violation;
    b. In the past five years, the party has not entered into a 
settlement of an export-related administrative enforcement case with 
BIS or another U.S. Government agency or been found liable in an 
export-related administrative enforcement case brought by BIS or 
another U.S. Government agency;
    c. In the past three years, the party has not received a warning 
letter from BIS; and
    d. In the past five years, the party has not otherwise violated 
the EAR.
    Where necessary to effective enforcement, the prior involvement 
in export violations 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.
    6. The party has cooperated to an exceptional degree with BIS 
efforts to investigate the party's conduct.
    7. The party has provided substantial assistance in BIS 
investigation of another person who may have violated the EAR.
    8. The violation was not likely to involve harm of the nature 
that the applicable provisions of the EAA, EAR or other authority 
(e.g., a license condition) were intended to protect against; for 
example, a false statement on an SED that an export was ``NLR,'' 
when in fact a license requirement was applicable, but a license 
exception was available.
    9. At the time of the violation, the party: (1) Had little or no 
previous export experience; and (2) was not familiar with export 
practices and requirements. (Note: The presence of only one of these 
elements will not generally be considered a mitigating factor.)

Aggravating Factors

    1. The party made a deliberate effort to hide or conceal the 
violation(s). (GREAT WEIGHT)
    2. The party's conduct demonstrated a serious disregard for 
export compliance responsibilities. (GREAT WEIGHT)
    3. The violation was significant in view of the sensitivity of 
the items involved and/or the reason for controlling them to the 
destination in question. This factor would be present where the 
conduct in question, in purpose or effect, substantially implicated 
national security or other essential interests protected by the U.S. 
export control system, in view of such factors as the destination 
and sensitivity of the items involved. Such conduct might include, 
for example, violations of controls based on nuclear, biological, 
and chemical weapon proliferation, missile technology proliferation, 
and national security concerns, and exports proscribed in part 744. 
(GREAT WEIGHT)
    4. The violation was likely to involve harm of the nature that 
the applicable provisions of the EAA, EAR or other authority (e.g., 
a license condition) are principally intended to protect against, 
e.g., a false statement on an SED that an export was destined for a 
non-embargoed country, when in fact it was destined for an embargoed 
country.
    5. The quantity and/or value of the exports was high, such that 
a greater penalty may be necessary to serve as an adequate penalty 
for the violation or deterrence of future violations, or to make the 
penalty proportionate to those for otherwise comparable violations 
involving exports of lower quantity or value.
    6. The presence in the same transaction of concurrent violations 
of laws and regulations, other than those enforced by BIS.
    7. Other than with respect to antiboycott matters under part 
760:
    a. The party has been convicted of an export-related criminal 
violation;
    b. In the past five years, the party has entered into a 
settlement of an export-related administrative enforcement case with 
BIS or another U.S. Government agency or has been found liable in an 
export-related administrative enforcement case brought by BIS or 
another U.S. Government agency;
    c. In the past three years, the party has received a warning 
letter from BIS; or
    d. In the past five years, the party otherwise violated the EAR. 
Where necessary to effective enforcement, the prior involvement in 
export violations 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.
    8. The party exports as a regular part of the party's business, 
but lacked a systematic export compliance effort.
    In deciding whether and what scope of denial or exclusion order 
is appropriate, the following factors are particularly relevant: the 
presence of mitigating or aggravating factors of great weight; the 
degree of willfulness involved; in a business context, the extent to 
which senior management participated in or was aware of the conduct 
in question; the number of violations; the existence and seriousness 
of prior violations; the likelihood of future violations (taking 
into account relevant export compliance efforts); and whether a 
monetary penalty can be expected to have a sufficient deterrent 
effect.

IV. How BIS Makes Suspension and Deferral Decisions

    A. Civil Penalties: In appropriate cases, payment of a civil 
monetary penalty may be deferred or suspended. See 
Sec. 764.3(a)(iii). In determining whether suspension or deferral is 
appropriate, BIS may consider, for example, whether the party has 
demonstrated a limited ability to pay a penalty that would be 
appropriate for such violations, so that suspended or deferred 
payment can be expected to have sufficient deterrent value, and 
whether, in light of all of the circumstances, such suspension or 
deferral is necessary to make the impact of the penalty consistent 
with the impact of BIS penalties on other parties who committed 
similar violations.
    B. Denial of Export Privileges and Exclusion from Practice: In 
deciding whether a denial or exclusion order should be suspended, 
BIS may consider, for example, the adverse economic consequences of 
the order on the respondent, its employees, and other parties, as 
well as on the national interest in the competitiveness of U.S. 
businesses. An otherwise appropriate denial or exclusion order will 
be suspended on the basis of adverse economic consequences only if 
it is found that future export control violations are unlikely and 
if there are adequate measures (usually a substantial civil penalty) 
to achieve the necessary deterrent effect.

    Dated: September 9, 2003.
Kenneth I. Juster,
Under Secretary of Commerce for Industry and Security.
[FR Doc. 03-23499 Filed 9-16-03; 8:45 am]
BILLING CODE 3510-33-P