[Federal Register Volume 72, Number 136 (Tuesday, July 17, 2007)]
[Rules and Regulations]
[Pages 38999-39009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-13717]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 730, 764 and 766

[Docket No. 0612242577-7145-01]
RIN 0694-AD63


Antiboycott Penalty Guidelines

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Final rule.

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SUMMARY: This rule sets 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 
rule also sets 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 antiboycott cases.

DATES: This rule is effective August 16, 2007.

FOR FURTHER INFORMATION CONTACT: Edward O. Weant III, 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

[[Page 39000]]

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 to BIS 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). On June 30, 2006, 
BIS published a proposed rule regarding specific procedures for 
voluntary self-disclosures of violations to OAC, guidance about how BIS 
responds to violations of the antiboycott provisions, and a description 
of how BIS makes penalty determinations in the settlement of 
administrative enforcement cases related to the antiboycott provisions. 
After reviewing the public comments on the proposed rule, BIS is 
publishing this final rule.
    This rule does 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.
    BIS received comments from two organizations regarding the proposed 
rule. Collectively, the two organizations raised seven issues. Three of 
the issues were general in nature and four addressed specific 
provisions of the proposed rule.

General Issues Raised by the Comments

    One commenter suggested that BIS consult with industry and provide 
guidance on what a company's reporting structure should be. BIS 
concludes that this proposal is outside the scope of the issues raised 
by the proposed rule. BIS recognizes that among the entities that have 
reporting obligations, one could find myriad organizational structures. 
BIS believes that any tailoring of the manner of reporting to 
accommodate both an organization's structure and BIS's need to properly 
identify the source of reports can best be done through consultations 
between the organization and BIS rather than through an amendment to 
the regulations. BIS encourages organizations that have questions about 
how to submit reports to contact BIS for such consultations.
    One commenter suggested that BIS develop a system to allow the 
public to submit boycott reports electronically. This suggestion is 
outside the scope of the proposed rule.
    One commenter suggested that BIS update and publish its telephone 
advice guidance and look for other opportunities to provide practical 
written guidance for companies to use in complying with boycott 
requests. This comment is outside the scope of the proposed rule.

Comments Relating to Specific Features of the Proposed Rule

    The comments address four specific issues in connection with the 
proposed rule. Those four issues are: The burden that would be imposed 
by new Sec.  764.8 regarding voluntary self-disclosures; whether the 
provision of new Sec.  764.8(f) regarding requests to take action that 
would otherwise violate Sec.  764.2(e) is contrary to prior agency 
practice; whether new Sec.  764.8 should allow verbal voluntary self-
disclosures with written follow-up; and whether the rule should provide 
more concrete incentives to disclose by making a warning letter the 
maximum sanction for most voluntary self-disclosure cases.

Comment on Paperwork Burden

    One commenter stated that BIS had underestimated the costs large 
global companies would incur in complying with the voluntary disclosure 
provisions. In particular, the commenter noted that a company with 
decentralized operations would incur costs measured in tens of 
thousands of dollars if it conducted the five-year review of all its 
operations recommended by BIS. Upon review, BIS acknowledges that the 
burden on large companies with decentralized operations would be 
greater than estimated in the proposed rule. However, BIS believes that 
such burden will be justified in many instances because of the risks to 
the firm involved if it performs a less comprehensive review. The risk 
of conducting a review covering a period shorter than five years or 
that does not include all business units is that some violations will 
be made known to OAC through other sources or during the course of an 
OAC investigation initiated in response to the voluntary self-
disclosure. Such undisclosed violations would not receive the ``great 
weight'' mitigating factor that BIS would apply in settlement 
negotiations to voluntarily self-disclosed violations under this rule. 
The larger penalties imposed for such undisclosed violations might 
exceed the cost of doing a business-wide five-year search. Hence, BIS 
believes that it is appropriate to recommend a five-year period for 
this kind of review. BIS notes that the proposed rule and this final 
rule recommend but do not require a review extending back for a period 
of five years prior to the initial notification.
    In the proposed rule, BIS stated that it intended to treat the 
collection of information related to the voluntary self-disclosure 
procedures in this rule as an extension of the scope of the collection 
approved under OMB control number 0694-AD58. Based on this comment, BIS 
re-evaluated the burden hours associated with this information 
collection and concluded that the burden is large enough to justify a 
separate collection authorization. Therefore, BIS sought and obtained 
separate OMB authorization for the collection related to the voluntary 
self-disclosure procedure in this rule. The collection related to the 
voluntary self-disclosure procedure in this rule explicitly accounts 
for the larger burden that would be imposed on large companies with 
decentralized locations and is authorized under OMB control number 
0694-0132 for which the estimated annual burden hours and costs are 
1,280 and $51,200, respectively.

Comment on Sec.  764.8(f) and Prior Agency Practice

    One commenter raised an issue concerning the implication of 
proposed Sec.  764.8(f). Proposed Sec.  764.8(f) would have provided a 
procedure by which a person making a voluntary self-disclosure of a 
violation of the antiboycott provision may request authorization to 
take certain actions with respect to the transaction. The commenter 
expressed a belief that ``the current OAC practice is not to require 
companies to seek BIS authorization to continue with a transaction 
after filing a voluntary disclosure.'' The commenter went on to state 
that ``[t]he proposed rule, however, would impose such a requirement * 
* * if a company were to commit a Category B or C violation it seems 
unreasonable that the company would have to file a voluntary disclosure 
and then seek BIS authorization to continue with the transaction. A 
more reasonable approach would be to require BIS

[[Page 39001]]

authorization only in those instances where the company voluntarily 
discloses a Category A violation.''
    BIS agrees that, in the past, OAC has advised members of the public 
who contacted OAC via its telephone advice line a violation of part 760 
does not preclude exporting in connection with the same commercial 
transaction. Upon review, BIS has decided to remove paragraph (f) from 
Sec.  764.8 because it is not consistent with prior agency practice.

Comment Proposing Allowing Verbal Voluntary Self-Disclosures

    BIS received one comment expressing the opinion that the Bureau of 
Customs and Border Protection self-disclosure procedure set forth in 19 
CFR 162.74(a) is better than the procedure in the proposed rule. The 
procedure in 19 CFR 162.74(a) allows an importer to make a verbal 
disclosure to a Customs officer of a violation with the requirement 
that the disclosure be followed up in writing within 10 days. The 
commenter suggested that this Customs procedure encourages more 
disclosures by allowing the importer to disclose the violation at the 
earliest possible moment. The ten day written follow-up deadline 
encourages accurate and complete disclosures. BIS has reviewed 19 CFR 
162.74(a) and the commenter's rationale. BIS notes that 19 CFR 
162.74(a) applies to penalties for certain violations related to 
tariffs on imports into the United States. Compliance with the 
disclosure requirements in Sec.  162.74 can allow the importer to pay a 
reduced penalty as compared with violations for which no such 
disclosure takes place. The penalties are set forth in 19 CFR 162.73 
and 19 CFR 162.73a. Generally, the penalties are expressed as a 
percentage of value of the merchandise that was the subject of the 
violation. BIS believes that violations of the antiboycott provisions 
are substantively different from the violations addressed by 19 CFR 
162.74(a). As noted in the preamble to the proposed rule, BIS believes 
that written initial notifications reduce the possibility of confusion 
as to whether a particular communication was intended to be a voluntary 
self-disclosure and are likely to produce more complete disclosures 
than would oral disclosures. In addition, BIS believes that preparing 
and submitting a written submission of the information required in an 
initial notification, i.e., the name of the person making the 
disclosure and a brief description of the suspected violations and 
their general nature and extent, is not an onerous task. Therefore, 
this final rule makes no changes to the provisions of the proposed rule 
that required initial notifications to be in writing.

Comment Regarding Incentives to Self-Disclose Violations

    One commenter recommended that BIS provide more concrete incentives 
for making disclosures of violations of the antiboycott provisions. 
This commenter noted that although new Supplement No. 2 to part 764 
provides that voluntary self-disclosures be given ``GREAT WEIGHT'' as a 
mitigating factor, other language in the supplement concerning the 
effect of other factors as well as language in new Sec.  764.8(b) 
stating that ``[t]he weight given to a voluntary self-disclosure is 
solely within discretion of BIS and the effect of voluntary self-
disclosure may be outweighed by aggravating factors'' makes the 
benefits of voluntary self-disclosure almost speculative and could 
affect decisions to disclose. That commenter stated that BIS's proposal 
``contrasts sharply with * * * customs law administration. [Where] * * 
* definite advantages always flow from disclosing violations * * *.'' 
The commenter recommended that BIS at least adopt a position of 
resolving all voluntary self-disclosure cases with a warning letter 
unless the ``violation involves serious anti-boycott concerns--e.g., 
complying with boycott requests to discriminate on the basis of race, 
religion, sex, or national origin, or where there are significant 
aggravating factors.''
    BIS notes that as stated in Sec.  764.8, the weight to be given to 
any factor is solely within the discretion of BIS. Supplement No. 2 to 
part 764 describes how BIS exercises that discretion. BIS's statement 
in the supplement that voluntary self-disclosure made in accordance 
with Sec.  764.8 be given great weight and that factors of great weight 
ordinarily should be given considerably more weight than other factors 
reflects the policy that BIS has followed and intends to follow in 
settling administrative enforcement actions involving the antiboycott 
provisions. However, given the myriad possible combinations of facts 
that may be present in any given case, including a range of possible 
aggravating and mitigating factors, BIS believes that it cannot 
determine in advance the maximum sanction that would be appropriate for 
a particular violation or combination of violations. Moreover, 
attempting to do so could create incentives to violate the antiboycott 
provisions in cases where the potential economic benefit to the 
violator is large relative to the maximum monetary penalty. Such 
incentives could occur, for example, in a situation in which a single 
violation provides the violator with access to a very large market.

Changes to the EAR in This Rule

    This rule creates a new Sec.  764.8 setting forth the procedures 
for voluntary self-disclosure of violations of the antiboycott 
provisions. It also creates a new supplement No. 2 to part 764 that 
describes how BIS responds to violations of the antiboycott provisions 
and how BIS makes penalty determinations in the settlement of 
antiboycott administrative enforcement cases. The rule also makes 
technical and conforming changes to part 766.
    This rule provides specific criteria with respect to what 
constitutes a voluntary self-disclosure and how voluntary self-
disclosures relate to other sources of information that OAC may have 
concerning violations of the antiboycott provisions. The rule also 
informs the public of the factors that BIS 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 on a more equal footing because 
procedures for making voluntary self-disclosures, information about how 
BIS responds to violations and how BIS makes penalty determinations in 
the settlement of antiboycott administrative enforcement cases will all 
be matters of public record. BIS also believes such publication will 
make settlement of antiboycott administrative cases more efficient, as 
respondents and BIS will be able to focus on the important factors in 
antiboycott administrative enforcement cases and OAC generally expends 
fewer resources to obtain information received through voluntary self-
disclosure than information obtained by other means.
    This rule also revises Supp. No. 1 to part 730 of the EAR to 
display the OMB control number of the newly approved collection of 
information that relates to Sec.  764.8 of the EAR, which is created by 
this rule.

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

    The new Sec.  764.8 both defines what constitutes a voluntary self-
disclosure and provides the procedures for making such disclosures. 
Compliance with the provisions of Sec.  764.8 is important because a 
voluntary self-disclosure ``satisfying the requirements of Sec.  
764.8'' is designated as a mitigating factor of ``GREAT WEIGHT'' in the 
settlement of administrative cases as set forth in the new Supplement 
No. 2 to part 764. Supplement No. 2 provides that such

[[Page 39002]]

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 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.
    Section 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. Section 764.8 provides that a person 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 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 EAR 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. 
Section 764.8(b)(3)(i) 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 self-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 persons requesting such advice may 
disclose that they have 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 disclose fully all relevant facts when making telephone 
or e-mail inquiries for advice concerning the antiboycott provisions. 
Therefore, Sec.  764.8(b)(3)(ii) provides that violations revealed in 
telephone or e-mail requests for advice concerning the antiboycott 
provisions are not information received from another source for 
purposes of Sec.  764.8. Section 764.8(b)(3)(ii) also states that 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 persons who reveal violations in the course of seeking such 
advice of their opportunity to make a voluntary self-disclosure.
    Section 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 or of an officer or 
employee who is authorized to make such disclosures on behalf of the 
firm.'' BIS believes that approval of a person with such authority 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 has disclosed wrongdoing. The proposed rule did not 
include the phrase ``or of an officer or employee who is authorized to 
make such disclosures on behalf of the firm.'' Upon review, BIS does 
not believe that knowledge and approval of ``senior management'' are 
needed so long as someone with authority to make such disclosures on 
behalf of the firm has approved the disclosure on behalf of the firm.

Creation of Supplement No. 2 to Part 766

    This rule creates a new supplement to part 766 of the EAR to set 
forth publicly BIS's practice with respect to violations of the 
antiboycott provisions. The supplement describes the ways that BIS 
responds to violations, 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 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 supplement sets forth the three actions that 
BIS may take in response to a violation, namely, issuing a warning 
letter, pursuing an administrative case, and referring a case to the 
Department of Justice for criminal prosecution. This paragraph also 
lists the factors that often cause BIS to issue a warning letter. 
Additionally, it notes BIS'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), BIS is not required to issue a 
proposed charging letter. Finally, paragraph (b) notes that BIS may 
refer a case to the Department of Justice for criminal

[[Page 39003]]

prosecution in addition to pursuing an administrative enforcement 
action.
    Paragraph (c) of the supplement lists the types of administrative 
sanctions that may be imposed in antiboycott administrative enforcement 
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 BIS determines what 
sanctions are appropriate in settlement of antiboycott 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. BIS typically looks to the presence 
or absence of the specific factors, alongside the general factors, in 
determining what sanctions should apply in a given settlement.
    Paragraph (d) begins by listing seven general factors to which BIS 
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 BIS 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 BIS 
generally considers when determining what sanctions should apply. The 
listed factors are not exhaustive and BIS may consider other factors as 
well in a particular case. However, the listed factors are those that 
BIS's experience indicates are commonly relevant to penalty 
determinations in cases that are settled. Factors identified by the 
term ``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 boycotted or 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. The proposed rule contained a 
statement in paragraph (d)(2)(i)(B)(2), to the effect that deliberate 
or intentional destruction of records may be an issue in settlement. 
Paragraph (d)(2)(i)(B)(2) is part of a discussion of mitigating factors 
of great weight. Upon review BIS removed the sentence about intentional 
or deliberate destruction of records because it pertains to aggravating 
factors and would be subsumed in the serious disregard for compliance 
issues provision in paragraph (d)(2)(ii)(B).
    The nine specific aggravating factors in paragraph (d) 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 
violation, 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, violation 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 antiboycott administrative 
enforcement 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 BIS considers to be 
particularly relevant when deciding whether to impose a denial or 
exclusion order in the settlement of antiboycott administrative 
enforcement 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 (e). 
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 BIS may consider in 
deciding whether to suspend or defer a monetary penalty or suspend an 
order denying export privileges or an order providing for exclusion 
from practice. With respect to suspension or deferral of monetary 
penalties, BIS 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, BIS 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 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. This rule contains a new collection of information 
subject to the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) 
that has been approved by the Office of Management and Budget under 
control number 0694-0132 which carries a burden hour estimate of 1,280 
and a cost estimate of $51,200.
    Send comments about this collection, including suggestions for 
reducing the burden, to David Rostker, Office of Management and Budget, 
by e-mail to [email protected], 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 at the Department of Commerce 
certified

[[Page 39004]]

to the Chief Counsel for Advocacy at the Small Business Administration 
that this rule, if adopted, would not have a significant economic 
impact on a substantial number of small entities. The factual basis was 
published in the proposed rule and is not repeated here. BIS received 
only one comment that addressed the economic impact of this rule. That 
comment addressed the rule's economic impact on large businesses with 
multiple operating units in many countries and did not address the 
rule's impact on small entities. BIS has included that comment in its 
Paperwork Reduction Act submission to OMB and addressed it under the 
heading ``Comment on Paperwork Burden'' earlier in this preamble. 
Therefore, BIS has not prepared a final regulatory flexibility analysis 
for this rule.

List of Subjects

15 CFR Part 730

    Administrative practice and procedure, Advisory committees, 
Exports, Reporting and recordkeeping requirements, Strategic and 
critical materials.

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.

0
For the reasons set forth above, the Export Administration Regulations 
(15 CFR 730-774) are amended as follows:

PART 730--[AMENDED]

0
1. The authority citation for part 730 continues to read as follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c; 22 U.S.C. 2151 
note, Pub. L. 108-175; 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; 30 
U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 
1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; Sec. 901-911, Pub. L. 
106-387; Sec. 221, Pub. L. 107-56; E.O. 11912, 41 FR 15825, 3 CFR, 
1976 Comp., p. 114; E.O. 12002, 42 FR 35623, 3 CFR, 1977 Comp., 
p.133; E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O. 
12214, 45 FR 29783, 3 CFR, 1980 Comp., p. 256; E.O. 12851, 58 FR 
33181, 3 CFR, 1993 Comp., p. 608; E.O. 12854, 58 FR 36587, 3 CFR, 
1993 Comp., p. 179; E.O. 12918, 59 FR 28205, 3 CFR, 1994 Comp., p. 
899; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 12947, 
60 FR 5079, 3 CFR, 1995 Comp., p. 356; E.O. 12981, 60 FR 62981, 3 
CFR, 1995 Comp., p. 419; E.O. 13020, 61 FR 54079, 3 CFR, 1996 Comp. 
p. 219; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 
13099, 63 FR 45167, 3 CFR, 1998 Comp., p. 208; E.O. 13222, 66 FR 
44025, 3 CFR, 2001 Comp., p. 783; E.O. 13224, 66 FR 49079, 3 CFR, 
2001 Comp., p. 786; E.O. 13338, 69 FR 26751, May 13, 2004; Notice of 
August 3, 2006, 71 FR 44551 (August 7, 2006); Notice of October 27, 
2006, 71 FR 64109 (October 31, 2006).


0
2. In Supp. No. 1 to part 730, add a new row to the table of approved 
information collections immediately following the row that begins with 
``0694-0129'' and immediately preceding the row that begins with 
``0607-0152'' to read as follows:

Supplement No. 1 to Part 730--Information Collection Requirements Under 
the Paperwork Reduction Act: OMB Control Numbers

* * * * *

 
------------------------------------------------------------------------
                                                       Reference in the
         Collection No.                  Title                EAR
------------------------------------------------------------------------
 
                              * * * * * * *
0694-0132.......................  Voluntary Self-      Sec.   764.8.
                                   Disclosure of
                                   Antiboycott
                                   Violations.
                              * * * * * * *
------------------------------------------------------------------------

PART 764--[AMENDED]

0
3. 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 
3, 2006, 71 FR 44551 (August 7, 2006).


0
4. 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 (OAC) 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 to 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 parts 764 and 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 before it commences an investigation or inquiry in 
connection with the same or substantially similar information it 
received 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 constitutes the 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 does not 
constitute the receipt of information from another source. Such 
revelation also does not constitute a voluntary self-disclosure or 
initial notification of a voluntary self-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 
BIS, 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 BIS, and the mitigating effect of voluntary 
self-disclosure may be outweighed by aggravating factors. Voluntary 
self-disclosure does not

[[Page 39005]]

prevent transactions from being referred to the Department of Justice 
for criminal prosecution. In such a case, BIS would notify the 
Department of Justice of the voluntary self-disclosure, but the 
decision as to how to consider 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 or of 
a person with authority to make such disclosures on behalf of the firm.
    (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 enforced by BIS 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 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; BIS informs the 
disclosing party that it will take no action; BIS 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, BIS 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 and attempt to settle the 
matter pursuant to Sec.  766.18 of the EAR;
    (4) Issue a charging letter pursuant to Sec.  766.3 of the EAR if a 
settlement is not reached or BIS otherwise deems appropriate; and/or
    (5) Refer the matter to the Department of Justice for criminal 
prosecution.
    (e) Criteria. Supplement No. 2 to part 766 of the EAR describes how 
BIS typically exercises its discretion regarding whether to pursue an 
antiboycott administrative enforcement case under part 766 and what 
administrative sanctions to seek in settling such a case.

PART 766--[AMENDED]

0
5. 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 
3, 2006, 71 FR 44551 (August 7, 2006).


0
6. In Sec.  766.3, paragraph (a) the second sentence is revised to read 
as follows:

[[Page 39006]]

Sec.  766.3  Institution of administrative enforcement proceedings.

    (a) Charging letters. * * * Supplements Nos. 1 and 2 to this part 
describe how BIS typically exercises its discretion regarding the 
issuance of charging letters. * * *
* * * * *

0
5. In Sec.  766.18 paragraph (f) is revised to read as follows:


Sec.  766.18  Settlement.

* * * * *
    (f) Supplements Nos. 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.

0
6. Add 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 (OAC) 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 
BIS 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. 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 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. BIS's policy and practice is to treat similarly 
situated cases similarly, taking into consideration that the facts 
and 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 posture or penalties BIS may 
seek in settling or litigating 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.
    (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 BIS has 
reason to believe that such a violation has occurred, BIS 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 BIS's 
belief that a violation has occurred. In the exercise of its 
discretion, BIS 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) BIS may issue 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) BIS 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) BIS will not issue a warning letter if it concludes, based 
on available information, that a violation did not occur.
    (iv) BIS may reopen its investigation of a matter should it 
receive additional evidence or if it appears that information 
previously provided to BIS 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, BIS 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 BIS 
expects that those violations would be charged. Issuance of the 
proposed charging letter provides an opportunity for the party and 
BIS to consider settlement of the case prior to the initiation of 
formal enforcement proceedings.
    (3) 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.
    (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 as 
provided in Sec.  764.3(a)(1) of the EAR;
    Note to paragraph (c)(1): The maximum penalty 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. For 
violations that occurred before March 9, 2006, the maximum monetary 
penalty per violation is $11,000. For violations occurring on or 
after March 9, 2006, the maximum monetary penalty per violation is 
$50,000.
    (2) An order denying a party's export privileges under the EAR 
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. BIS 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, BIS 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), BIS is more likely 
to seek a denial of export privileges or an exclusion from practice, 
and/or a greater monetary penalty as BIS 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, a denial 
order and/or an 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;

[[Page 39007]]

    (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 sections 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, BIS may choose 
to impose a smaller or greater penalty per violation. In exercising 
its discretion, BIS 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 BIS 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 exporter fails to report the 
receipt of the request. The exporter 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, BIS 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 
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, 
BIS 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. 
BIS 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, BIS 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. 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.
    (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 filed--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 of this part are fewer, insofar 
as BIS has already expended significant resources on discovery, 
motions practice, and trial preparation. Given the importance of 
allocating BIS resources to maximize enforcement of the EAR, BIS 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, BIS 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, 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 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, BIS 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, BIS 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 BIS 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) Specific 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)

[[Page 39008]]

    (1) General policy or program pertaining to Antiboycott 
Provisions. BIS will consider whether a party's compliance efforts 
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. 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. In the case of a party that has done previous 
business with or in boycotted countries or boycotting countries, BIS 
will examine whether the party has an effective antiboycott 
compliance program and whether its overall antiboycott compliance 
efforts have been of high quality. BIS may deem it appropriate to 
review the party's internal business documents relating to 
antiboycott compliance (e.g., corporate compliance manuals, employee 
training materials).
    (2) Compliance with reporting and recordkeeping requirements. In 
the case of a party that has received reportable boycott requests in 
the past, BIS may examine whether the party complied with the 
reporting and recordkeeping requirements of the antiboycott 
provisions.
    (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. BIS 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.
    (1) BIS 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 not 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 relating to the antiboycott provisions; or
    (iv) In the past 5 years, the party has not 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. When an acquiring firm takes reasonable steps to uncover, 
correct, and disclose to BIS conduct that gave rise to violations 
that the acquired business committed before the acquisition, BIS 
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 Provisions.
    (1) BIS 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 BIS relating to the antiboycott provisions; or
    (iv) 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 BIS conduct that gave rise to violations 
that the acquired firm committed before being acquired, BIS 
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 
credit or related financial documents in the course of its standard 
business practices.
    (E) Prior history of business with or in boycotted countries or 
boycotting countries. The party has a prior history of conducting 
business with or in boycotted and boycotting countries. BIS may 
examine the volume of business that the party has conducted with or 
in boycotted and boycotting countries as reflected by the size and 
dollar amount of transactions or the percentage of a party's overall 
business that such business constitutes.
    (F) Long duration or high frequency of violations. Violations 
that occur at frequent intervals or repeated violations occurring 
over an extended period of time may be treated more seriously than a 
single violation or related violations that are committed within a 
brief period of time, particularly if the violations are committed 
by a party with a history of business with or in boycotted and 
boycotting countries. (Compare to isolated occurrence of violation 
in paragraph (d)(2)(i)(H) of this supplement.)
    (G) Clarity of request to furnish prohibited information or take 
prohibited action. The request to furnish information or take other 
prohibited action (e.g., enter into agreement to refuse to do 
business with a boycotted country or entity blacklisted by a 
boycotting country) is facially clear as to its intended purpose.
    (H) Violation relating to specific information concerning an 
individual entity or individual. The party has furnished prohibited 
information about business relationships with specific companies or 
individuals.
    (I) Violations relating to ``active'' conduct concerning an 
agreement to refuse to do business. The party has taken action that 
involves altering, editing, or enhancing prohibited terms or 
language in an agreement to refuse to do business, including a 
letter of credit, or drafting a clause or provision including 
prohibited terms or language in the course of negotiating an 
agreement to refuse to do business, including a letter of credit. 
See ``passive'' agreements to refuse to do business in paragraph 
(d)(2)(i)(G) of this supplement.
    (e) Determination of Scope of Denial or Exclusion Order. 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 seriousness involved; 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 efforts to comply with the antiboycott provisions); and 
whether a civil monetary penalty can be expected to have a 
sufficient deterrent effect.
    (f) How BIS Makes Suspension and Deferral Decisions.
    (1) Civil Penalties. In appropriate cases, payment of a civil 
monetary penalty may be

[[Page 39009]]

deferred or suspended. See Sec.  764.3(a)(1)(iii) of the EAR. 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 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.
    (2) 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 party, its employees, and other persons, as well as 
on the national interest in maintaining or promoting 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 violations of 
the antiboycott provisions are unlikely and if there are adequate 
measures (usually a substantial civil monetary penalty) to achieve 
the necessary deterrent effect.

    Dated: July 9, 2007.
Christopher A. Padilla,
Assistant Secretary for Export Administration.
 [FR Doc. E7-13717 Filed 7-16-07; 8:45 am]
BILLING CODE 3510-33-P