Under the Federal Civil Penalties Inflation Adjustment Act of 2015, Congress has mandated, effective August 1, 2016, a one-time catch-up adjustment to civil monetary penalties for export violations, in order to account for inflation. The last time such an increase occurred was in 1985. Going forward, it is important to note that these penalties are not one-time increases but will be subject to an annual adjustment for inflation, to be implemented no later than January 15 of each year.
It is imperative to recognize that these new penalty amounts are retroactive and can be charged against each violation, regardless of when the violation occurred. This is bad news if you are charged by U.S. Customs, the Bureau of Industry and Security (BIS), or the Directorate of Defense Trade Controls (DDTC) after August 1, 2016, as they can now use the revised penalty rates. These penalty increases raise the stakes for exporters to meet their regulatory obligations.
Here is a summary of the penalty increases:
- The maximum amount for an EAR civil violation is now $284,582 or two times the value of the transaction (50 U.S.C. 1705(b)).
- Penalties for late AES filings are now $1,312 per day; with the maximum per violation increasing to $13,118. All other AES violations are now $13,118 (13 U.S.C. 304 & 13 U.S.C. 305(b)).
- The penalty for DDTC civil penalties has increased to $1,094,010 per violation (22 U.S.C. 2778).
The adjusted penalty amounts serve as a reminder to keep your export compliance program and training up to date. Make sure you monitor your export transactions and processes, and if you do discover an export violation, consider making a voluntary disclosure.
By Jim Trubits, Vice President