Washington, D.C.—Today, the Bureau of Industry and Security (BIS) announced four
significant policy changes that will strengthen BIS’s administrative enforcement tools. The
announcement was made in remarks by Assistant Secretary of Commerce for Export
Enforcement Matthew S. Axelrod during the 2022 BIS Update Conference on Export Controls
and Policy.

“Export controls are a critical strategic national security tool for responding to the current threat
environment, as we have seen from the powerful response to Russia’s further invasion of
Ukraine,” said Under Secretary of Commerce for Industry and Security Alan Estevez. “We
need to back up the new policies we’ve put in place with robust enforcement, and the changes
being made today will improve the already strong work being done by our Export Enforcement
team in that area.”

“Our enforcement tools have never been a better match for the global threat environment than
they are right now, and today’s changes will help to make sure that we are using those tools to
their fullest potential to protect our national security,” said Assistant Secretary of Commerce
for Export Enforcement Matthew S. Axelrod. “The changes we are announcing today will
ensure that we are focusing our greatest attention on the most serious violations, that we are
creating a level playing field that incentivizes investments in compliance, and that our penalties
are appropriately commensurate with the harm to national security.”

The changes being announced today are detailed in a memorandum from Assistant Secretary of
Commerce for Export Enforcement, Matthew S. Axelrod and will take effect immediately. The
full memo is available online here.

The Assistant Secretary’s remarks as prepared for delivery follow. Additional remarks and
information about the 2022 BIS Update Conference on Export Controls and Policy will be
published on BIS’s website here.

                                                                ###

                    Assistant Secretary for Export Enforcement Matthew S. Axelrod
                       BIS’s 2022 Update Conference on Export Controls and Policy
                                                            June 30, 2022

                                              Remarks As Prepared for Delivery

Thank you, Kevin, for that kind introduction. And, more importantly, thank you for all
you have done over the past twenty-five years – and continue to do every day – to help BIS
advance its mission and keep our country safe. And thank you to all of you for being here today,
either in person or virtually. I am so excited to be here with you, speaking at my first Update
Conference.

I’ve been in the seat since the beginning of January, so I’m now a grizzled six-month
veteran of BIS. While I’m joking, there’s actually a bit of truth to it. Six months may not sound
like a long time, but Kevin tells me he’d put the past six months up against any six-month period
in BIS’s history. Sparked by Russia’s brutal and unprovoked war against Ukraine, the pace and
scope of changes to our export control rules are without precedent. And, given the global threat
environment we currently face, our enforcement efforts have never been more central to
America’s national security strategy.

I want to take today as an opportunity to talk a little bit about what we at Export
Enforcement, or EE, have accomplished in the past six months and then a little bit about what we
have planned for the future. And when I say “what we have accomplished,” I really mean the
accomplishments of the incredible team of agents, analysts, and export compliance specialists I
have the honor to lead. These men and women work tirelessly every day to deny our adversaries
the sensitive technology they desire – technology our adversaries would then use in their quest to
overcome the United States’ military superiority. We may not be the biggest law enforcement
agency, but no agency enforces export controls – or antiboycott controls for that matter – better
than EE.

As you all know, Russia launched its invasion of Ukraine on February 24th. That same
day, the United States and our partner countries put in place the initial wave of what would
become the most expansive export controls in history aimed at a specific country. Since that
day, both the scope of the restrictions put in place, and the number of countries standing shoulder
to shoulder alongside us in this effort, have only continued to grow. Thanks to the incredible
work of Thea Kendler, Matt Borman, and their team, BIS has issued 12 separate rules aimed at
degrading Russia’s ability to continue to wage war against the people of Ukraine, rules that have
been complemented by parallel actions taken by our now 37 coalition partners.

EE’s enforcement of these enhanced Russian export controls has been swift and
powerful. Our agents have detained or seized over 200 shipments valued at over $88 million. I
have signed nine temporary denial orders, or TDOs – including three that I signed last Friday –
against Russian and Belarusian airlines; those orders should ground significant numbers of
Russian- and Belarusian-operated planes. We’ve also, for the first time ever, published lists of
airplanes we believe have violated our controls. We did that to put the world on notice that
providing services or parts to those planes will place the providers in violation of General
Prohibition 10 of the EAR. And while these TDOs and our General Prohibition10 list have 
successfully hampered Russian owners’ abilities to fly these aircraft, we’ve also been busy
granting case-by-case authorizations to return specific planes to their Western owners, thereby
helping to thwart Vladimir Putin’s efforts to steal American and European assets. 

On June 6, OEE administratively charged oligarch Roman Abramovich for illegally
exporting his Gulfstream 650 and 787 Dreamliner, planes worth an estimated combined $400
million. On the same day, the Department of Justice, with OEE’s assistance, obtained seizure
warrants for the two planes. The public nature of the OEE charging letter represents the first use
of an important regulatory change that just became effective on June 2nd
– our charging letters
will now be public when issued, rather than down the road after a matter is resolved. Prior to the
change, the public wouldn’t know when a charging letter was issued, and there wasn’t as strong
an incentive for those under investigation to try to resolve matters quickly. And because the
wider world wasn’t given visibility into what types of violations we saw occurring until those
violations were later resolved, other companies sometimes didn’t have the information they
needed – information that would have sparked urgency to upgrade their compliance program or
to submit a voluntary disclosure. To address those issues, we made a change. Now, charging
letters are public when filed with the Administrative Law Judge. Once that happens, we put
them up on our website for public viewing. That’s not to say we’ll always go straight to a
charging letter. In appropriate cases, we will still use pre-charging letters, which are not public,
and which allow us to give a company notice of what we think they’ve done wrong. In
appropriate cases, pre-charging letters can be a useful tool as they allow us to have conversations
and negotiations about a resolution prior to a charging letter being issued publicly.

We’ve been innovative in other ways as well. Two days ago, on Tuesday, we partnered
with the Treasury Department to issue the first ever joint BIS-FinCEN alert. This unprecedented
joint alert informs financial institutions about the specifics of our new Russia controls and
identifies red flags that those institutions should be looking for as indicators of potential evasion.
The joint alert also gives financial institutions a specific code to use in their Suspicious Activity
Reports when they identify transactions they think might be designed to evade the controls. The
use of this special code will in turn allow our investigators to review SARs for potential
violations of the Russia controls more quickly and should help lead to enforcement actions.

We want our investigators to have powerful tools to identify violations because once
identified, we can take action. Take, for example, the Entity List announcement this week
identifying eight companies for backfilling – in other words, for shipping items to Russia to
replace the items Russia is no longer able to obtain from the United States due to the enhanced
controls. Identifying these parties came about because of the terrific research our enforcement
analysts, working with interagency partners, were able to do. Secretary Raimondo has been
crystal clear that we will not tolerate parties in third countries undermining our export controls,
and Tuesday’s announcement delivers on this promise. These listings are in addition to almost
300 Russian and Belarusian defense sector companies we have added to the Entity List since
Russia’s invasion of Ukraine.

Our enforcement efforts have not been limited to Russia alone, of course. While the
invasion of Ukraine has rightfully occupied a lot of our time, we have also been laser focused on
identifying violations tied to China. CIA Director Burns has identified China as “the most 
important geopolitical threat we face in the 21st Century.” The PRC is determined to advance
China’s military capabilities by illicitly acquiring U.S. technology. Our job is to prevent them
from doing so.

The Temporary Denial Order I issued on June 8th is an example of our efforts. Our
investigation uncovered a scheme by three interrelated companies – Quicksilver Manufacturing
Inc., Rapid Cut LLC, and U.S. Prototype Inc – that contracted with U.S. defense and aerospace
customers to 3-D print items based off sensitive prototype space and defense technologies.
Unbeknownst to their customers, the three companies sent the blueprints and technical drawings
to China, without the required export licenses, to have the items 3-D printed there and then
shipped back to the United States. In response, we imposed what some consider our most
powerful administrative tool – the denial of export privileges. And while the investigation
continues, those companies will no longer be able to ship sensitive U.S. technology to China,
risking that technology falling into the hands of the PRC.

We have been using other administrative tools as well. In February, I added 33 Chinese
parties to our Unverified List as a result of our inability to conduct end-use checks on them.
When a requested end-use check cannot be performed, we cannot have confidence that items
sent to that party will be used for their intended purpose. Until and unless we are able to conduct
the checks successfully, those 33 parties will remain on our list.

Earlier this week, in addition to identifying eight Chinese parties on the Entity List for
their backfilling to help Russia, we added 25 other Chinese parties for involvement in military
modernization and Iran sanctions evasion activities. Those additions bring us to a total of over
100 Chinese parties added to the Entity List during the Biden Administration, for an overall
current total of nearly 600 – nearly 600 Chinese parties that the interagency has determined to
have been involved, or to have posed a significant risk of being involved, in activities contrary to
the national security or foreign policy interests of the United States. That number includes
parties leveraging artificial intelligence applications to support the Chinese Police’s subjugation
of Uyghur Muslims in Xinjiang; of quantum technology acquisitions by China for WMD and
military modernization purposes; and efforts to leverage semiconductor designs for high
performance computers that can model Chinese hypersonic missiles.

Beyond enforcement actions involving Russian, Chinese, or other actors, we have also
been busy building coalitions – with industry, with academia, and with foreign partners.

For industry, we have just finished revising our Don’t Let This Happen to You guidance
document, which provides examples of what happens when individuals or companies don’t
comply with our regulations. In fact, we just uploaded the new version to our website today, so
industry will have an up-to-date compendium of examples to help drive compliance. Separately,
we’ve been working hard to educate the exporting community about the Russia controls – our
philosophy being that we’d rather deter violations on the front end than enforce on the back end
after a violation has occurred. Our Export Control Officers stationed overseas have organized
seminars with U.S. and international business associations to explain the new Russia controls,
with more than 1,500 companies trained to date. And, domestically, our agents have visited
more than 500 U.S. companies with a history of exporting to Russia to explain the new rules and
to partner on preventing diversion. 

Having our agents spread across the country allows us to better know the exporting
community, and the technologies being exported, so that we can help protect them from
unauthorized use. In that regard, I am pleased to be able to announce that, thanks to the
President and to Congress, our footprint is growing. The Office of Export Enforcement is
located in 30 cities nationwide, and today I am announcing that our Phoenix location will
officially become our ninth full Field Office. Given the region’s growing semiconductor
manufacturing presence, and the important role this technology plays for our U.S. national
security, we’re excited to be able to bring a full complement of agents there.

For academia, I was in Pittsburgh on Tuesday to announce our “Academic Outreach
Initiative,” which is the name of our new effort to help educate universities about export controls
and their importance to national security. Our research universities are an essential component
of the scientific and technological success that powers the engine of the American economy. But
they can also sometimes present an inviting target for foreign adversaries. Our goal is to help
these institutions maintain their open collaborative research environments in a way that allows
them to protect themselves from national security risk. The Initiative has four elements. First,
we’re prioritizing engagement with academic research institutions whose work has resulted in an
elevated risk profile – for example, those universities that are engaged in sensitive research for
the Department of Defense or have ties to parties on the Entity List. Second, for each prioritized
university, we’re designating a specific local Special Agent to serve as a dedicated point-of contact 
who will offer to hold regular meetings with them. Third, we’ll be offering background
briefings for prioritized universities on known national security threats. And, fourth, we will be
training universities on how to comply with EAR license requirements and implement an Export
Management and Compliance Program, as well as on how to vet potential foreign partners to
determine connections to parties that are on the Entity List or otherwise of concern. By
launching this initiative, we hope to work alongside our great research universities to protect the
innovation driven by professors and students of all nationalities from illicit acquisition attempts
by foreign governments.

At the government-to-government level, the Department of Commerce has been leading
an effort to establish international enforcement partnerships and coordination mechanisms.
Earlier this month, Deputy Secretary Don Graves and I met with European Commission
counterparts to lay the groundwork for an U.S.-EU enforcement cooperation strategy, and the
following week, I met virtually with counterparts from Canada to publicly announce a
strengthened partnership between Export Enforcement and the Canada Border Services Agency.
These efforts are already producing results, including through surges in end-use checks and
coordinated detentions and investigations with our partners in Canada and Europe.

Thanks to President Biden and to Congress, we were provided with supplemental
resources to expand our international partnerships by deploying additional Export Control
Officers. We’ve started by implementing long-term deployments, including at the U.S. Embassy
in Helsinki and the American Institute of Taiwan in Taipei. And, in May, we deployed our first
intelligence analyst abroad. We now have an analyst working side-by-side with the Canada
Border Services Agency to identify illicit reexports through Canada and to speak with Canadian
companies about export compliance. 

So that’s what we’ve been up to so far this year. You can see why I say it’s been such a
busy six months. Now let me talk about what comes next.

It’s my view that our enforcement tools have never been a better match for the global
threat environment than they are right now. Given that, we need to make sure we are using those
tools to their fullest potential. In partnership with our Office of Chief Counsel, we are going to
focus our greatest attention on the most serious violations, by prioritizing the cases that do the
most harm to our national security. That way, we can ensure that we use our finite resources to
maximum effect.

Today, I am announcing four policy changes to help accomplish this prioritization
strategy and strengthen the power of our administrative enforcement tools. These four changes
are laid out in a policy memorandum that I issued earlier today to the entire EE workforce and
that will be publicly available on our newly revamped enforcement website.

First, we will use all of our existing regulatory and statutory authorities to ensure that the
most serious administrative violations trigger commensurately serious penalties. By
aggressively and uniformly applying the existing BIS settlement guidelines, we will ensure that
all appropriate cases are properly deemed “egregious,” which opens the door to more significant
penalties under our regulations. In addition, we will ensure that the existing aggravating penalty
factors are applied more uniformly to escalate penalty amounts where appropriate, which
parallels how mitigating factors are currently applied to reduce penalty amounts. In short, if you
invest in an export compliance program while your competitor flouts the rules to gain an
economic advantage, we are going to aggressively impose penalties on your competitor to create
a level playing field. In addition, by imposing stiff penalties, we want to create a strong
disincentive for those considering circumvention – one that hurts both the pocketbook and
reputation of violators.

Second, in keeping with our goals of ensuring a level playing field and incentivizing
investments in compliance, we are doing away with “no admit, no deny” settlements. We want
companies – and industry generally – to have the opportunity to learn from others and avoid
making the same mistakes. When we enter a resolution, the settling party gets significant credit,
in the form of a reduced penalty. But to earn that reduced penalty, there needs to be an
admission that the underlying factual conduct occurred. That way, others will have a clear sense
of what the company or individual did that got them into trouble and can modify their own
behavior accordingly.

Third, to help clear through pending administrative cases where the violations do not
reflect serious national security harm but do rise above the level of cases warranting a warning
letter or no-action letter, we are going to offer settlement agreements that do not require
monetary penalties. Instead, we will seek to resolve cases by focusing on remediation – through
the imposition of a suspended denial order with certain conditions, such as training and
compliance requirements. Any such resolution will be contingent on the violator’s willingness to
accept responsibility, admit to the conduct, and commit to enhanced compliance measures.

Fourth, we are amending how we process Voluntary Self-Disclosures (VSDs). For those
VSDs involving minor or technical infractions, we will resolve them on a “fast-track” with a
warning letter or no-action letter within 60 days of receipt of a final submission. For those VSDs
that indicate potentially more serious violations, however, we will do a deeper dive to determine
what type of enforcement action may be warranted, while at the same time adhering to the
principle that companies deserve, and will get, significant credit for coming forward voluntarily.
The VSDs that are not fast-tracked will be assigned to a Special Agent and an OCC attorney. In
the most serious cases, the Department of Justice’s Counterintelligence and Export Controls
Section will assign an attorney as well. (As an aside, please know that VSDs to us don’t qualify
you for benefits under DOJ’s VSD program. As their policy makes clear, to qualify for their
program, a company must disclose to DOJ also.) By fast-tracking the minor violations while
assigning specific personnel to the potentially more serious ones, we will be able to use our finite
resources more effectively while also allowing companies that submit more minor VSDs to
receive a quicker turnaround.

These four changes are designed to enhance our administrative enforcement program and
to help make it as effective as possible. While these changes will be applied within our existing
regulatory framework, they do come on top of a fifth change made earlier this month that was
regulatory in nature – a regulatory amendment making charging letters public. So that’s where
we are for now. Depending on how these collective changes play out, we may consider further
ones as well. We are committed to making whatever changes are necessary to maximize the
effectiveness of our administrative enforcement of export violations.

In addition to the export side, I also oversee the Office of Antiboycott Compliance, or
OAC, which has administrative enforcement authority over our antiboycott laws. These laws
prohibit U.S. persons from supporting unsanctioned foreign boycotts against countries friendly to
the United States, such as the Arab League boycott of Israel. Because violations of the
antiboycott regulations cause real harm to the principle of free trade and to our national security
and foreign policy interests, strong enforcement and accountability measures are needed. To that
end, we are reviewing ways to further enhance OAC’s enforcement posture to reflect the
seriousness with which we view antiboycott violations and to discourage U.S. companies, in the
strongest possible terms, from cooperating with any unsanctioned boycott.

More specifically, we are considering revising the EAR to recategorize the relative
seriousness of the various antiboycott violations to better comport with current boycott-related
activity and with OAC’s priorities and practices. In addition, we are evaluating current penalty
levels to determine whether they should be higher – both to sanction those who violate the law
and to deter those who would. And, last, like I announced today with regard to export cases,
we’re considering whether to eliminate “no admit, no deny” settlements in order to incentivize
compliance and strengthen deterrence. I expect to have more to say about where we’ll land on
these questions in the coming weeks.

Thank you again for being here today and for your continued partnership in this effort.
We at BIS don’t do this work alone. All of you who make up the exporting community are on
the frontlines alongside us. And just as your clients and companies rely on you to keep them in 
compliance and out of trouble, so do we. So, thank you for all you do to help ensure our rules
are followed and our sensitive technology kept secure. If the last six months have taught us
anything, it is that all of us must remain vigilant in protecting our democratic principles, our
shared values, and our technology from misappropriation. Thank you.