“Let This Be a Warning”: BIS Threatens Denial Order for Substandard Corporate Compliance

This week, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) imposed a three-year denial order against a Portland, Oregon-based package forwarding company, USGoBuy LLC (USGoBuy). The denial order prohibits USGoBuy from participating in all exports from the United States under BIS jurisdiction for a period of three years. Not only is the denial order likely to have damaging effects on the company itself, whose business centers around exports, it also serves as a clear warning to similarly situated companies that BIS is carefully scrutinizing companies’ export compliance efforts. In BIS’ press release announcing the denial order, Assistant Secretary for Export Enforcement Matthew S. Axelrod cautioned, “Let this denial order serve as a warning: if you don’t follow the terms of our administrative settlement and you lack a robust compliance department, you may lose the ability to export at all.”

According to the denial order, USGoBuy serves as an intermediary for exports by non-U.S. based customers who purchase items online from U.S. retailers. Non-U.S. based customers can ship those items to USGoBuy’s warehouse in Oregon, and USGoBuy then consolidates and re-packages the items for export from the United States. USGoBuy also purchases and exports U.S.-origin items itself on behalf of non-U.S. customers through a service called “BuyForMe.”

This week’s denial order stems from USGoBuy’s failure to adhere to a 2021 settlement agreement and order relating to an enforcement action against USGoBuy for its export of riflescopes in violation of the Export Administration Regulations (EAR). Under the terms of the settlement agreement and order, USGoBuy was required to pay a civil penalty and to undergo an Export Compliance Audit. The order imposed a three-year denial of USGoBuy’s export privileges, but the denial was suspended pursuant to the probationary conditions. BIS could activate the denial order if USGoBuy failed to comply with the agreed-upon settlement — which it did just this week, almost exactly three years after the order was issued.

In its denial order, BIS maintained that USGoBuy had failed to implement appropriate corrective action and had committed additional EAR violations during the probationary period. The Export Compliance Audit, according to BIS, identified significant, continued deficiencies in USGoBuy’s export compliance program, which USGoBuy failed to remediate through corrective action as required by the settlement agreement and order. BIS’ denial order also noted that, in response to a notice letter issued by BIS regarding the deficiencies, USGoBuy explained that it had recently implemented certain compliance enhancements. However, BIS found that such enhancements “[did] not appear reasonably designed to address the Company’s past violations or to identify and prevent future potential misconduct.”

Denial orders are one of the most drastic actions BIS can take in response to export controls violations. BIS’ denial order signals, not just to freight forwarders but to industry at large, that BIS takes seriously companies’ commitments under settlement agreements, particularly as they pertain to strengthening export compliance programs.

For questions about export controls or sanctions matters, contact the authors or any of their colleagues in Arnold & Porter’s White Collar Defense & Investigations or Export Control & Sanctions practice groups.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.