Gov't May Be Issuing More Export Control-Related Subpoenas, Industry Lawyer Says

Ashley Craig, a Venable lawyer and the legal counsel for the National Customs Brokers & Forwarders Association of America, said he has recently seen “increased activity by way of administrative subpoenas.” Those subpoenas haven’t necessarily been directed at forwarders or other shipping intermediaries, but forwarders often risk getting “pulled into the crossfire” if they’re helping to move an export that potentially violates export regulations, Craig said during the NCBFAA’s annual conference in Arizona.

Both Commerce Secretary Howard Lutnick (see 2503180041) and BIS Undersecretary Jeffrey Kessler (see 2503280039) recently said they want to significantly increase penalties against companies that violate export controls, particularly against China.

“Hearing from the secretary on down, it does seem that enforcement is here,” Craig said. “The message from Secretary Lutnick is, we're going to do our job,” and the “focus seems to be on China, technology tech transfer, [artificial intelligence], semiconductors, etc.”

Craig also said the government is increasingly expecting companies to screen all their transactions against people or entities added to restricted party lists. He noted that those lists are constantly growing, which “obviously can impact a transaction,” including for forwarders.

“We can tell you stories of sitting across the table at Commerce and trying to argue on behalf of an intermediary why there should be leniency in mitigation” of a possible penalty, Craig said. He said the government often responds by saying: “You're the last line of defense here, and we're going to hold you to a higher standard.”

Screening against government lists, including the Entity List, has become more challenging for some companies after BIS last year began adding address-only entries, instead of company names, to the Entity List (see 2406180033 and 2501300064). Donna Kavanaugh, the chair of NCBFAA’s export compliance subcommittee, said companies using screening software should review that software to make sure it’s flagging matches to addresses.

Some software programs “have different weights, and you can change the settings to put more weight on a company name versus just an address,” she said during the conference. “So I just encourage everyone here to just be mindful of that and make sure that you're checking that.”

Craig also said companies should make sure they’re watching for red flags around transactions that could signal a counterparty is looking to violate U.S. export controls. “You probably would not be surprised at how many transactions flow when these red flags are there, and for a variety of reasons, the export moves and complications resolve later on,” he said.

Kim Calicott, chair of the NCBFAA’s Transportation Committee, said most trade compliance professionals can “see a red flag from a mile away,” but those flags may not be as obvious to other employees handling exports. The company’s compliance department should speak with those employees so they know “what to look out for” and who to contact if they see a possible red flag, Calicott said during the NCBFAA conference. “It's important to make sure that the people that are handling the shipments day-to-day understand the red flags.”

Calicott also briefly touched on the ongoing BIS export license pause. She said forwarders with customers who regularly ship licensed exports should let those customers know that “there could potentially be issues and that they may want to think about their sales,” speak with BIS or just be aware about licensing delays.

BIS licensing officers were ordered in February to pause license approvals, and the agency partially lifted the pause toward the end of the month (see 2502130068, 2502280006 and 2503060013). Licensing officers were again told in late March to not approve licenses or refer applications to other U.S. agencies as BIS senior leadership reviews those licenses (see 2504020051).