Security and political relationships have long had a direct bearing on commerce. [Firm] is deeply experienced in representing both U.S. and foreign interests at this intersection of commerce and national security.
With expertise in international economic sanctions imposed under the Office of Foreign Assets Control (OFAC) regulations and export controls restricting both dual-use items under the Export Administration Regulations (EAR) and defense articles and services under the International Traffic in Arms Regulations (ITAR), the firm helped U.S. and foreign manufacturing and technology firms seeking export licenses for products and services in many industries including transportation,
[Firm] provides clients with wider international market access by guiding them through the U.S. government’s complex regulations and policy deliberation processes and securing licenses for them to operate in restricted markets consistent with U.S. law.
We also design and implement compliance programs that prevent problems from arising and mitigate potential liabilities by helping our clients to avoid running afoul of:
U.S. Economic Sanctions and Embargoes
U.S. economic sanctions are imposed for a variety of reasons and take various forms but are generally targeted at foreign countries as well as individuals, banks and other organizations or entities that may be involved in activities that oppose U.S. national security interests and foreign policy objectives. In some cases, such sanctions restrict dealings with all nationals of specified countries as well as any person or organization that is “specially designated” as acting on behalf of the specified countries (e.g., Cuba, and Iran). Increasingly, however, sanctions are more narrowly drawn in order to target particular groups such as “Narcotics Kingpins” or “Foreign Terrorist Organizations” or “Senior Officials of the Government of X.”
The restrictions are spelled out in the Office of Foreign Assets Control Regulations (OFACR), which are based upon the statutory authority contained in a number of laws, including:
The Office of Foreign Asset Controls (OFAC) is the principal agency responsible for implementing, administering, and enforcing U.S. economic sanctions, although OFAC relies on the Commerce Department’s Bureau of Industry and Security (BIS) to administer some parts of the economic sanctions programs and relies on the Justice Department in the context of criminal prosecutions. Other agencies are involved in the policy considerations associated with export license applications such as the Department of State, Defense, and Energy.
Because these laws are subject to frequent changes and impose very different restrictions on transactions with different countries and entities, U.S. companies and persons engaged in international commerce must exercise considerable care to ensure that they neither directly engage in any transaction nor indirectly facilitate any transactions by foreign persons if those transactions would run afoul of these complicated and shifting laws.
Violations of these sanctions programs may result in heavy penalties, both civil and criminal, including up to 20 years in prison for individuals or $1 million dollars for corporations.
U.S. Export Controls
Export Controls on Defense Articles, Services, and Technologies
Military related products, services and technologies are defined by the U.S. Munitions List (USML) and export of these items are controlled under the International Traffic in Arms Regulations (ITAR) and Arms Export Control Act (AECA). The State Department’s Directorate of Defense Trade Controls (DDTC) administers these export controls in coordination with the Defense Department’s Defense Technology Security Administration (DTSA), as well as the Departments of Justice, Energy and Commerce. Controls on USML listed defense articles, services, and technologies are very strict and violations carry potentially severe penalties, both civil and criminal.
[Firm] assists both U.S. and foreign entities in meeting their registration and licensing obligations under these laws, whether manufacturing, exporting, or acquiring companies and technologies covered by the USML.
Export Controls on Dual-Use Items
Dual-use items (i.e., items useful in both a military and commercial context) and related software and technologies that are subject to export controls are set forth in the Commerce Control List (CCL) and the restrictions are described in the Export Administration Regulations (EAR). The Department of Commerce, Bureau of Industry and Security (BIS) (formerly known as the Bureau of Export Administration or BXA) administers the EAR and coordinates its decisions with the Departments of State, Defense, Energy and other agencies as appropriate. Export restrictions on dual-use items also are rigorously enforced and violations can incur heavy penalties, both civil and criminal.
The Bureau of Industry and Security (BIS) in the U.S. Commerce Department and the International Revenue Service (IRS) in the Treasury Department each administer and enforce regulations that prohibit or penalize cooperation with any foreign country’s economic boycott that is not supported by the United States (e.g., the Arab boycott of Israel). The “anti-boycott” laws were adopted to encourage U.S. firms to refuse to participate in foreign boycotts.
The Arab League boycott of Israel is the principal foreign economic boycott that U.S. companies must be concerned with today. The anti-boycott laws, however, apply to all boycotts imposed by foreign countries that are unsanctioned by the United States.
The two statutes that implement the anit-boycott laws were first adopted in the 1977 amendments to the Export Administration Act (EAA – Note: the EAA has lapsed but its provisions are kept in force under the International Emergency Economic Powers Act (IEEPA)) and the Ribicoff Amendment to the 1976 Tax Reform (TRA).
Conduct that may be penalized under the TRA and/or prohibited under the EAA includes:
The tax related aspects of the anti-boycott laws under the TRA do not “prohibit” conduct, but do impose reporting duties on companies operating in certain countries and deny tax benefits to (“penalizes”) companies for certain types of boycott-related agreements.
These regulatory regines impose complex reporting requirements and often counter-intuitive restrictions on U.S. persons, companies, and foreign subsidiaries and affiliates – especially those in certain Middle Eastern countries. The regulations subject companies doing business in certain countries to strict deadlines and violations of the rules or failures to make timely reports can expose U.S. companies to penalties and adverse publicity.
[Firm] advises clients on the anti-boycott requirements of both the Commerce Department (BIS) and Treasury Department (IRS) and provides comprehensive assistance on the regulatory prohibitions, tax penalties, reporting obligations, and compliance with the requirements of the anti-boycott programs. We also assist clients with internal compliance reviews, and audits initiated by the BIS or the IRS, as well as enforcement proceedings. We regularly monitor developments in this and related areas of the law to ensure that our clients’ maintain compliance programs that address the current state of the law and government enforcement priorities.
Foreign Corrupt Practices Act (“FCPA”)
The U.S. Foreign Corrupt Practices Act (FCPA) prohibits payments to foreign officials with the aim of securing or maintaining business. The U.S. Department of Justice is the primary enforcement agency of the FCPA but the Securities and Exchange Commission (SEC) also may bring a civil action to enjoin any act or practice of a firm if it appears that the firm is violating the anti-bribery provisions of the FCPA. The U.S. Department of Commerce also has a role providing guidance to U.S. exporters regarding FCPA compliance.
Because the fines can be very high for violations of the FCPA, and because the Act explicitly provides that U.S. persons and companies can be held liable for the acts of their representatives if they have reason to know that the representatives are making bribes on their behalf, the FCPA forces U.S. directors, officers, and managers to exercise great care when contracting with foreign consultants, representatives, or joint venture partners for any work that might involve external interfaces on their behalf. U.S. persons and companies should perform due diligence on such representatives before entering into contracts and relationships that could result in improper offers to foreign officials.
Criminal violations of the FCPA can result in companies facing fines up to $2 million per violation and individuals facing fines up to $100,000 and up to five years in jail. Note that fines imposed on individuals may not be paid by their employer or principal. Moreover, under the Alternative Fines Act, these fines may be actually much higher — the actual fine may be up to twice the benefit that the defendant sought to obtain by making the corrupt payment.