This post was written by Michael A. Grant.
This post was written by Michael A. Grant.
We've written before on the new sanctions regimes introduced by the EU, UN and the U.S (link to past blog). This is an update on sanctions imposed against Libya and Syria. Attached to this briefing is an updated table of sanctions targets. To view the entire alert please click here.
The last eighteen months have seen numerous new sanctions regimes introduced by the EU, UN and the U.S. Reed Smith has issued a series of Client Alerts already this year as and when new or changed sanctions regimes have been introduced. Amongst the energy and commodity trading and the shipping communities, there has naturally been a heavy focus on Iranian, Ivory Coast and Libyan sanctions. It is important to understand, however, that there are now a whole host of countries facing sanctions from the EU, UN and U.S. Whilst the sanctions position is fast moving, we thought it sensible to draw all of these together in one place.
To view the entire alert please click here.
This post was written by Joelle E.K. Laszlo.
The Export Control Reform Initiative currently underway will transform the cumbersome U.S. export controls regime into a streamlined system featuring a single control list, a single licensing agency, a single information technology system, and a single primary enforcement coordination agency. Until that dream of a reality comes true, the Administration’s serial short- and medium- term changes will have to suffice.
The latest is the Strategic Trade Authorization (“STA”) license exception. Effective immediately, License Exception STA allows for the export, reexport, and in-country transfer of specified goods to “low risk” countries. Specifically, under 15 C.F.R. § 740.20(c)(1), licenses will not be required for exports to any of 36 countries of certain sensitive technologies that are subject to control for any of six reasons (national security, chemical or biological weapons, nuclear nonproliferation, regional stability, crime control and/or significant items). The sensitive technologies eligible for License Exception STA include submersible vehicles, radar systems, source code, and high tech cameras.
Under 15 C.F.R. § 740.20(c)(2), a second group of eight destinations is eligible for export, reexport, and transfer (in-country) of a shorter list of less-sensitive technologies. Specifically, under the this part of the STA license exception, technologies controlled only for national security reasons are eligible for export to Albania, Hong Kong, India, Israel, Malta, Singapore, South Africa, and Taiwan.
The STA license exception applies only to goods for which the Export Administration Regulations (“EAR”) already impose the obligation to receive a license before export, reexport, or transfer (in-country). The license exception is not available for items controlled for other reasons like encryption, short supply, surreptitious listening, missile technology, chemical weapons, and human rights reasons. A user of the STA license exception are required to furnish its consignee with the Export Control Classification Number (“ECCN”) of any items shipped under the exception, maintain written records of shipments, and notify the consignee that the shipment is made pursuant to the license exception. Exporters of software source code must follow separate conditions for STA license exception use that include explicitly notifying the end user, in writing, of the restrictions on further release of the software.
The STA license exception is only a first and a small step in the long reformation process to come, and it may not be among the best. Even if the license exception applies to a given shipment, compliance with its conditions will not going be easy – exporters using the exception must keep thorough records, train employees, and possibly modify business practices. Those able to manage the conditions of License Exception STA, however, will also reap its substantial benefits.
Research and drafting assistance for this post was provided by Reed Smith Summer Associate Julya Vekstein.
This post was written by Joelle E.K. Laszlo.
A relaxation of export controls is not very relaxing when all it really does is shift the majority of the compliance burden from one party to another. But it appears that that will be the result of recent amendments to the International Traffic in Arms Regulations (“ITAR”) regarding transfers of unclassified technical data and defense articles to dual and third-country nationals employed by approved end-users. Under the new rules, U.S. companies will no longer have the responsibility to collect and submit to the State Department’s Directorate of Defense Trade Controls (“DDTC”) certain biographical information about the employees of their foreign business partners, in order to ensure there will be no diversion of unclassified defense articles or controlled technical data to unauthorized countries or entities. Instead, the bulk of anti-diversion tasks will fall to the foreign business partners. Since the U.S. companies in these arrangements will remain responsible for everyone’s ITAR compliance, however, their new role may be one of strenuous oversight of their business partners’ anti-diversion measures.
Under DDTC’s current policy, a U.S. company seeking authorization under the ITAR via a Technical Assistance Agreement or a Manufacturing License Agreement for the transfer of unclassified defense articles and/or technical data to a foreign business partner has typically been required to collect and provide the nationality and country of birth of each of the business partner’s dual- and third-country national employees who will have access to the transferred defense articles, and submit this information with the associated agreement application. (A dual national is a citizen or national of the country of his employer and of another country, neither of which is the United States. A third-country national is a citizen or national of neither the United States nor the country of his employer.) The collection of employee personal data is not required if every individual who will have access to the transferred articles is a national of a NATO or European Union member country, Australia, Japan, New Zealand, or Switzerland. In order to qualify under this exemption, however, the transfer to any national of one of the named countries must take place entirely within the physical territory of the country, or the United States, and the foreign business partner that employs the national must be a signatory to the agreement under which the transfer is made, or must have executed a Non Disclosure Agreement. As noted by commenters to the new rules, the personal data collection required for any proposed transfer of defense articles that doesn’t meet the precise specifications of the exemption imposes a significant administrative burden on U.S. companies, and potentially violates foreign data privacy, labor, and “human rights” laws.
The new rules add an exemption to the current policy, that will permit transfers of unclassified defense articles and technical data to dual and third-country national employees of a foreign business partner (including any corporate or governmental entity or international organization, whether the partner is an end-user, consignee, or sub-licensee) without prior DDTC authorization (and the personal data collection pursuant thereto), provided four conditions are met:
This fourth condition is the one shifts the compliance burden, and there are two ways that it may be met. First, the foreign business partner will be considered to have “effective procedures to prevent diversion” if it has a security clearance for its employees issued by the government of the country in which it operates. Alternatively, a business partner lacking such a clearance must (a) have in place an active “technology security/clearance plan” that includes a process to screen employees for “substantive contacts” with restricted countries and (b) maintain a Non Disclosure Agreement with any employee to whom the defense article is to be transferred. The business partner must keep records of its screening activities for five years, and provide details of its plan and records to DDTC upon request “for civil and criminal law enforcement purposes.”
While the provision equating the foreign business partner’s holding of a general security clearance with “effective procedures to prevent diversion” arguably should lessen the compliance burden for all parties, it also has distinctly limited applicability. Otherwise, the new rules impose a substantial burden on business partners to develop comprehensive plans for employee screening with virtually no guidance about what will make those plans “effective” to prevent diversion. Though the new rules put forward seven kinds of activities constituting “substantive contacts” for which dual and third-country national employees should be screened, the seventh is the very broad “acts otherwise indicating a risk of diversion.” Thus absent further guidance from DDTC, foreign business partners will have to devise their screening plans largely from scratch, and in light of the same data privacy, labor, and “human rights” laws that make compliance with the current policy difficult. Given that they will be held wholly responsible if something goes wrong, U.S. companies will not only want a say in the development of those screening plans, but will have to devise some means of monitoring to ensure that the plans are being followed, and that they are being “effective.” As a result, U.S. companies that wish to take advantage of the new exemption and still meet the obligations of anti-diversion compliance, will also be required to shoulder some of the burdens risk analysis and anti-diversion enforcement.
The new rules will take effect on August 15, 2011. In the meantime, we’ll be watching State closely in anticipation of further guidance.
Research assistance for this post was provided by former Reed Smith Intern Henry R. Barnes.
This post was written by Matthew J. Thomas.
US and EU sanctions continue to escalate on Iran and Syria, catching an ever-broadening group of global targets, as detailed in this latest update. While the EU continues to add dozen of names to its lists of blocked parties, the US today began imposing secondary sanctions on non-Iranian companies that allegedly have provided investment and assistance to Iran's refined petroleum sector.
This post was written by Matthew J. Thomas.
"Have you seen these new Mideast sanctions? I don't think we can go ahead with our contracts there. Can we just cancel them?"
This common dilemma is at the heart of a new Reed Smith Client Alert discussing the application of sanctions-based contract cancellation clauses. Use of such clauses was examined recently by the Court of Appeals of England and Wales in Arash Shipping Enterprises Co. Ltd. v. Groupama Transport, a case involving international shipping, insurance, and new sanctions on Iran.
The alert also gives an update on the latest round of trade sanctions against Syria, both by the US and the EU. Given developments there, we expect the sanctions landscape to continue to evolve.
This post was written by Joelle E.K. Laszlo.
In an effort to update U.S. policy to “enhanc[e] support to allies and friends, improv[e] efficiency in licensing, and reduc[e] unintended consequences,” the State Department (“State” or “the Department”) has proposed to revise the definition of “defense service” in the International Traffic in Arms Regulations (“ITAR”). While the proposed revisions, which are currently up for public comment, provide some helpful streamlining and clarification, providers of these kinds of services are likely to find the changes do not go as far as they would like. Whether State will further modify the definition of “defense service” to accommodate concerns about its breadth is uncertain, given that the Department has already declined some tailoring recommendations offered by the Defense Trade Advisory Group (“DTAG”), the body which coordinates formally with industry on U.S. export policy.
Continue Reading...For everyone out there contracting with the State of California -- here is a quick heads up. Remember way back in 2010 when Congress passed the Comprehensive Iran Sanctions, Accountability, and Divestment Act? Well, it turns out that California has decided to take advantage of the Divestment part. The Iran Contracting Act of 2010 requires the state to create a list of "persons" who "invest" in Iran. If a person makes it onto the list, they are prohibited from contracting or renewing a contract with California state and local governments. Contractors are encouraged to be on the lookout for communication from California indicating that the state plans on listing them. After all, the only evidence needed to list a person is "credible information available to the public."
For more of the fine print, exceptions, and defenses check out this Reed Smith Client Alert.
With all that had been going on in Libya, the US Government has been working to ensure that regulations are not prohibiting the Administration's anti-Gaddafi policy. OFAC recently released some guidance that should ease the burden on those US persons seeking to do business with the anti-Gaddafi regime in eastern Libya. For more information seek this Reed Smith Client Alert.
After reading this article, I will no longer complain while my family gets ready to go out. Unlike the DoD, which spends approximately $31 Billion/year, I’m pretty sure I can't fund a constant state of preparedness.
Howard Sklar does some thinking out loud about the risk/reward for implementing a private sector bribery compliance program under the UK Bribery Act.
Line of the Day (ok -- I know the post is a couple weeks old) goes to Clif Burns at exportlawblog.com: Irish-American musicians can’t go to the Cuban festival because there will be Irish people there (emphasis in original). Thanks OFAC.
Electric car buying … batteries no longer included?
Presenting a new segment I'm calling: It's OK to Laugh.
This post was written by Joelle E.K. Laszlo.
In response to the increasingly grave political, commercial, and humanitarian turmoil that Libya has endured in the recent weeks, the international community has combined forces in an effort to subdue Muammar Qadhafi’s brutal regime. The United Nations Security Council has called its Member States to enact, among other initiatives, trade sanctions targeted against not only Qadhafi and his close associates, but also against the entire Libyan Government.
In affirming this concerted stance against Qadhafi, President Obama put into force an Executive Order Blocking Property and Prohibiting Certain Actions Related to Libya (“the Order”) on February 25, 2011. The Order immediately blocks the assets of and prohibits the provision of goods or services (including humanitarian donations) to: the Libyan Government and its agencies, instrumentalities, and controlled entities; the Central Bank of Libya; and Qadhafi and those closely associated with him. The Order further provides for the blocking of assets of anyone determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be a senior official of the Libyan Government; a child or agent of Qadhafi; a spouse, dependant child, or agent of any of Qadhafi’s children named in the Order; or in any way responsible for or materially involved in “the commission of human rights abuses related to political oppression in Libya.”
On the day the Order was signed, aside from adding the designated Qadhafi family members to the Specially Designated Nationals List (each with a sizeable list of aliases), the Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued a general license authorizing transactions with Libyan Government –owned or –controlled financial institutions organized under the laws of a country other than Libya. On February 26th, the State Department’s Directorate of Defense Trade Controls announced the immediate suspension of all licenses it had issued for exports to Libya, and advised that no exemption in the International Traffic in Arms Regulations may be used to export defense articles and services to Libya until further notice (forthcoming in the Federal Register). Shortly thereafter, OFAC issued a second general license on March 1, 2011 authorizing the provision of and payment for goods and services to Libya’s diplomatic missions to the United States and the United Nations (limited to items to support official business and for employee personal use).
The Order, which actively blocks an estimated $30 billion, was described by the White House as “the most rapid and forceful sanctions” ever, and has already caused considerable commercial backlash. For instance, Morgan Stanley, in complying with the OFAC sanctions, has been left with no alternative but to entirely cease its operations in Libyan oil trade. Other members of the U.S. business community have expressed their concern and continue to seek authorization to provide measures of safety, welfare, and support of their employees and contractors who remain in Libya by paying their salaries and for other routine taxes, fees, benefits, goods and services associated with their employment. As developments with respect to Libya’s political and commercial climate become alarmingly unpredictable, investors and other potential stakeholders should remain aware of the situation at hand and should also exercise a heightened level of prudence, particularly with respect to transactions that may implicate the Libyan government or its agencies, instrumentalities or controlled entities.
Acting alongside the U.S, other nations and coalitions have recently demonstrated their united opposition against Qadhafi with sanctions of their own. A Reed Smith Shipping Alert addressing the measures taken by the U.S., the United Nations, and the European Union is available here.
This post was co-authored by Reed Smith Intern Henry R. Barnes.
This post was written by Anne E. Borkovic.
As everyone can cite, the Foreign Corrupt Practices Act (“FCPA”) in part prohibits offering or providing anything of value to a foreign official to obtain or retain business. But what does that mean in practice? Two federal courts are grappling with defining “foreign official” and, in turn, whether the prosecution can establish all the elements of a violation.
In U.S. v. Stuart Carson et al., defendants moved to dismiss and argued that the officers and employees of state-owned companies are not “foreign officials” because the companies are not instrumentalities, departments, or agencies of the foreign government. The FCPA Professor Mike Koehler filed a declaration in support of the motion, detailing the legislative history of the FCPA and the “foreign official” element. A hearing on the motion is set for March 21.
In U.S. v. Enrique Faustino Aguilar, defendants also moved to dismiss under the same argument and have asked the judge to take judicial notice of the Carson declaration.
Of course, we will keep you apprised of developments as the Courts decide this important issue.
This post was written by Matthew J. Thomas.
The US Federal Maritime Commission (FMC), which regulates US international ocean shipping services, has made life easier for thousands of logistics companies and their import/export customers.
The FMC regulates a broad range of “ocean transportation intermediaries,” the logistics providers and forwarders who connect importers and exporters with global shipping lines. Many of these (called “non-vessel-operating common carriers or “NVOCCs” ) act as resellers of ocean transportation services. NVOCCs buy space in bulk from vessel operators, then resell it, often bundled with additional services, to manufacturers and retailers.
On February 16th the FMC announced a plan to waive longstanding requirements that licensed NVOCCs publish their pricing in public freight tariffs and file all individual customer contracts with the FMC. Cutting these anachronistic filing rules will help over 3300 companies, according to the FMC, and should help encourage more individualized negotiations for international transportation solutions. The changes should take effect later this spring, but logistics companies still will need to comply with FMC licensing, bonding and recordkeeping rules.
The FMC cited the White House’s latest mandate for agencies to review rules and reduce burdens, set out in President Obama’s January 18, 2011 Executive Order 13563, and signaled a willingness to consider further cuts.
Hopefully the FMC’s zeal for streamlining will be contagious, given the rigorous regulatory landscape for logistics providers. Companies providing integrated supply chain solutions must navigate an impressive array of agencies, including the FMC, the Department of Transportation (air freight forwarding), Federal Motor Carrier Safety Administration (motor carrier forwarding and broking), Transportation Security Administration (facility security) and Customs and Border Protection (carrier bonding and manifest filing). With additional requirements and regulators for dual-use goods, arms, food, drugs, and hazardous materials, compliance planning quickly becomes an exceptionally sophisticated undertaking.
With a title like "Tactical Secrets" I was expecting a insiders look into fly fishing for Steelhead trout . But then I realized I was reading the New York Times. Instead, this piece addresses the government's assertion of the state-secrets privilege in General Dynamics Corp v. US.
Déjà vu all over again. Nick Silver compares the political landscape that President Clinton faced with the current congressional make up now facing President Obama.
When blogs reference other blogs, we here in the Round Up office get excited. Howard Sklar at Open Air Blog explains why he disagrees with the FCPA Professor and Alexandra Wrange (of TRACE) over the impact of the UK Bribery Act.
Sudan Watch: With referendum results showing overwhelming support for secession, Khartoum is calling for an end to the US embargo. In news that should surprise absolutely no one, the US has decided to wait and see.
The National Institute of Standards and Technology has issued new guidelines for cloud computing. If "safeguarding data in the public cloud" is something you are in to, or have no idea what it means, you may want to read this.
This post was written Christopher B. Monahan.
The new Form I-129 has highlighted the restrictions on deemed exports of technology to foreign national employees. Originally effective December 23, 2010, the new form requires employers to certify that they will not "release" controlled technology or data to an H-1B, L-1 or O-1 worker without the appropriate "export license," if one is required. Technology or data can be controlled for export purposes under either the Export Administration Regulations (“EAR”) or the International Traffic in Arms Regulations (“ITAR”). Both the EAR and the ITAR already prohibit the unauthorized disclosure of controlled technical data to foreign persons. U.S. Citizenship and Immigration Services’ (“USCIS”) new form will now require employers to certify that they are acting in compliance with the current law.
The ITAR and EAR are complex and classification can be burdensome depending on the technology involved, the available resources to devote to the project, and the IT issues in identifying and segregating the data. Restrictions on disclosure of controlled data to foreign persons apply even if the technology is not shared outside of the United States and even if the employer does not do any international business.
Due to the concerns and questions raised about the new Form I-129, USCIS has postponed the new form’s requirement that employers certify that they will not release controlled technical data. Employers will not have to complete the portion of the form requiring the certification until February 20, 2011.
This post was written by Joelle E.K. Laszlo.
While it’s usually good to be the first to do something in Hollywood, it is decidedly not good when that something is violate the Foreign Corrupt Practices Act (“FCPA”). Former power couple Gerald and Patricia Green are learning that lesson the hard way, as they spend the holidays and beyond in Federal prison. Though the Greens and the Government are appealing the six-month sentences handed down in August, it’s safe to say the Greens’ post-conviction lifestyle won’t come close to matching what it was before.
The Greens were originally indicted in January 2008 for bribing the former governor of the Tourism Authority of Thailand (“TAT”) in exchange for contracts to operate and manage the annual Bangkok International Film Festival (“BIFF”) from 2002 through 2007. In October 2008 the plot thickened as a superseding indictment added bribery charges related to several other TAT tourism programs. In all, and among other things, the Greens were accused of violating the FCPA ten times, ultimately paying out $1.8 million to generate nearly $14 million in revenue. In September 2009 a Los Angeles jury found the Greens guilty of nine FCPA violations and nearly all of the other charges against them.
Sentencing of the Greens was postponed numerous times over several months, as both sides battled to sway the court’s final act. The Justice Department, arguing that FCPA defendants who do not plead guilty or otherwise cooperate with the Government generally receive stricter sentences, asked for ten years in prison for each Green. Defense counsel requested five years’ probation, noting both that Mr. Green suffers from emphysema and that the BIFF generated substantial revenue for Thailand and its people, and thus there were no real victims from the Greens’ actions. After a final lengthy hearing, in August 2010 the Greens were sentenced to six months in prison each, followed by six months of home confinement.
Though the Greens’ prison sentences are some of the lightest ever received by FCPA defendants, there is no Hollywood ending to their story. Under a forfeiture agreement approved along with their sentences, each Green personally owes the Government nearly $1.05 million and any amount of their production company’s pension that can be traced to their offenses. The Justice Department intends to seize and sell a home owned by Mrs. Green to satisfy the judgment. And unable to muster any more funds for his defense, Mr. Green will be represented in his sentencing appeal by a court-appointed attorney. Thus the Greens’ saga is not really fodder for a future blockbuster, or even a movie of the week, though it may make for a good public service announcement on complying with the FCPA.
Around this time of year many people look forward to the ringing of bells. Bryan Rahija wants your help in ensuring that we have year-round blowing of the whistles.
If the estate tax was called the death tax, would we all try to live a little healthier? (It’s the holidays – I'll make and break my resolutions in a few weeks). Regardless of its title, the tax is on the table. So what should congress do about it?
As a child, my parents coerced my siblings and I to get along through the promise of presents from Santa. Turns out FCPA violators who play nice with the DOJ may be able to secure a present of their own: a Non-Prosecution Agreement.
Holiday takeaways: good = presents; bad = coal; Microsoft engineer who attempts to export ITAR controlled goods to China = criminal complaint.
On Monday, December 6, in an effort to run some names against the SDN list, I headed over to OFAC’s website. Much to my surprise I discovered that the Treasury Department had unveiled its newly designed website. To make things even more serendipitous, I stumbled across the Treasury blog. The first post is penned by the one and only Tim Geithner, with the second post highlighting some of the new features. One of the features is the highly anticipated automated Trade Sanctions Reform Act application (commonly referred to as Ag-Med) for licensing exports of agricultural and medical goods to Iran and Sudan. OFAC indicated at BIS Update that they invested significant amounts of time into the process and we hope it will help speed up the application review times.
Rest assured loyal OFAC fans, you can still find all the same information as before but now in a more “user friendly” format. Spend a few minutes learning your way around. If nothing else, the government will like the increased traffic.
I bet you think pretty highly of yourself. I know I do … come on, I’m a lawyer! (Please insert stereotypical lawyer joke here – put a good one in the comments if you dare). From time to time, I’m “gently” reminded that not all of my accomplishments are oh-so noteworthy. As my brother used to say after I would regale him with some of my more humdrum endeavors: “what do you want, a cookie?” It looks like I’m not the one in search of a cookie.
As the great state of Wisconsin bids farewell to Russ Feingold, the rest of us begin to say goodbye to the legislation he is most known for.
When I think of auditors, the first thing I think of (after the Grim Reaper) is efficiency. So why then is the Defense Contract Audit Agency amending its procedures in a way that “could expose the government to massive overcharges by prime contractors?”
Interested in potentially saving millions of dollars? Yep, I thought so. Now lets play: Follow the Blogosphere Link Machine. This post is my reference to the FCPA Blog’s reference to an article written by Andrew Weissmann and Alixandra Smith discussing the potential for substantive FCPA revision.
This post was written by Michael A. Grant.
Hello good-looking regulatory attorneys. Welcome to the first installment of the Regulatory Round-up (catchy, I know). If you are reading this post, odds are someone in an office larger than yours is wondering why you aren't working -- but I'm glad you stopped by. The goal of this weekly installment will be to connect you to stories from around the blogosphere that impact those of us practicing in regulated industries. While the primary focus of the Round-up (look, I already gave it a trendy nickname) will be the 7 topics to the left, I'll be sure to mix in other stories that catch the eye. Here's hoping you see something new, have a laugh, or at least get some legitimate "professional reading" time.
This post was written by Anne Borkovic.
After months of intense global negotiations, and facing increased sanctions from the United States, the EU, and the United Nations, what is life like in Iran? As expected, Iranians are experiencing increased gas prices, and the Iranian Revolutionary Guard is having some financing difficulties. Some of the more interesting effects, though, are the ban on mullets and fatwa against puppies.
In July, Iran’s Ministry of Culture and Islamic Guidance announced a ban on certain “decadent Western” hair styles for men, including the mullet. The full catalog of acceptable styles was presented at the Modesty and Veil Festival. Some interesting concessions were made – including allowing a modest amount of hair gel and a goatee – but mullets, pony tails, and elaborate spikes are out.
This past week, the Ministry announced a ban on advertising that promotes pets, pet care, and pet food in response to a June fatwa against pets from Ayatollah Shirazi, because pet owners were “blindly imitating the West.” He explained that “Many people in the West love their dogs more than their wives and children,” and that the devotion to pets would result in “evil outcomes.”
While it is unclear whether the ban on mullets and puppy food advertising will change Iran’s stance regarding nuclear power, we are interested to see what the Ministry will do in response to the June announcement from prayer leader Hojjat ol-eslam Kazem Sediqi that "Many women who do not dress modestly lead young men astray and spread adultery in society which increases earthquakes.”
This post was written by Leigh Hansson and Chris Monahan.
The U.S. State Department spent a little ink in the Federal Register earlier this month in an attempt to get green in the 21st century. On August 4, 2010, the State Department, Directorate of Defense Trade Controls, or DDTC, announced a final rule requiring the electronic submission of requests for Commodity Jurisdiction Determinations, or CJs. Companies submit a CJ if they have doubts as to whether an article or service is covered by the U.S. Munitions List, or if they want to request consideration of a redesignation of an article or service currently covered by the U.S. Munitions List.
In a stunning departure for the federal government, the State Department developed and issued a new form for CJs. All kidding aside, this new wrinkle in State Department bureaucracy should be a welcome change for most companies interacting with the agency for a few reasons.
The new CJ form is a more environmentally responsible alternative to the old method that required companies to submit seven collated sets of their request and the supporting documentation. In addition to removing the need for all those copies, the new CJ request form must be submitted electronically as of September 2, 2010.
Applicants will not be required to use the DTRADE system and will also not be required to register with DDTC, as some had feared prior to the new rule. Instead, DDTC has created what appears to be a simple and less-burdensome alternative to the old CJ process. Applicants now download the form, scan and attach necessary supporting documents, and submit everything using an open net, web-based application system. DDTC has posted instructions as well as links here.
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This post was written by Michael Grant.
The U.S. State Department’s DDTC (Directorate of Defense Trade Controls) has finally joined the green revolution. Whether this move should be construed as the State Department’s support of a healthier planet, an attempt to limit the potential for loss of sensitive documents, or an effort to deprive the legal community of its paper obsession, we may never know. What we can be sure of is that beginning September 1, 2010, DDTC’s licensing division will no longer accept certain unclassified paper agreements. See DDTC’s announcement here.
Technical Assistance Agreements, Manufacturing License Agreements, Warehouse Distribution Agreements, and major amendments thereto, as of September 1, 2010, must be submitted through use of the form DSP-5 via D-Trade 2. For those of you unfamiliar with the requirements for electronically submitted TAAs, MLAs, and WDAs, rest assured your government has an answer for you: stop by the DDTC Agreement Guidelines Section and check out the third PDF. It will provide you with a little light reading (165 pages) covering everything you need to know about electronically filing these agreements.
This post was written by Anne Borkovic.
Who knew that gecko was mixed up with such unsavory characters? On June 3, 2010, the U.S. Treasury, Office of Foreign Assets Control (“OFAC”) announced that GEICO General Insurance Company paid $11,000 to settle allegations that, from approximately September 2006 to June 2007, it provided a car insurance policy to an individual listed on the Specially Designated Nationals (“SDN”) List as a narcotics kingpin. The alleged violations involved premium payments totaling $2,265. OFAC’s brief announcement specifies that the settlement amount reflects OFAC’s consideration that GEICO screens its customers against a version of the SDN List updated only annually, but is taking measures to improve its procedures.
The announcement also specifies that the base penalty for the alleged violations was $11,000. This combined with the penalty calculation procedures in OFAC’s penalty guidelines indirectly confirms that the case was likely not voluntarily disclosed. The imposition of a base penalty also indirectly confirms that OFAC did not pursue egregious or “willful” violation penalties in this case. However, it also indicates that OFAC considered the case significant enough to pursue a monetary penalty rather than only issue a cautionary letter or formal finding of a violation.
Many companies struggle with the need to screen customers against the continually-updated SDN List, as well as the Denied Parties, Unverified, Entity, and Debarred Lists. Companies with more standard business models – order placement, shipment, -- can take advantage of screening software, including automatic updates of the lists and friendly interfaces, to screen each order for shipment. However, many companies have such a high volume of customers, international locations, and non-traditional structures, that even implementing a procedure to use the software would require significant changes to the business process.
Unfortunately, even with robust processes, there are no safe harbors available for screening transactions to ensure that the customer is not included on a list. The GEICO enforcement action demonstrates that even one slip in the screening can result in an administrative investigation and civil money penalty. It also shows that OFAC is willing to undertake enforcement actions in industries with less traditional distribution models.
This post was written by Leigh Hansson and Michael Grant.
On July 1, 2010, President Barack Obama, preceded by Congressional voting signaling overwhelming support, signed into law the Comprehensive Iran Sanctions Accountability and Divestment Act ("Act"). The Act is an effort by the United States to hinder what appears to be Iran's intent to develop nuclear weapons. Action by the United States comes at a time when several countries are modifying their sanction policies in response to Iran's actions. In recent weeks, the United Nations, the European Union, and the United Kingdom, among others, have all enacted resolutions or sanctions directed at Iran. While many elements of the Act must be implemented by regulations, and are therefore unknown at this time, this article summarizes the major changes that are now known.
To view the entire alert, please click here.
This post was written by Paul Skeet, Dan Gallagher, and Leigh Hansson.
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This post was written by Hugh Scogin, Mao Rong, and Zack Dong.
In November 2009, the Ministry of Science and Technology, the National Development and Reform Commission and the Ministry of Finance jointly issued Notice No. 618, requiring enterprises registered in China to apply for accreditation of indigenous innovation products. The program would have provided the Ministry of Science and Technology with authorization to prioritize accredited products for government procurement. Of particular interest to foreign enterprises were requirements that an applicant's use, disposal and improvements to a relevant product's intellectual property (IP) must not be subject to foreign restrictions, while any trademark used would first require registration in China and would also need to be free of restrictions from any related foreign brands. Under this program, foreign-invested companies whose products are not locally developed would not be able to participate equally with their Chinese competitors in government procurement unless they agreed to take the risk of removing licensing restrictions from their IP. In response to the notice, foreign associations and business leaders expressed concern that the system promoted domestic favoritism and would potentially result in discriminatory requirements for companies looking to take part in the government procurement market, while also restricting the capacity for innovation and development in China.
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This post was written by Leigh Hansson, Michael Lowell, Michael Grant, and Anne Borkovic.
The United States Congress is currently considering legislation that would increase the scope and application of the U.S. sanctions against Iran: The Comprehensive Iran Sanctions, Accountability and Divestment Act of 2009 (S. 2799) and the Iran Refined Petroleum Sanctions Act of 2009 (H.R. 2194). These changes could significantly impact the ability of non-U.S. companies to do business with both Iran and the United States. This article summarizes the proposals under consideration and highlights key provisions that could affect the international operations of European companies.
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