• Russian corporations de-listed through significant specific steps agreed to with OFAC
  • Exporter settles for $7.7 million and agrees to comprehensive compliance measures
  • OFAC outlines sanctions compliance best practices, expands oversight

As 2018 came to a close, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) announced two actions that should be studied by any party subject to U.S. economic sanctions. OFAC is the U.S. government agency with principal responsibility for administering U.S. sanctions regulations.

First, on December 19, OFAC published a letter to members of the U.S. Congress announcing the agency’s intention to remove a group of Russian corporations from the List of Specially Designated and Blocked Persons List (SDN List) that OFAC maintains. As a general matter, U.S. individuals and entities are prohibited from engaging in any transaction with an SDN.

Then, on December 20, OFAC released its settlement agreement with Zoltek Companies, Inc. (Zoltek) for violations of the Belarus Sanctions Regulations. According to OFAC, the violations consisted of at least 26 transactions with an SDN.

These actions are quite different. But as described below, each includes very useful guidance about OFAC’s current view of sanctions compliance best practices. Continue Reading OFAC Actions Provide Guidance on Sanctions Compliance Best Practices

  • Penalties imposed for violations of U.S. sanctions on Russia and Ukraine
  • Violations identified during pre-acquisition due diligence on contractor
  • Denied persons screening was conducted but missed prohibited parties

In late November 2018, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) announced that Cobham Holdings, Inc. agreed to pay $87,507 to settle violations of U.S. sanctions on Ukraine and Russia.

Violations Identified During Pre-acquisition Due Diligence

According to OFAC, the violations were committed by Cobham’s former subsidiary, Metelics, prior to the sale of Metelics to MACOM. It was MACOM that identified the violations during due diligence related to its acquisition of Metelics. And it was presumably MACOM that required Cobham to make the voluntary disclosure to OFAC that led to the penalty in this matter.

The penalty is small by recent OFAC standards. (For example, it is about 620 times less than Societe Generale paid to OFAC as part of its global settlement of sanctions violations.)

But as a cautionary tale, the Cobham matter is important to any exporter.

Continue Reading OFAC Dings U.S. Defense Contractor for Sanctions Violations, Inadequate Screening

I provided insight on the Export Control Reform Act – a law passed in August 2018 that will limit exports of some emerging technologies to curb national security threats and espionage. Some technology groups fear that the Commerce Department, which regulates most U.S. exports, will too broadly define which emerging technologies should be covered by the law. As I noted, this could result in “a more onerous review process for non-U.S. parties that seek to invest in these technologies.”

The full article, “Tech Giants Worry Commerce Going Too Far to Block China Exports,” was published by Bloomberg Law on December 10, 2018, and is available online (subscription required).

I recently provided insight for a Bloomberg Law article on the new interim rules implementing the Foreign Investment Risk Review Modernization Act (FIRRMA). The interim rules, which went into effect on November 10, broaden the authority of the Committee of Foreign Investment of the United States (CFIUS) – an interagency committee that reviews foreign investments in U.S. companies that could impact national security.

To implement the new interim rules, CFIUS is establishing a pilot program to carry out new requirements for foreign parties making investments, including non-controlling investments, in U.S. businesses involved in 27 explicitly designated industries that develop “critical technology.”

The Treasury Department imposed “pretty stringent, broad rules,” I explained. “The potential penalties are substantial, and the breadth of [covered] industries is pretty significant too. They could have limited it to a smaller subsection of industries.”

The full article, “CFIUS Review Law Sends ‘Critical’ Tech Companies Scrambling,” was published by Bloomberg Law on November 12, 2018, and is available online. Click here to read an earlier post on this blog further detailing the CFIUS pilot program.

On November 7, 2018, Global Trade Magazine republished a blog post that I wrote discussing recent changes to U.S. law that further restrict trade with individuals and entities in Russia. The changes further complicate an already-difficult situation for businesses working in and with the country.

You may access the original September 27 blog post on the Government Contracts and International Trade blog website. You may also access the full article, “Update on Russia: Restrictions Expanded to New Actors, Industries,” on the Global Trade Magazine website.

  • Economic sanctions and export restrictions extended
  • Russian investment in United States likely subject to heightened scrutiny
  • Diligence on Russia transactions and business partners is essential to ensure compliance

Since the beginning of August 2018, the United States has taken multiple actions that will affect U.S. trade with Russia.  The actions cover exports to Russia, doing business with Russian partners, and potential Russian investment in the United States.  These actions have added to the already challenging landscape of conducting business in and with Russia.

Economic Sanctions in Place Since 2014 Are Expanded Again

The United States has maintained targeted economic sanctions on Russia since 2014.  Most of these sanctions are administered by the U.S. Treasury Department, Office of Foreign Assets Control (OFAC).

These sanctions ensnare many prominent Russian individuals and entities.  They have also ensnared prominent U.S. companies: see our July 2017 blog post on penalties imposed against Exxon for Russia sanctions violations.  For an example of how sanctions have been periodically and consistently extended, see our September 2016 blog post.

Continue Reading Update on Russia: Restrictions Expanded to New Actors, Industries

  • Ericsson Caused Violation by Having U.S. Party Ship Equipment to Sudan
  • U.S. Employee Facilitated Sudan Business
  • OFAC Expects Parties Conducting International Business to Have Robust Compliance Processes

In June 2018, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) announced that Ericsson, a Swedish telecommunications company, agreed to pay approximately $145,000 for violating U.S. sanctions on Sudan.  Among other things, this is one of the few OFAC enforcement actions explicitly premised on a non-U.S. actor causing a U.S. company to violate U.S. sanctions.

Continue Reading Swedish Telecom Company Pays Penalty for Sanctions Violation

  •  Previously permissible activities must be wound down in 90 or 180 days
  • Non-U.S. companies at particular risk of enforcement action
  • Only limited guidance issued so far, unclear what authority U.S. companies have

On May 8, 2018, President Trump announced that the United States is leaving the Joint Comprehensive Plan of Action (JCPOA).  The U.S. Treasury, Office of Foreign Assets Control (OFAC), which administers most U.S. economic sanctions programs, has taken an initial stab at providing guidance in a set of Frequently Asked Questions (FAQs) released the same day as the President’s announcement.

Continue Reading President Snaps Iran Sanctions Back

  • 7-year denial order imposed against Chinese telecommunications equipment maker
  • Denial order strictly limits business with company
  • Action comes as U.S. imposes other trade restrictions on China

On April 16, U.S. Commerce Secretary Wilbur Ross announced a seven-year denial order (the Order) against Chinese telecommunications company Zhongxing Telecommunications Equipment Corporation (ZTE).  The Order prohibits ZTE from engaging in virtually any trade or other activities involving U.S.-origin goods or technologies.

Continue Reading US Hammers ZTE with Export Denial Order, May Further Weaken Trade with China

  • Many medical products can be exported to Iran – so long as a license is obtained
  • Imposition of successor liability underscores importance of pre-transaction due diligence
  • OFAC enforcement, as in the past, continues to take a long time

In December 2017, the U.S. Office of Foreign Assets Control (OFAC) announced a penalty of $1.2 million against DENTSPLY SIRONA Inc. (DSI), one of the world’s largest manufacturers of dental products, for violating U.S. sanctions on Iran.  DSI, which is publicly traded in the United States, is based in York, Pennsylvania, and maintains operations around the world.

Continue Reading U.S. Dental Supply Company Penalized for Violating Iran Sanctions