International Trade

On December 23, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and TD Bank, N.A. (TD) reached a settlement to resolve TD’s violations of the North Korea Sanctions Regulations and the Foreign Narcotics Kingpin Sanctions Regulations.  On January 12, OFAC and Sojitz Hong Kong (Sojitz HK) reached a settlement agreement in connection with Sojitz’s violations of the Iranian Transaction and Sanction Regulations (ITSR).  These two resolutions, reached only a few weeks apart, serve as a reminder of OFAC’s broad remit to administer and enforce U.S. sanctions regulations.

TD Bank Violated North Korea and Narcotics Kingpin Sanctions

The United States maintains comprehensive sanctions on North Korea, and most transactions with the country and nationals of the country, wherever located, are prohibited without a license.  While a license authorizes banks in the United States to conduct certain transactions with the North Korean Mission to the United Nations, that license does not extend to maintaining accounts for employees of the North Korean Mission.

According to OFAC, TD processed 1,479 transactions and maintained nine accounts on behalf of five employees of the North Korean Mission without a license from OFAC.  OFAC noted that TD’s sanctions screening did not pick up individual employees of the government of North Korea.  OFAC also noted that TD employees apparently misclassified North Korean Mission personnel when processing passports by filling in the South Korean country code or leaving the citizenship identification field blank.Continue Reading OFAC Enforcement Update: Settlements Show Value of Internal Controls, Disclosure

I am looking forward to presenting at the 11th Annual U.S. Export & Re-Export Compliance for Canadian Operations Virtual Conference. The conference will take place January 26-27, 2022 with pre-conference workshops on January 25, 2022. I will be presenting with John Boscariol, Partner at McCarthy Tétrault LLP based in Toronto, Canada.

Our session, “Updating Your Risk-Based Economic Sanctions Compliance Program: The Latest U.S. and Canadian Restrictions, and Their Practical Impact,” will take you through the most critical economic sanctions developments and trends affecting exports and reexports. The discussion will focus on new, unanticipated pitfalls to avoid for 2022 and beyond.

  • Comparing and contrasting U.S. and Canadian sanctions-and their practical impact on export and reexport operations
  • The rapidly changing China landscape, and the impact on due diligence and supply chain risks
  • Impact of the PRC’s Foreign Anti-Sanctions Regulation and the new Blocking Statute
  • Performing due diligence amid the increased use of The Entity List
  • Iran: Status report and negotiations with Iran and what is on the horizon

Continue Reading [VIRTUAL EVENT] Updating Your Risk-Based Economic Sanctions Compliance Program: The Latest U.S. and Canadian Restrictions, and Their Practical Impact

In an article for Business Weekly Taiwan, I discussed the impact on Taiwan companies amid rising tensions between the United States and China. The U.S. Department of Commerce recently added China-based tech company Hunan Goke Microelectronics to the Entity List, one of the U.S. government lists that impose various levels of trade, travel, asset, and financial restrictions on overseas companies to help protect U.S. national security. Adding China-based companies to the Entity List or another restrictive trade list, often negatively impacts Taiwan companies who rely on trade with China.

As I recommend to Taiwan companies, it’s important to know your customer – it’s important to research fully to know the supply chain and end users of your products. I note that companies in China and anywhere, including the U.S., put a lot of their businesses on the website so you can see the types of activities that they’re engaged in. Company websites are a good starting point for researching companies and exercising due diligence.Continue Reading Impact on Taiwanese Companies Amid Trade Situation between United States and China

I recently co-authored an article for WorldECR with Scott Jones, a nonresident fellow at The Stimson Center, examining the history and current trajectory of the Entity List, part of the Export Administration Regulations (EAR) administered by the U.S. Bureau of Industry and Security (BIS) to help protect U.S. national security. In the article, we outline the history of the Entity List and discuss the need for a just and transparent removal mechanism.

We state that “since the 2008 change in scope to include national security and foreign policy concerns, the number of parties added to the Entity List has increased dramatically” from its original purpose of preventing the proliferation of weapons of mass destruction.  With the recent technology conflicts between the United States and China, we argue the Entity List has become the most convenient tool in the toolbox to further U.S. national security and foreign policy goals.Continue Reading History and Trajectory of the Entity List Related to National Security Concerns

On November 10, the U.S. Departments of State, Treasury, and Commerce issued an unusual joint advisory (the “advisory”) on the risk of investing and interacting with certain Cambodian individuals and entities. The advisory is evidence of the United States’ active campaign against corruption; the advisory also continues the recent U.S. practice of employing sanctions and other trade restrictions to fight corruption.

Specific Cambodian Sectors Designated as High Risk

In the advisory, the government identified the following Cambodian sectors as high risk:

  1. The financial, real estate, casino, and infrastructure sectors – deemed high risk because of illicit finance activities and related risks.
  2. The manufacturing and timber sectors of Cambodia – deemed high risk because of trafficking of persons, wildlife, narcotics, and related risks.

The advisory emphasizes that involvement, or potential involvement, of U.S. companies in any of those sectors could result in reputational, economic, and/or legal risk.Continue Reading U.S. Imposes Restrictions, Issues Warning on Business with Cambodia

The U.S. government continues to vigorously enforce U.S. export laws against both U.S. and non-U.S. companies. In addition to monetary penalties, companies charged with violating U.S. export laws may be subject to strict compliance obligations. In extreme cases, the U.S. government may even suspend a company’s export privileges.

In this webinar, we will discuss recent…

On October 12, the U.S. Commerce Department, Bureau of Industry and Security (BIS) announced that it imposed a civil penalty fine against VTA Telecom Corporation (VTA) for the unauthorized export of controlled commodities to Vietnam.  Additionally, BIS is requiring VTA to improve its export control compliance efforts and retain a Director of Trade Compliance.  Alternatively, VTA can dissolve or cease operations.

VTA, located in Milpitas, California, was established in 2013 as a subsidiary of a Vietnamese state-owned telecommunications company.  BIS is the primary U.S. government agency responsible for administering and enforcing export controls on commercial items that could support weapons proliferation and other threats to U.S. national security.

According to BIS, VTA procured and exported items from the United States to its parent company in Vietnam with knowledge that certain of those exports were intended to support a Vietnamese defense program. To settle the matter, VTA agreed to the following:

  1. A penalty of $1,869,372.
  2. Expenditure of $25,000 to fund its internal export compliance program (ICP).
  3. Hiring and retention of a Director of Trade Compliance to oversee VTA’s export activities for at least two years.

Continue Reading BIS Imposes Civil Fine and Compels Hiring of Compliance Official or Cease Operations

On September 28, the U.S. Commerce Department, Bureau of Industry and Security (BIS) announced that it has imposed a civil penalty fine and denial of export privileges against Vorago Technologies (Vorago) for the unauthorized export of controlled commodities to Russia.

Vorago is a U.S. manufacturer of integrated circuits for use in environments with high radiation levels and extreme temperatures.  The company’s products are particularly well suited for use in space.  BIS is the primary U.S. government agency that administers and enforces U.S. export controls on commercial items, including particularly strict licensing requirements on items that can be used with weapons of mass destruction or conventional weapons.

According to BIS, Vorago engaged in a conspiracy with a Russian company, Cosmos Complect (Cosmos), to circumvent U.S. export controls.  To settle the matter, Vorago agreed to the following:

  1. A penalty of $497,000, and
  2. Denial of export privileges until September 2023.

The denial of export privileges, and roughly half of the penalty, will be suspended as long as Vorago complies with the terms of the settlement.Continue Reading U.S. Technology Company Pays for Unauthorized Exports to Russia

I recently authored an article for Law360 offering an inside look at two U.S. Department of Commerce committees responsible for interpreting how national security and foreign policy should be applied to transactions involving the export, re-export and transfer of U.S. technology. I served on both committees – the Export Administration Operating Committee (OC) and the Advisory Committee on Export Policy (ACEP); I was chair of the OC and executive secretary of the ACEP until joining Bass, Berry & Sims. The article lends important insight to the closed-door processes each body uses and provides clarity on how national security decisions are reached.

While the chair of the OC has decision-making authority (with certain exceptions where decisions are made by interagency vote), the ACEP is the body that reviews cases where a government agency does not agree with the OC chair’s decision. “The decisions of these bodies are where the rubber meets the road in export control implementation,” I explained in the article. “Export control is a key feature in determining whether the U.S. will continue to maintain its technological supremacy, or China or another country will catch up or surpass the U.S.”

In addition to a neutral chair of the OC, who also serves as executive secretary of the ACEP by law, and the politically appointed ACEP chair, representatives from the Department of Commerce, Defense, Energy and State sit on the OC and ACEP. At the OC level, the chair makes a decision based on recommendations from the four agencies (again, with certain exceptions). At the ACEP, decisions are based on a majority vote and where the vote is a tie, the decision reverts to the OC Chair’s decision. The goal of the balanced interagency structure at the OC level is to prevent a single agency from dominating the process. The ACEP’s process aims to resolve situations where the regulatory standards and policy are not clear and have led to disagreements among agencies at the OC, including giving policy guidance for OC members to apply in similar situations going forward.Continue Reading Key Department of Commerce Entities Related to National Security Decision-Making Processes

Please join us for the Compliance & Government Investigations Seminar hosted by Bass, Berry & Sims and FTI Consulting. Due to ongoing COVID-19 concerns, this event will be virtual only.

We are excited for this year’s complimentary CLE program, which will provide the same caliber of practical advice, insight into government developments, and thoughtful discussion from industry panelists you have come to expect from this seminar. This year’s topics include:

  • Inside Scoop: Top Issues In-House Counsel Currently Face
  • Update on International Trade Regulations and Enforcement
  • SEC Update: Key Enforcement and Regulatory Priorities
  • Running an Investigation
  • Antitrust Is Back: DOJ and FTC Signal Significant Increase in Antitrust Enforcement
  • Data Privacy Update
  • Healthcare Fraud Enforcement Updates
  • Hot Topics in Procurement Fraud in 2021 and Beyond
  • COVID-19 Funding Fallout: Preparation for Government Scrutiny

This year’s seminar will be held from 8:30 a.m.–3:45 p.m. CDT on Tuesday, September 28. To register, please click here.

Click here to view the agenda.Continue Reading [Virtual Event] 8th Annual Compliance & Government Investigations Seminar

From the Bass, Berry & Sims Blog Network
From the Bass, Berry & Sims Blog Network

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