Bass, Berry & Sims attorneys Richard Arnholt and Todd Overman will present a training webinar titled, “COVID-19 Update – What Every Government Contractor Needs To Know” for the Maryland Procurement Technical Assistance Center (Maryland PTAC). The interactive seminar will provide insight into the flurry of government contracting activity relating to the COVID-19 pandemic and government reaction, as well as the statutory, regulatory, and administrative actions the government is attempting to decrease the impact of this national emergency on government contractors.

Among other topics, the webinar will cover:

  • Claims and excusable delays – is the pandemic a force majeure event?
  • New legislation and regulatory actions – small business grants/loans, authority for agencies to pay contractors to be on standby, and increased DoD progress payments.
  • Emergency contracting authorities – can the government really do that?
  • Book keeping during a crisis – will you be prepared for investigations and inquiries when the crisis is over?

This webinar will be held on Thursday, April 2, 2020 from 10:00 a.m. to 11:00 a.m. EDT. For more information and registration, please visit the Maryland PTAC website.

On March 18, President Trump issued an Executive Order invoking the Defense Production Act (DPA), a tool that may help the administration combat the COVID-19 pandemic. With companies like 3M, GE, and others voluntarily ramping production of medical supplies to accomplish the nation’s significant needs, the president is yet to unleash his recently invoked authority. Still, the Executive Order activates far-reaching executive powers to prioritize production of key medical supplies, including protective medical equipment and ventilators. With the apparatus needed to deploy the DPA now in place, government contractors should prepare themselves for what may come.

By way of background, Congress passed the DPA during the Korean War to ensure sufficient production of materials deemed critical to the nation’s defense. Echoing economic controls imposed in World War II, the DPA gives the executive branch extraordinary powers, including the authority to require manufacturers to produce and prioritize certain items; allocate raw materials and facilities for the production of these items; and, in certain circumstances, even set price and wage controls.

Continue Reading Administration Ready to Use DPA to Address COVID-19 Shortages

Last night the Senate passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act, (CARES Act), by a vote of 96 to 0.  This rescue package will now be considered by the House, which, according to the latest reports, will likely vote on the legislation this Friday.

The bill, which is 883 pages long, will provide immediate assistance to American workers and companies impacted by the COVID-19 pandemic.  For the 3.28 million Americans who filed initial unemployment claims last week, this is welcome, and much-needed legislative action that includes extended unemployment benefits, direct cash payments, small business loans, among other emergency assistance.

Like any complex legislation that is passed so quickly, it will take time to fully digest the implications of all of the provisions, many of which have not been debated or widely discussed.  Among them is a section that has received little notice to date that, if included in the bill when it is signed into law by the president, gives agencies the authority to provide relief to government contractors by authorizing them to pay contractors for paid leave, including sick leave, to maintain employees in a ready state during the shutdown.

Continue Reading Possible Federal Contractor Reimbursement for Keeping Employees in a “Ready State” During the COVID-19 Shutdown

The U.S. government continues to take action in an effort to slow the spread of the COVID-19 virus.  In so doing, the government has provided insight into those industries and operations deemed to be essential to U.S. national security.  Lessons learned from these actions will almost certainly help inform U.S. policymakers and regulators when the current crisis has eased, particularly with respect to reviewing foreign investment in the United States.  (Such investment, when it could implicate U.S. national security, is subject to review and approval by the Committee on Foreign Investment in the United States.)

DHS Outlines Essential Businesses for Quarantine Purposes

On March 19, the Department of Homeland Security (DHS) issued guidance to identify those industries and businesses considered to be “essential” for U.S. continued operational purposes.  That Guidance on the Essential Critical Infrastructure Workforce was published by the Cybersecurity and Infrastructure Security Agency (CISA), which forms part of DHS.  The guidance is available here.

Continue Reading COVID-19 and National Security: Federal Government Defines Essential Business

The federal government has taken and will continue to take a host of actions to deal with the COVID-19 crisis.  Our Government Contracts Practice Group at Bass, Berry & Sims is carefully monitoring these developments and will keep you updated through our blog and through our Firm’s COVID-19 Response website page.

While the health of our citizens is, as it must be, the primary focus of the response, Congress and the Executive Branch are scrambling to ensure that companies have sufficient liquidity to continue operations, and continue employing people, notwithstanding the global economic shutdown that could run for months.  Given that the federal procurement budget is in the hundreds of billions of dollars and government contracting involves hundreds of thousands of workers nationwide, our government procurement workers play an important role in facing this crisis.

Continue Reading Increased Progress Payments: DoD Adjusts Procurement Rules to Increase Liquidity

  • Humanitarian exports to Iran are permitted – within limits.
  • Corruption can flourish in the midst of crisis.
  • Export controls limit sharing technical data related to the virus with some countries.
  • Compliance professionals should be proactive and visible during a time of crisis.

Despite the sobering news reports on the global spread of COVID-19, companies are continuing to try to conduct operations as (relatively) normally as possible.  International business is particularly affected given the different responses and newly imposed rules in various countries.  Moreover, the U.S. government response is continuing to evolve and what is permitted today could be restricted or prohibited tomorrow.

We thought it would be useful to highlight a few considerations for conducting business internationally in light of where things stand currently with COVID-19.

U.S. Emphasizes that Assistance Can Be Provided to Iran – To A Limit

U.S. sanctions prohibit U.S. companies and individuals from conducting virtually any transaction with or involving Iran.  This has not changed.

However, there is a limited exception to these prohibitions when providing certain humanitarian assistance to Iran.  To highlight the circumstances in which such assistance is permissible, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) recently published guidance about when such assistance is permitted.  OFAC is the primary U.S. government agency responsible for administering U.S. economic sanctions.

In particular, U.S. companies and individuals can export medical devices and medicine to Iran when intended to minimize human suffering.  U.S. nonprofits are also authorized to conduct certain transactions with Iran to directly support the Iranian people.

Yet even when transactions are authorized, there are limits on doing business involving the government of Iran or a Specially Designated National (SDN) of Iran.  Given the significant role that the state of Iran plays in many of the country’s industries, including in the healthcare space, it is essential to proceed carefully even when a transaction is well-intended.  All parties to a transaction, the financial terms of the transaction, and all goods and services to be supplied must be vetted carefully to avoid a violation.

Recognize Potential FCPA Issues in the Context of Crisis Response

The U.S. Foreign Corrupt Practices Act (FCPA), the primary U.S. law penalizing U.S. companies and individuals from bribing or offering, authorizing, or promising to bribe foreign officials, was not enacted to address bribery in the context of responding to a crisis such as the COVID-19 pandemic.  But the U.S. government has aggressively interpreted and enforced the law over the past 15 years.  There is no reason to think the U.S. government would decline to pursue enforcement action simply because it occurred in the context of a global health crisis.

It is often crises or other structural breakdowns – such as in the context of inordinately long permitting periods, challenging regulatory approval processes, or unilateral, opaque government demands – that create opportunities for corruption.  It is easy to envision a situation where a poorly paid Customs official in the developing world refuses to allow the import of hand sanitizer without a bribe.  A well-intended importer could very easily decide that payment is worth making to provide critical health supplies to a disadvantaged population.

Good intentions are not a defense to an FCPA violation.  Many FCPA enforcement actions involve bribes paid to facilitate transactions that benefit both the bribe payer and the country in which the bribe was paid.  Red tape and bureaucracy often slow down or even deter transactions that otherwise make a lot of sense.  Even in the context of a global pandemic, the U.S. government is likely to view a bribe as a bribe and take corresponding enforcement action.  This is especially true when the transaction is viewed through the lens of a regulator several years later, after the dust has settled.

U.S. Export Controls Limit Some Sharing of Information on COVID-19

The U.S. Commerce Department, Bureau of Industry & Security (BIS) administers U.S. export controls on samples of and technical data related to certain viruses and other diseases.  In many cases, the controls are significant and exports can only be made with a license.

Importantly, U.S. export controls extend to the sharing and transfer of technology with non-U.S. persons in the United States.  For example, a U.S. healthcare company that employs a non-U.S. national in its research & development department could require an export license to share certain technology and technical data with the non-U.S. employee, even when that employee is authorized to live and work in the United States.

The newness of COVID-19 means that BIS is still assessing how tightly samples of the virus – and technology related to it – should be controlled for export purposes.  In February, BIS announced that COVID-19 is currently covered under Export Control Classification Number EAR99.  As stated in the BIS announcement, the EAR99 designation means that an export license “is generally not required for export of [the] virus or its genetic elements to most destinations” or nationals.  However, BIS also underscored that “certain end-users, end-uses, and destination countries may require a license for the export of [COVID-19, including technical data related to the virus].”

Remain Attuned to Policy Changes to Promote Compliance

While international compliance may not be the primary concern for many companies at present, the risk of potential violations has not decreased.  In fact, in the context of this sort of crisis, there is perhaps more opportunity for personnel to take action without properly considering the legal ramifications.  Compliance personnel should remain present, even if working remotely, and be proactive.  When communicating with personnel, it is important to remind them that compliance and ethics are as important now as ever.

If you have any questions about international compliance during the COVID-19 global pandemic, please contact the authors of this post.

This week the World Health Organization (WHO) declared COVID-19, otherwise known as the coronavirus, a pandemic, and President Trump declared a national emergency. Rising concerns over the spread of the disease and resulting uncertainty, supply chain disruptions, and changes in consumer behavior dominated the news and social media and resulted in sharp declines in the financial markets and the suspension or cancellation of numerous events. As the world scrambles to respond to the coronavirus, businesses are considering what rights and remedies their existing agreements provide.

Many agreements contain a force majeure clause, which “allocate[es] the risk of loss if performance becomes impossible or impracticable, [especially] as a result of an event or effect that the parties could not have anticipated or controlled.” Evaluating the application of a force majeure clause requires assessing:

  1. How “force majeure” is defined (if at all) in the agreement.
  2. If a force majeure event has occurred, what rights or remedies are available?

Continue Reading on BassBerry.com

As the number of confirmed 2019 novel coronavirus (COVID-19) cases continues to rise across the country and around the world, employers are looking for guidance regarding how they should react to the potential for spread of the virus. Several government agencies have responded to this demand. Bass, Berry & Sims’ labor & employment attorneys have compiled the latest guidance in an effort to address many of the common questions employers currently face.

Follow the link below to review a summary of:

  • The CDC’s Interim Guidance for Businesses and Employers
  • The CDC’s Risk Assessment guidelines
  • The EEOC’s guidance on “pandemic preparedness” and compliance with the ADA
  • OSHA’s information on employers’ obligations with respect to COVID-19

We are closely monitoring the government’s response to this developing situation and will update our website with further guidance as it unfolds.

A bill was recently introduced by U.S. Representative Bryan Steil (R-Wisconsin) that would allow the U.S. Treasury Department to target European financial intuitions conducting business with Iran through the Instrument in Support of Trade Exchanges (INSTEX) vehicle in order to avoid U.S. sanctions.

While there have been a low number of actions against European institutions, I recently explained to Payments Compliance that “arguably that is because many major non-U.S. financial institutions, particularly in Europe, have decided to halt business with Iran and thereby have eliminated the U.S. government’s basis for potentially imposing secondary sanctions. But I also think that the limited use of secondary sanctions against non-U.S. financial institutions is in part because even this U.S. administration understands that imposing secondary sanctions against major non-U.S. banks is a very significant step.”

Check out the full article, “U.S. Lawmaker Launches Legislative Assault on INSTEX.” It was published on March 4 and is available online (subscription required).

  • Actions underscore long arm of U.S. sanctions jurisdiction
  • Voluntary disclosures and cooperation can lead to significant penalty reductions
  • Facilitation of a violation is treated the same as a direct violation

In two recent enforcement actions, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) demonstrated the long-arm of U.S. economic sanctions jurisdiction.  One matter involved Société Internationale de Télécommunications Aéronautiques SCRL (SITA), a Swiss firm that provides commercial telecommunications network and information technology services to the civilian air transport industry.  The other involved Eagle Shipping International (Eagle), a U.S.-based shipping and logistics company.

Each action serves as a reminder of the U.S. government’s willingness to enforce U.S. sanctions in the context of what is primarily non-U.S. conduct.  The resolutions also illustrate the potential benefits of voluntarily disclosing sanctions violations to OFAC.

Continue Reading Sanctions Enforcement Update: Penalties for Logistics, Telecom Companies