Export Compliance Management Seminar 29 & 31 May 2012: An overview of U.S. Export Controls and Sanctions
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Export Compliance Management Seminar 29 & 31 May 2012: An overview of U.S. Export Controls and Sanctions

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Thomas E. Crocker - Alston & Bird ...

Thomas E. Crocker - Alston & Bird

www.exportcompliancemanagement.com

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  • 1. Eagle Compliance SeminarRotterdam May 29, 2012London May 31, 2012 WWW.ALSTON.COM An Overview of U.S. Export Controls and Sanctions Thomas E. Crocker Partner Alston & Bird LLP Thomas.crocker@alston.com 202-756-3318
  • 2. WWW.ALSTON.COMU.S. EXPORT CONTROLS: OVERVIEWTOPICS COVERED I. Policy, Structure and Key Concepts II. Item-Based Controls III. Controls Based on Destination, End-User and End-Use IV. Violations and Penalties V. Anti-Boycott VI. Reform: Recent and Future Changes to U.S. Controls VII. A&B International Trade and Regulatory Group 2 Alston & Bird©2012
  • 3. WWW.ALSTON.COMPOLICY, STRUCTURE AND KEY CONCEPTS 3 Alston & Bird©2012
  • 4. WWW.ALSTON.COMPURPOSE OF U.S. EXPORTCONTROLS Export controls are designed to protect the United States’ national security, foreign policy and economic interests.  Post 9/11 concerns (anti-terrorism efforts).  Longstanding concerns such as nonproliferation of nuclear, chemical and biological weapons and regional stability.  Impede non-friendly countries’ efforts to develop military capabilities. Some controls are also required to comply with international obligations.  United Nations.  International export control regimes. 4 Alston & Bird©2012
  • 5. WWW.ALSTON.COMPRINCIPAL U.S. EXPORT CONTROLAND SANCTIONS REGIMES  Bureau of Industry & Security of the U.S. Department of Commerce (“BIS”) regulates commercial or “dual use” items through the Export Administration Regulations (“EARs”), 15 C.F.R. Parts 730-774, including the Anti-boycott Regulations, 15 C.F.R. Part 760.  Exports involving goods controlled by another agency (e.g., DDTC/ITAR) are not subject to the EAR.  Directorate of Defense Trade Controls of the U.S. Department of State (“DDTC”) regulates defense articles and services through the International Traffic in Arms Regulations (“ITAR”), 22 C.F.R. Parts 120-130.  Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”) administers and enforces sanctions and embargoes applicable to U.S. persons (and limited transactions by non-U.S. persons) with respect to designated countries, persons or entities, 31 C.F.R. Parts 500-596. 5 Alston & Bird©2012
  • 6. WWW.ALSTON.COMEXTRATERRITORIAL REACH OF U.S.EXPORT CONTROLS AND SANCTIONS U.S. export controls have application outside the United States.  U.S. items (“exported or reexported”).  In rem jurisdiction (“goes with the goods”).  BIS and DDTC.  Makes a non-U.S. person’s activities subject to U.S. jurisdiction.  U.S. persons (“wherever located”).  In personam jurisdiction.  OFAC 6 Alston & Bird©2012
  • 7. WWW.ALSTON.COMIMPACT ON INTERNATIONAL BUSINESS  Export controls and sanctions can affect business operations.  Require licenses or prohibit certain business opportunities.  Delay shipments or technical discussions while licenses are pending approval.  Increase and extend business recordkeeping obligations.  Make U.S. origin components less attractive (e.g., “ITAR-free”).  Sanctions affect ability of U.S. persons to work on some transactions.  Well-designed and implemented compliance practices minimize disruption and penalty exposure. 7 Alston & Bird©2012
  • 8. WWW.ALSTON.COMKEY CONCEPTS: “EXPORT” and“REEXPORT”  “Export”: Shipment or transfer (including hand-carry) of an item, including –  Goods.  “Technology” (EAR) or “Technical Data” (ITAR).  Services (ITAR).  Software (EAR and ITAR).  To –  A foreign country.  A foreign national in the United States (“deemed export”).  “Reexport”: Shipment or transmission of an item subject to U.S. export control jurisdiction from one foreign country to another foreign country. 8 Alston & Bird©2012
  • 9. WWW.ALSTON.COM“HIDDEN EXPORTS”  Routine business activities can lead to “exports” or “deemed exports” when they involve foreign persons or countries:  International hand carry of files, portable devices or laptops.  In-person meetings.  Telephone calls, emails, faxes.  IT systems.  Encryption.  Presentations and bid proposals.  Conferences and trade shows.  Consulting services.  Application abroad of knowledge obtained in the U.S. (e.g., demonstrations at trade shows).  Employment of foreign persons in U.S. (“deemed exports”).  “Deemed reexports.” 9 Alston & Bird©2012
  • 10. WWW.ALSTON.COMFOUR TYPES OF CONTROLS Controls can be based on –  “Items” – control lists in the EAR (Commodity Control List or “CCL”) and ITAR (United States Munitions List or “USML”).  “Destination” – ITAR, EAR and OFAC regimes each feature controls with tighter/looser restrictions for some countries.  “End-users” – so-called “denied parties.”  “End-uses” – Enhanced Proliferation Control Initiative (“EPCI”) added non-item based “catch-all” controls to the EAR to protect against exports related to weapons proliferation. 10 Alston & Bird©2012
  • 11. WWW.ALSTON.COMITEM-BASED CONTROLS 11Alston & Bird©2012
  • 12. WWW.ALSTON.COMITEM-BASED CONTROLS  Two item-based regimes:  EAR – Commercial or “Dual Use.”  All items except those controlled by another agency or in the public domain.  Commerce Control List (“CCL”).  Non-enumerated items are still controlled as “EAR99.”  ITAR – Military/defense (e.g., products specially designed for a military purpose).  Munitions List (“USML”). 12 Alston & Bird©2012
  • 13. WWW.ALSTON.COM EAR BASICS Statute: Export Administration Act (“EAA”) and International Economic Emergency Powers Act (“IEEPA”). Scope –  Exports, reexports, deemed exports and deemed reexports of U.S.-origin commercial or “dual-use” commodities, software and technology.  Anti-boycott regulations. Control List: CCL, organized by Export Control Classification Numbers (“ECCN”).  Items covered in an ECCN are described and defined in technical parameters.  ECCN tells you –  Applicable “Reasons for Control,” including which export destinations require a license.  Applicable license exceptions.  Whether any related controls should be consulted (e.g., technology controls). 13 Alston & Bird©2012
  • 14. WWW.ALSTON.COMITEMS SUBJECT TO THE EAR  Goods, technology and software (“items”) that are “subject to the EAR” include:  “All items in the United States… or moving in transit through the United States from one foreign country to another,” regardless of origin.  “All U.S. origin items wherever located.”  “U.S. origin parts, components, materials, or other commodities, software or technology incorporated into foreign-produced items in quantities exceeding de minimis levels.”  De minimis = 10% controlled U.S. content by value for exports destined to Cuba, Iran, North Korea, Sudan and Syria and 25% content by value for all other destinations.  Foreign-made products of “U.S. origin technology or software” that are “the immediate product (including processes and services) produced directly by the use” of U.S. technology or software.”  “Subject to the EAR” only if they are controlled for National Security (NS) purposes.  Certain products resulting from foreign plants that are direct products of U.S.-origin technology or software or U.S.-origin plants. 14 Alston & Bird©2012
  • 15. WWW.ALSTON.COMREEXPORTS SUBJECT TO THE EAR AND DE MINIMISCALCULATIONS Reexports of U.S. origin items – when reexported in the same condition they remain subject to the EAR.  Must classify and determine license requirements based on CCL classification and reexport destination. Exports of foreign-produced items with U.S. content – conduct de minimis calculation to determine if item is subject to the EAR at all.  If subject to the EAR, must classify and determine license requirements based on CCL classification and reexport destination.  This is merely a jurisdictional question – if there is jurisdiction, the reexporter must look to classification/destination to determine licensing policy. De minimis levels are –  10 percent for exports and reexports to Cuba, Iran, North Korea, Sudan and Syria.  25 percent for exports and reexports to all other countries. “Controlled” U.S. content –  Ask: Would the item (in the form when exported from the U.S.) require a license if exported directly to the ultimate destination?  EAR99 only counts for reexports to Cuba, Iran, N. Korea, Sudan and Syria. 15 Alston & Bird©2012
  • 16. WWW.ALSTON.COMEAR SECOND INCORPORATION RULE  Based on administrative rulings and informal guidance; not in the EAR itself.  U.S.-origin components that are incorporated into a foreign-made item [first incorporation] are not counted in the de minimis calculations of another foreign-made product into which the first foreign-made item is incorporated [second incorporation].  Requirements –  First and second incorporations each yield a “discrete” product.  Discrete products are more likely to exist where there is an arm’s length transaction and when the item in question is often sold as a stand-alone or replacement part.  Discrete product is less likely to be found where the exporter participates in the design or manufacture of the component, specifies certain U.S. content to be used in the component, or where the incorporation of U.S.-origin contact is merely part of a large, single manufacturing process. 16 Alston & Bird©2012
  • 17. WWW.ALSTON.COM ITAR BASICS Statute: Arms Export Control Act (“AECA”).  Grants authority to the Department of State to administer law. Scope –  Defense articles, defense services, technical data transfers, brokering. Control List: USML.  A list (at Part 121 of ITAR) of the defense articles, technical data and services subject to ITAR.  Includes components, parts, accessories, forgings, castings, machined bodies, technical data and defense services related to listed articles. 17 Alston & Bird©2012
  • 18. WWW.ALSTON.COMACTIVITIES SUBJECT TO THE ITAR  Four basic categories of items/activities that require license or authorization from DDTC –  Exports/reexports/temporary imports of “defense articles” on the USML.  Note: “Export” means more than shipments leaving U.S. territory.  Exports or transfers of information that is considered “technical data.”  Providing services that are considered “defense services.”  Activities of persons that qualify as “brokering activities.” 18 Alston & Bird©2012
  • 19. WWW.ALSTON.COMITEMS SUBJECT TO THE ITAR  Defense Articles, Technical Data (including Software) subject to ITAR include –  All USML articles in the United States.  All U.S.-origin USML items outside the United States.  No de minimis jurisdictional limitations for foreign-made goods incorporating U.S. origin USML content.  Total “see through” jurisdiction.  Commodity Jurisdiction (“CJ”) procedure to determine if item is controlled by ITAR or EAR 19 Alston & Bird©2012
  • 20. WWW.ALSTON.COMREEXPORTS SUBJECT TO THE ITAR  “Reexport or Retransfer is defined in the ITAR as “the transfer of defense articles or defense services to an end-use, end-user or destination not previously authorized.”  U.S. origin USML items – when reexported in the same condition they remain subject to the ITAR.  Foreign-produced items – subject to ITAR if include any amount of U.S. origin USML content.  There is no de minimis rule in the ITAR limiting extraterritorial jurisdiction.  There is no Second Incorporation Rule in the ITAR.  Any defense article on the USML, including parts and components, that is manufactured in or exported from the United States is therefore subject to the ITAR and DDTC’s broad licensing authority over its export, reexport or transfer, even when incorporated abroad into a foreign-produced item. 20 Alston & Bird©2012
  • 21. WWW.ALSTON.COMDEFENSE SERVICES SUBJECT TO THEITAR  Furnishing of assistance (including training) to foreign persons:  Whether in the United States or abroad;  In the design, development, engineering, manufacture, production, assembly, testing, repair, modification, operation, demilitarization, destruction, processing, installation, integration, training, or use of defense articles.  Furnishing to foreign persons of Technical Data controlled under ITAR.  A defense service may be performed –  Regardless of whether the underlying defense article is of U.S. or foreign origin.  Even when no controlled “Technical Data” is involved (i.e., all the information relied upon is public domain or otherwise not subject to the ITAR). 21 Alston & Bird©2012
  • 22. WWW.ALSTON.COMCONTROLS BASED ON DESTINATION,END-USER AND END-USE 22Alston & Bird©2012
  • 23. WWW.ALSTON.COM CONTROLS BASED ON DESTINATION Relationship to item-based controls –  EAR-- Licensing policy for exports of items subject to the EAR and listed on the CCL are determined by the country of destination (e.g., license required, no license required, or license required but license exceptions are available).  ITAR-- Licensing policy for exports of items subject to the ITAR can vary by destination.  General rule – All destinations require license.  Prohibited Destinations – no licenses will be issued to some destinations (e.g., China, Iran, North Korea, Syria, Venezuela).  License Exceptions – Canada (soon available for UK and Australia, too). 23 Alston & Bird©2012
  • 24. WWW.ALSTON.COM CONTROLS BASED ON DESTINATION – OFAC AND BIS Unilateral and multilateral sanctions and embargoes – jurisdiction for sanctions and embargoes is split/shared between OFAC and BIS.  Cuba (OFAC and BIS).  Iran (OFAC and BIS).  North Korea (BIS).  Sudan (OFAC).  Syria (BIS). 24 Alston & Bird©2012
  • 25. WWW.ALSTON.COM OFAC BASICS Statutes: IEEPA, Trading with the Enemy Act (TWEA), United Nations Participation Act (UNPA) and others.  Various grants of authority to the President to impose sanctions against targeted –  Foreign countries (e.g., Iran, Sudan, Cuba).  Individuals (e.g., terrorists, narcotics traffickers).  Entities (e.g., corporations or government ministries involved in weapons of mass destruction/missiles, charities linked to terrorist groups).  Practices (e.g., trade in non-certified rough diamonds).  Implemented through Presidential Executive Orders and OFAC regulations. Scope: Apply to persons in the U.S. and to U.S. persons (citizens, green card holders) everywhere.  Exports, reexports, transshipments; imports; financial transactions, investment; securities transactions; services, including shipping, brokering and insurance; donations. Minimal exceptions.  Jurisdiction is not tied to products, but rather to location or nationality of the actor (i.e., U.S. persons) and the recipient/beneficiary (i.e., a targeted country or person).  Specially Designated Nationals List (“SDN List”): master list of prohibited parties.  Blocked assets, rejection regimes. 25 Alston & Bird©2012
  • 26. WWW.ALSTON.COMCURRENT OFAC SANCTIONSPROGRAMS  Balkans  Lebanon  Belarus  Narcotics Trafficking  Burma (Myanmar)  Non-Proliferation/WMD  Cote d’Ivoire (Ivory Coast)  North Korea  Cuba*  Somalia  Dem. Republic of Congo  Sudan*  Diamond Trading  Syria*  Iran*  Terrorism (including Hamas)  Liberia  Zimbabwe * Complete embargoes: prohibit nearly all export activity and services  Each sanction/embargo regime is unique. Compare –  Cuba – foreign incorporated subsidiaries of U.S. companies covered.  Iran – foreign incorporated subsidiaries of U.S. companies not covered . 26 Alston & Bird©2012
  • 27. WWW.ALSTON.COMACTIVITIES SUBJECT TO OFACJURISDICTION  OFAC regulations generally prohibit –  Exports from the U.S. to sanctioned parties/embargoed destinations.  Exports from the U.S. to third countries where the exporter “knows or has reason to know” that U.S. origin items are destined for a sanctioned party/ embargoed destination.  Reexports of controlled (CCL or USML) U.S. origin items and some foreign-made items containing greater than de minimis levels of controlled U.S. content.  Transactional support or assistance involving U.S. Persons with sanctioned/embargoed destinations or recipients, in the U.S. or in third countries (i.e., “facilitation”).  Causing U.S. person to violate OFAC sanctions (extraterritorial).  U.S. person –  Includes foreign subsidiaries of U.S. parent corporation (Cuba only).  Always includes U.S. person employees of foreign company.  Any product requires a license for export from the U.S. if the destination country or recipient is subject to an OFAC sanction/embargo.  Some products require a license for reexport from the original recipient to a third country (look at classification, destination, scope of sanctions program).. 27 Alston & Bird©2012
  • 28. WWW.ALSTON.COMOFAC REEXPORTS AND IRAN  OFAC extraterritorially prohibits non-U.S. persons from reexporting U.S.-origin items if:  They have knowledge the item is intended specifically for Iran.  The item is not EAR99 (CCL or USML).  This prohibition does not apply if the U.S.-origin items either:  Have been substantially transformed into a foreign product outside the United States.  Or have been incorporated into a foreign-made product outside the United States if the U.S. content’s aggregate value is less than 10 percent.  De minimis calculation must include other U.S. origin components supplied by third parties. 28 Alston & Bird©2012
  • 29. WWW.ALSTON.COM CONTROLS BASED ON END-USER – OFAC AND BIS “LISTS” Even if no item-based licensing requirement applies to a transaction, license may still be required when the intermediate consignee, purchaser or end-user is listed on various U.S. government denied/restricted party lists:  BIS Entity List and BIS Table of Denial Orders (apply to all transactions “subject to the EAR” unless specified otherwise in the designation).  OFAC’s SDN List (applies to U.S. persons wherever located).  State Department Nonproliferation Lists.  State Department Debarred List. Solution – screen all parties. 29 Alston & Bird©2012
  • 30. WWW.ALSTON.COMExport Controls/Sanctions Some key addresses:  Commerce Control List (http://www.access.gpo.gov/bis/ear/ear_data.html)  Denied Persons List (http://www.bis.doc.gov/dpl/thedeniallist.asp)  Entity List (http://www.bis.doc.gov/Entities/Default.htm)  Unverified List (http://www.bis.doc.gov/Enforcement/UnverifiedList/unverified_pa rties.html)  Department of State Nonproliferation Lists  (http://www.state.gov/t/isn/c15231.htm)  OFAC’s Specially Designated Nationals List (SDN List)  www.treas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf 30Alston & Bird©2012
  • 31. WWW.ALSTON.COM CONTROLS BASED ON END-USE – EPCI AND RED FLAGS Relationship to item-based controls –  If item-based licensing requirements do not apply to a specific transaction involving an item that is subject to the EAR, a license may still be required if there is an EPCI or Red Flag issue. Enhanced Proliferation Control Initiative (“EPCI”).  End-use based license requirements – The end-use of the item to be exported or re-exported is one of several enumerated applications involving nuclear (certain countries), chemical and biological weapons (worldwide) or missiles capable of delivering them (certain countries). Red Flags  Red Flags” indicate that an export or reexport may be destined for an inappropriate end-use (i.e. suspicious activity).  If there are Red Flags, you must inquire and resolve them –  False positive.  Apply for license – may be denied.  Decline business. 31 Alston & Bird©2012
  • 32. WWW.ALSTON.COMForeign Blocking Statutes Foreign blocking statutes  Canada (Foreign Extraterritorial Measures Act (FEMA), R.S.C., ch. F-29 (1985), as amended)  EU (Protecting Against the Effects of the Extraterritorial Legislation Adopted by a Third Country, Council Regulation No. 2271/96)  United Kingdom (Extraterritorial US Legislation (Sanctions against Cuba, Iran and Libya) (Protection of Trading Interests) Order 1996)  Mexico (Ley de Proteccion al Commercio y la Inversion de Normas Extranjeras que Contravengan el Derecho Internacional, D.O., Oct. 23,1996)) Mainly problem as to Cuban Assets Control Regulations, Iran Sanctions Act 32Alston & Bird©2012
  • 33. WWW.ALSTON.COMVIOLATIONS AND PENALTIES 33Alston & Bird©2012
  • 34. WWW.ALSTON.COM TYPES OF VIOLATION Under U.S. export control and sanctions laws (ITAR, EAR, OFAC), it is generally unlawful to –  Export, attempt or conspire to export an item or service that requires a license without first obtaining one.  Use any export document containing a false statement or omission of a material fact.  Cause, aid, abet or procure the commission of a violation.  Evade the regulations.  Violate any of the terms and conditions of the regulations or any license or order issued thereunder.  Facilitate transactions with sanctioned or embargoed countries, entities or persons. 34 Alston & Bird©2012
  • 35. WWW.ALSTON.COM EXPORT MISTAKES CAN BE COSTLY – FINES AND JAIL Criminal Penalties Willful Knowing Regulations Corporation Individual Corporation Individual A fine of up to the greater A fine of up to the A fine of up to A fine of up to the of $50,000 or five times greater of $1,000,000 or $1,000,000 or greater of $50,000 or the value of the exports or EAR five times the value of imprisonment for up to five times the value of imprisonment for up to the exports for each 20 years, or both, for the exports for each five years, or both, for violation. each violation. violation. each violation. A fine of up to $1,000,000 or imprisonment for up ITAR N/A N/A to ten years, or both, for each violation. Administrative Penalties The imposition of a fine of up to the greater of $250,000 for each violation or two times the amount of the EAR transaction that is the basis of the violation with respect to which the penalty is imposed. ITAR The imposition of a fine of up to $500,000 for each violation. 35Alston & Bird©2012
  • 36. WWW.ALSTON.COMOFAC Penalties Criminal: Fine of up to $1,000,000, imprisonment for up to 20 years per violation. Civil: Greater of $250,000 or twice the value of the transaction per violation. Strict liability regime (intent does not matter). Vigorous enforcement. 36Alston & Bird©2012
  • 37. WWW.ALSTON.COM ENFORCEMENT LIABILITY Parties are always responsible for what they know or should have known. Parties are always responsible for what their employees know or should have known (imputed knowledge). Cannot “self-blind.” Penalties (both civil and criminal) can be imposed against individuals and corporations.  Individuals can be personally fined and imprisoned. Extraterritorial enforcement (MLATs, US Dollar clearing, minimal contacts with U.S.). 37 Alston & Bird©2012
  • 38. WWW.ALSTON.COM ENFORCEMENT TRENDS Recent “record” settlements:  BIS: PPG Industries ($3.75 million)  DDTC: ITT ($100 million).  OFAC – Credit Suisse ($536 million), ABN Amro ($500 million), Lloyds Bank ($217 million), Barclays Bank ($176 million). Jail time for executives Criminal enforcement for violations of all three export control regimes is increasing. Civil enforcement activity is also increasing.  Voluntary and mandated disclosures.  Mandated compliance audits.  Compliance monitors. 38 Alston & Bird©2012
  • 39. WWW.ALSTON.COMEnforcement Trends Overview  Deliberate enforcement priority for Administration.  Steep increase in IEEPA-based penalties applicable to export controls and OFAC.  Higher volume of export control cases with greater involvement by Justice.  Vastly more aggressive enforcement, more novel theories by prosecutors.  Higher expectations for compliance. 39Alston & Bird©2012
  • 40. WWW.ALSTON.COMExport Control Enforcement Developments 2007 launch of Department of Justice “National Counter-Proliferation Initiative.” Aimed at illegal exports of dual use and military items that could harm US or contribute to WMD proliferation. Applying lessons learned from counter-terrorism. Led by Assistant Attorney General for National Security. Involves participation by National Security Division at Main Justice and US Attorney’s offices across the country, plus  FBI.  ICE (has doubled number of agents assigned to export control enforcement).  BIS.  DOD Criminal Investigative Service.  Bureau of Politico-Military Affairs at State Department. 40Alston & Bird©2012
  • 41. WWW.ALSTON.COMNational Counter-Proliferation Initiative What is being targeted?  Biotechnology.  Pharmaceuticals.  Nanotechnology.  Quantum computing.  Advanced materials.  Communications/encryption.  Weapons systems. Targeted technologies included components for nuclear weapons systems, guidance systems, basic ingredients for chemical/biological weapons, military aircraft components, naval warship data and night vision equipment. China and Iran particular concerns (cited in announcement). 41Alston & Bird©2012
  • 42. WWW.ALSTON.COMANTI-BOYCOTT 42Alston & Bird©2012
  • 43. WWW.ALSTON.COMANTI-BOYCOTT REQUIREMENTS UNDER EAR Require U.S. companies to refuse to participate in foreign boycotts that are not sanctioned by the U.S.  Primarily concerned with the Arab boycott of Israel. Five Prohibited Activities.  Boycott-based refusal or agreement to refuse to do business.  Furnishing or agreeing to furnish information about business relationships with a boycotted country or blacklisted person.  Boycott-based discrimination based on religion, race, sex or national origin.  Furnishing information on religion, race, sex or national origin of a U.S. person.  Implementing a Letter of Credit containing prohibited conditions. Reporting requirements. Penalties are the same as for violation of export control laws with additional IRS penalties such as loss of foreign tax credits. 43 Alston & Bird©2012
  • 44. WWW.ALSTON.COMANTI-BOYCOTT JURISDICTION Applies to “Any person who is a United States resident or national, including individuals, domestic concerns, and ‘controlled in fact’ foreign subsidiaries, affiliates, or other permanent foreign establishments of domestic concerns.”  “Control in fact” means “the authority or ability of a domestic concern to establish the general policies or to control day-to-day operations of its foreign subsidiary, partnership, affiliate, branch, office, or other permanent foreign establishment.” Prohibitions and reporting requirements for foreign subsidiaries are triggered if--  Their activities relate to the sale, purchase, or transfer of goods or services (including information) within the United States or between the U.S. and a foreign country.  Must be in interstate or foreign commerce of the United States.  For example, a boycott questionnaire request received by a United States person located outside the United States (i.e., a foreign subsidiary that is controlled in fact by any domestic concern) is reportable if it is received in connection with a transaction or activity in the interstate or foreign commerce of the United States. 44 Alston & Bird©2012
  • 45. WWW.ALSTON.COMUPDATE: STATUTORY ANDREGULATORY CHANGES 45Alston & Bird©2012
  • 46. WWW.ALSTON.COM PRESIDENT’S NATIONAL EXPORT INITIATIVE – EXPORT REFORM Goal is to abandon the three different licensing agencies (BIS, DDTC, OFAC), two different item-based control lists (CCL and USML), and establish a new system that features:  1) Single commodity control list, broken into tiers of control and clearly indentified through “bright lines” where items are classified, and with several items moving to lower control tiers compared to current controls or dropped from the control list altogether.  2) Single licensing agency, including a single license application.  3) Single enforcement-coordination agency.  4) Single IT system for use by both exporters and the government regulators. 46 Alston & Bird©2012
  • 47. WWW.ALSTON.COM PRESIDENT’S EXPORT CONTROL REFORM INITIATIVE - PHASES Phase I focuses on developing criteria-based control lists.  Refine and harmonize “control list” definitions and structure (to facilitate eventual merging of USML and CCL by statute in Phase III).  Develop criteria to classify technologies into three categories, according to their military importance, thus controlling the most sensitive items while allowing the export of less critical ones under less restrictive conditions.  Initial integrated enforcement center and identifying IT needs to facilitate the creation of a single U.S. government point of contact. Phase II focuses on consolidating licensing procedures.  Complete harmonizing and restructuring of control lists into identical tiered control lists, thus moving closer toward a single control list.  Implement licensing harmonization.  Administrative enforcement procedures and self-disclosure processes. Phase III focuses on congressional approval to complete the overhaul of U.S. export controls.  Would completely merge the two control lists into a single list and establish a single licensing agency and a single enforcement coordination agency. 47 Alston & Bird©2012
  • 48. WWW.ALSTON.COM OFAC – IRAN Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (H.R. 2194) (“CISADA”). Signed into law July 1, 2010. Four main provisions:  Ban on exports/imports (export and reexport provisions mirror those already in existence).  Amendments to Iran Sanctions Act.  Bank provisions.  Divestment provisions. Links to more details on CISADA, Iran:  http://www.alston.com/files/docs/AIBAPPT312.pdf  http://www.alston.com/Files/Publication/57c9eeec-9079-40e1-9d8a- a2eb813bab7e/Presentation/PublicationAttachment/009bec6f-c8ae-4998-9847-a7ddd167efd2/12- 270%20SANCTIONS%20ON%20IRAN%20AND%20SYRIA.pdf 48 Alston & Bird©2012
  • 49. WWW.ALSTON.COMALSTON & BIRD INTERNATIONALTRADE & REGULATORY GROUP 49Alston & Bird©2012
  • 50. WWW.ALSTON.COMITRG MEMBERS Partners (three senior partners with over 30 years’experience each): Tom Crocker, Ken Weigel, Jon Fee, Jason Waite, Liz Hein Associates: Jeff Schwartz, Diego Marquez, BJ Shannon, Chris Lucas, Lian Yang Policy Advisor: Eric Shimp Related Practices: Bob Driscoll (Litigation, Investigations), Brian Frey (Litigation, Investigations), Senators Bob Dole and Blanche Lincoln (Legislative) 50 Alston & Bird©2012
  • 51. WWW.ALSTON.COM PRACTICE AREAS Import and customs.  Preferential and regional trade agreements. Export controls (Commerce and State Departments).  Committee on Foreign Investment in the United States Office of Foreign Assets (“CFIUS”) national security Control (“OFAC”) sanctions. reviews/approvals. Foreign Corrupt Practices Act  Section 337 (unfair (“FCPA”). imports/infringement). Trade remedies – antidumping,  Trade policy and legislation. countervailing duty, etc. 51 Alston & Bird©2012
  • 52. WWW.ALSTON.COMPROFESSIONAL SERVICES  Compliance counseling, compliance programs and procedures and employee training.  Representation before U.S. government agencies (rulings, notifications, guidance, advocacy) and U.S. courts.  Audits.  Investigations (government and internal).  Enforcement proceedings (administrative and criminal). 52Alston & Bird©2012