INTERNATIONAL TRADE PITFALLSDavid Garrett, Nexsen Pruet
Foreign Corrupt Practices Act Anti-Bribery Provisions Accounting & Internal• Cannot pay or offer to Controls pay money or anything of • Must make and keep value books, records and• Directly or indirectly accounts• To any foreign • In reasonable detail which official/foreign political accurately and fairly party reflect transactions and dispositions of company’s• To obtain or retain business assets
FCPA – Anti-Bribery Provisions8 elements:1. Use of Instrumentality of interstate commerce2. To authorize a payment, make a payment, offer a payment or promise a payment;3. Of money or anything of value4. With corrupt intent5. To a covered person6. By a covered person (that’s you)7. To influence any act or omission of the covered person, induce covered person to do or omit an act in violation of his lawful duty, use influence a foreign government, or secure any improper advantage8. In order to assist in obtaining or retaining business for or with, or directing business to, any person.
What’s not a payment to facilitate?“routine governmental actions” are not FCPA violations:• Obtaining permits, licenses or other official documents• Processing governmental papers like visas and work orders• Providing police protection• Mail pick up and delivery• Phone service, water, power• Loading or unloading cargo• Scheduling inspections associated with contract performance or transit of goods across country
Common Red Flags• Excessive commissions to third party agents or consultants• Unreasonably large discounts to distributors• “Consulting agreements” that include very vaguely described services• Third party consultant in a different line of business• Third party related to or closely associated with foreign official• Third party gets involved after request or insistence of foreign official• Third party is a mere shell company, usually incorporated offshore• Third party requests payment to offshore bank accounts
Some Safeguards• Pay all costs directly to travel and lodging vendors, or reimburse costs only on presentation of receipt• Don’t advance funds or pay for reimbursements in cash• Ensure stipends are reasonable approximations of costs likely to be incurred• Make expenditures transparent, within the company and to the foreign government. Ensure costs and expenses are accurately recorded in the company’s books and records• Do not ever condition payment on any action by a foreign official• Obtain written confirmation that payment of the expenses is not contrary to local law on questionable items• You are responsible for the actions of your agents and contractors
Know Your Alphabet OFAC – Office of Foreign Assets Control SDN – Specifically Designated National List BIS – Bureau of Industry and Security US DOC – U.S. Department of Commerce EAR – Export Administration Regulations ITAR – International Trafficking in Arms Regulations CCL – Commerce Control List
Denied Persons List• http://www.bis.doc.gov/dpl/default.shtm• “Know Your Customer” Check the parties to your transaction (including freight forwarders, intermediate consignees, and the ultimate consignee) against key U.S. Government Lists to Check to identify parties subject to denial orders or otherwise restricted or prohibited from engaging in U.S. export transactions. Look for “Red Flags”:
• The customer or its address is similar to one of the parties found on the Commerce Departments [BISs] list of denied persons.• The customer or purchasing agent is reluctant to offer information about the end-use of the item.• The products capabilities do not fit the buyers line of business, such as an order for sophisticated computers for a small bakery.• The item ordered is incompatible with the technical level of the country to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country that has no electronics industry.• The customer is willing to pay cash for a very expensive item when the terms of sale would normally call for financing.• The customer has little or no business background.• The customer is unfamiliar with the products performance characteristics but still wants the product.• Routine installation, training, or maintenance services are declined by the customer.• Delivery dates are vague, or deliveries are planned for out of the way destinations.• A freight forwarding firm is listed as the products final destination.• The shipping route is abnormal for the product and destination.• Packaging is inconsistent with the stated method of shipment or destination.• When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export, or for reexport.
Entity List http://www.bis.doc.gov/entities/default.htm The Export Administration Regulations (EAR) contain a list of names of certain foreign persons – including businesses, research institutions, government and private organizations, individuals, and other types of legal persons – that are subject to specific license requirements for the export, reexport and/or transfer (in-country) of specified items Must get a license from the US DOC (or other agencies) to do business with a listed person
OFAC’s SDN List A list compiled by the Treasury Department, Office of Foreign Assets Control (OFAC). OFAC’s regulations may prohibit a transaction if a party on this list is involved. In addition, the Export Administration Regulations require a license for exports or reexports to any party in any entry on this list that contains any of the suffixes "SDGT", "SDT", "FTO", "IRAQ2" or "NPWMD". If on the SDN List, their assets are blocked and U.S. persons are generally prohibited from dealing with them
David J. Garrett, Special Counsel 4141 Parklake Ave., Suite 200 Raleigh, NC 27612 (919) 755-1800 email@example.com
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