U.S. Trade Controls: What You Need to Know in 2014 LIVE Webcast

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In a two hour live webcast, a panel of thought leaders and practitioners assembled by the Knowledge Group will discuss the latest issues regarding U.S. trade controls. Speakers will help firms better understand recent legal developments that impact their ability to conduct business overseas and develop sound strategies for trade controls compliance.

To view the webcast go to this link: http://youtu.be/FTeH0Zp6JHA

To learn more about the webcast please visit our website: http://theknowledgegroup.org/

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U.S. Trade Controls: What You Need to Know in 2014 LIVE Webcast

  1. 1. Speaker Firms and Organization: Sheppard, Mullin, Richter & Hampton LLP J. Scott Maberry Partner Fluet Huber + Hoang PLLC Jennifer S. Huber Partner Kirkland & Ellis LLP Laura Fraedrich Partner Thank you for logging into today’s event. Please note we are in standby mode. All Microphones will be muted until the event starts. We will be back with speaker instructions @ 09:55am. Any Questions? Please email: Info@knowledgecongress.org Group Registration Policy Please note ALL participants must be registered or they will not be able to access the event. If you have more than one person from your company attending, you must fill out the group registration form. We reserve the right to disconnect any unauthorized users from this event and to deny violators admission to future events. To obtain a group registration please send a note to info@knowledgecongress.org or call 646.202.9344. Presented By: May 09, 2014 1 Partner Firms:
  2. 2. May 09, 2014 2  If you experience any technical difficulties during today’s WebEx session, please contact our Technical Support @ 866-779-3239.  You may ask a question at anytime throughout the presentation today via the chat window on the lower right hand side of your screen. Questions will be aggregated and addressed during the Q&A segment.  Please note, this call is being recorded for playback purposes.  If anyone was unable to log in to the online webcast and needs to download a copy of the PowerPoint presentation for today’s event, please send an email to: info@knowledgecongress.org. If you’re already logged in to the online webcast, we will post a link to download the files shortly.  If you are listening on a laptop, you may need to use headphones as some laptops speakers are not sufficiently amplified enough to hear the presentations. If you do not have headphones and cannot hear the webcast send an email to info@knowledgecongress.org and we will send you the dial in phone number.
  3. 3. May 09, 2014 3  About an hour or so after the event, you'll be sent a survey via email asking you for your feedback on your experience with this event today - it's designed to take less than two minutes to complete, and it helps us to understand how to wisely invest your time in future events. Your feedback is greatly appreciated. If you are applying for continuing education credit, completions of the surveys are mandatory as per your state boards and bars. 6 secret words (3 for each credit hour) will be given throughout the presentation. We will ask you to fill these words into the survey as proof of your attendance. Please stay tuned for the secret word.  Speakers, I will be giving out the secret words at randomly selected times. I may have to break into your presentation briefly to read the secret word. Pardon the interruption.
  4. 4. May 09, 2014 4 Welcome to the Knowledge Group Unlimited Subscription Programs. We have Two Options Available for You: FREE UNLIMITED: This program is free of charge with no further costs or obligations. It includes:  Unlimited access to over 15,000 pages of course material from all Knowledge Group Webcasts.  Subscribers to this program can download any slides, white papers, or supplemental material covered during all live webcasts.  50% discount for purchase of all Live webcasts and downloaded recordings. PAID UNLIMITED: Our most comprehensive and cost-effective plan, for a one-time fee:  Access to all LIVE Webcasts (Normally $199 to $349 for each event without a subscription). Including: Bring-a-Friend – Invite a client or associate outside your firm to attend for FREE. Sign up for as many webcasts as you wish.  Access to all of Recorded/Archived Events & Course Material includes 1,500+ hours of audio material (Normally $299 for each event without a subscription).  Free CLE/CPE/CE Processing (Normally $49 Per Course without a subscription).  Access to over 15,000 pages of course material from Knowledge Group Webcasts.  Ability to invite a guest of your choice to attend any live webcast Free of charge (Exclusive benefit only available for PAID UNLIMITED subscribers).  6 Month Subscription is $299 with No Additional Fees Other options are available.  Special Offer: Sign up today and add 2 of your colleagues to your plan for free Check the “Triple Play” box on the sign-up sheet contained in the link below. https://gkc.memberclicks.net/index.php?option=com_mc&view=mc&mcid=form_157964
  5. 5. May 09, 2014 5 Knowledge Group UNLIMITED PAID Subscription Programs Pricing: Individual Subscription Fees: (2 Options) Semi-Annual: $299 one-time fee for a 6 month subscription with unlimited access to all webcasts, recordings, and materials. Annual: $499 one-time fee for a 12 month unlimited subscription with unlimited access to all webcasts, recordings, and materials. Group plans are available. See the registration form for details. Best ways to sign up: 1. Fill out the sign up form attached to the post conference survey email. 2. Sign up online by clicking the link contained in the post conference survey email. 3. Click the link below or the one we just posted in the chat window to the right. https://gkc.memberclicks.net/index.php?option=com_mc&view=mc&mcid=form_157964 Discounts: Enroll today and you will be eligible for the “Triple Play” program and 3% off if you pay by credit card. Also we will waive the $49 CLE/CPE processing fee for today’s conference. See the form attached to the post conference survey email for details. Questions: Send an email to: info@knowledgecongress.org with “Unlimited” in the subject.
  6. 6. Partner Firms: May 09, 2014 6 Fluet Huber + Hoang (FH+H) is a values based law firm that serves as advocate, counsel, and champion for clients worldwide. Started by 1 lawyer in 1 office with 1 client, FH+H has rapidly grown to five practice groups – Government Contracts, International Trade + Transaction, Litigation + Investigation, Corporate + M&A, Employment + Labor – that serves the needs of hundreds of businesses and individuals. We're dedicated to improving lives and helping business grow. Sheppard Mullin is a full service Global 100 firm with 650 attorneys in 15 offices located in the United States, Europe and Asia. Since 1927, companies have turned to Sheppard Mullin to handle corporate and technology matters, high stakes litigation and complex financial transactions. In the U.S., the firm's clients include more than half of the Fortune 100. For more information, please visit www.sheppardmullin.com. Kirkland & Ellis LLP is a global law firm with approximately 1,600 lawyers representing clients in complex private equity, corporate and tax, litigation and dispute resolution/arbitration, restructuring, and intellectual property and technology matters. The Firm has offices in Beijing, Chicago, Hong Kong, London, Los Angeles, Munich, New York, Palo Alto, San Francisco, Shanghai and Washington, D.C.
  7. 7. Brief Speaker Bios: Jennifer S. Huber Ms. Huber is widely-recognized as an elite international trade and business transactions attorney with an exceptional ability to bring creative business and legal solutions to fast-paced, high-risk environments. She has particular experience negotiating and closing complex international transactions involving numerous parties, complex regulatory requirements, corporate formation overseas, and the interplay of foreign and domestic law in emerging economies. May 09, 2014 7 J. Scott Maberry Mr. Maberry is an International Trade partner in the Government Contracts, Investigations & International Trade Practice Group in the Washington, D.C. office of Sheppard, Mullin, Richter & Hampton LLP. Mr. Maberry's expertise includes counseling and litigation in export controls, the Foreign Corrupt Practices Act (FCPA), anti-terrorism, economic sanctions, anti-boycott controls, and Customs. He also represents clients in negotiations and dispute resolution under the World Trade Organization (WTO), North American Free Trade Agreement (NAFTA), and other multilateral and bilateral agreements.
  8. 8. Brief Speaker Bios: Laura Fraedrich Laura Fraedrich represents clients in a broad range of export control, customs, and trade remedy matters. She advises and represents clients with respect to export control matters, including issues related to the International Traffic in Arms Regulations, the Export Administration Regulations, and the various embargoes administered by the Office of Foreign Assets Control. She also represents importers in all types of U.S. customs matters, including ruling requests, prior disclosures, protests, penalties, seizures, liquidated damages, and audits covering classification, valuation, country of origin, and trade preference issues. Her trade remedy experience includes antidumping and countervailing duty matters, Section 201 and Section 421 proceedings, and Section 337 cases. Antidumping and countervailing duty experience extends to all areas of such proceedings at both the U.S. Department of Commerce and the U.S. International Trade Commission, including investigations, administrative reviews, sunset reviews, scope inquiry proceedings, and changed circumstances reviews, as well as NAFTA panel reviews. She also assists companies in evaluating whether to seek clearance for foreign acquisitions in the United States and prepares joint notifications to the Committee on Foreign Investment in the United States. Finally, she counsels clients with respect to the Foreign Corrupt Practices Act and represents their interests before U.S. enforcement agencies. May 09, 2014 8 ► For more information about the speakers, you can visit: http://theknowledgegroup.org/event_name/u-s-trade-controls-what-you-need-to-know-in-2014-live-webcast/
  9. 9. In a two hour live webcast, a panel of thought leaders and practitioners assembled by the Knowledge Group will discuss the latest issues regarding U.S. trade controls. Speakers will help firms better understand recent legal developments that impact their ability to conduct business overseas and develop sound strategies for trade controls compliance. May 09, 2014 9
  10. 10. Featured Speakers: May 09, 2014 10 Jennifer S. Huber Partner Fluet Huber + Hoang PLLC Laura Fraedrich Partner Kirkland & Ellis LLP J. Scott Maberry Partner Sheppard, Mullin, Richter & Hampton LLP
  11. 11. Introduction Mr. Maberry is an International Trade partner in the Government Contracts, Investigations & International Trade Practice Group in the Washington, D.C. office of Sheppard, Mullin, Richter & Hampton LLP. Mr. Maberry's expertise includes counseling and litigation in export controls, the Foreign Corrupt Practices Act (FCPA), anti- terrorism, economic sanctions, anti-boycott controls, and Customs. He also represents clients in negotiations and dispute resolution under the World Trade Organization (WTO), North American Free Trade Agreement (NAFTA), and other multilateral and bilateral agreements. His practice includes representing clients before the U.S. Department of Treasury Office of Foreign Assets Control (OFAC), Department of Commerce Bureau of Industry & Security (BIS), the Department of State Directorate of Defense Trade Controls (DDTC), the U.S. Department of Justice (DOJ), the International Trade Commission (ITC), the Committee on Foreign Investment in the United States (CFIUS), federal courts and grand jury proceedings, and WTO and NAFTA dispute resolution panels. May 09, 2014 11 J. Scott Maberry Partner Sheppard, Mullin, Richter & Hampton LLP
  12. 12. Introduction Ms. Huber is widely-recognized as an elite international trade and business transactions attorney with an exceptional ability to bring creative business and legal solutions to fast-paced, high-risk environments. She has particular experience negotiating and closing complex international transactions involving numerous parties, complex regulatory requirements, corporate formation overseas, and the interplay of foreign and domestic law in emerging economies. Ms. Huber routinely counsels corporate clients in all aspects of cross-border transactions, including export control, anti- bribery and corruption, international joint ventures negotiation, structuring, and documentation, and establishment of foreign subsidiaries. Her practice also includes counseling in international compliance support, including ITAR, EAR, OFAC, FCPA, foreign ownership, control and influence (FOCI) mitigation, and the review of transactions requiring approval by the Committee of Foreign Investment in the United States (CFIUS). Ms. Huber has specific expertise in the defense, intelligence, and security industries, and holds an active TS-SCI security clearance. May 09, 2014 12 Jennifer S. Huber Partner Fluet Huber + Hoang PLLC
  13. 13. Introduction Laura Fraedrich represents clients in a broad range of export control, customs, and trade remedy matters. She advises and represents clients with respect to export control matters, including issues related to the International Traffic in Arms Regulations, the Export Administration Regulations, and the various embargoes administered by the Office of Foreign Assets Control. She also represents importers in all types of U.S. customs matters, including ruling requests, prior disclosures, protests, penalties, seizures, liquidated damages, and audits covering classification, valuation, country of origin, and trade preference issues. Her trade remedy experience includes antidumping and countervailing duty matters, Section 201 and Section 421 proceedings, and Section 337 cases. Antidumping and countervailing duty experience extends to all areas of such proceedings at both the U.S. Department of Commerce and the U.S. International Trade Commission, including investigations, administrative reviews, sunset reviews, scope inquiry proceedings, and changed circumstances reviews, as well as NAFTA panel reviews. She also assists companies in evaluating whether to seek clearance for foreign acquisitions in the United States and prepares joint notifications to the Committee on Foreign Investment in the United States. Finally, she counsels clients with respect to the Foreign Corrupt Practices Act and represents their interests before U.S. enforcement agencies. May 09, 2014 13 Laura Fraedrich Partner Kirkland & Ellis LLP
  14. 14. Introduction to ITAR Subject matter: Anything specially designed or modified for military use; U.S. Munitions List a catch-all Coverage: Commodities, technical data, services Regulator: Directorate of Defense Trade Controls Method: License required to all destinations Regulations: • International Traffic in Arms Regulations, 22 C.F.R. Subchapter M • http://www.pmddtc.state.gov/regulations_laws/itar.ht ml • http://fullcirclecompliance.eu/shop/bartlett- annotated-itar/ 14
  15. 15. Introduction to EAR Subject matter: Items in “Commerce Control List” defined by performance specs Coverage: Commodities, technology Regulator: Bureau of Industry and Security Method: Matrix of performance and destination Regulations: • Export Administration Regulations, 15 C.F.R. Part 730 et seq. • http://www.bis.doc.gov/index.php/regulations/export- administration-regulations-ear/ 15
  16. 16. 2009: President Obama orders a broad-based review of export controls 2010: Defense Secretary Gates announces fundamental reform of export control system 2011: First proposed rules revising USML and CCL 2012: First ECR rules go into effect 16 Export Control Reform Timeline
  17. 17. “Higher walls around fewer items” • Make the USML a positive list • Move many items from USML to CCL • New definition of “Specially Designed” common to USML and CCL 17 ECR Essentials
  18. 18. 18 ITAR Controls: License required to all destinations Former “catch-all” items EAR Controls: More export opportunities ECR Essentials
  19. 19. 1. Review the USML – Review enumerated items – Catch-and-release under “specially designed” definition 2. If not on the USML, review the CCL 3. Determine CCL category and product group 4. Review applicable “600 series” entries – Specifically enumerated items – Categories .x and .y 5. Review applicable non-600 series entries 19 ECR Essentials: Order of Review
  20. 20. An end item or material is specially designed if: 1. As a result of “development” 2. Has properties peculiarly responsible for 3. achieving or exceeding performance specifications 4. In the relevant CCL or USML paragraph. A part, accessory, attachment, component or software is specially designed if: 1. It is for use “in or with” 2. Items in the relevant CCL or USML paragraph. 20 Specially Designed – “Catch”
  21. 21. 1. For any item: if listed in a paragraph not containing “specially designed” 2. For any part: if a fastener (screw, nut, rivet, pin, etc.) Released from “specially designed” 21 Specially Designed – “Release”
  22. 22. For parts, attachments, accessories, components, or software: 3. If the item has the same capabilities, function, and form as an item in production not enumerated on CCL or USML 4. If the item was developed with knowledge it would be used in or with items not enumerated on CCL or USML 5. If the item was developed as a general purpose commodity or software 6. If the item was developed with knowledge it would be used with EAR99 commodities Released from “specially designed” 22 Specially Designed – “Release”
  23. 23. 23 ECR Status USML Description ECCNs Status I Firearms 0y601 Final rule TBD II Artillery 0y602 Final rule TBD III Ammunition 0y603 Final rule TBD IV Launch Vehicles/Missiles 9y604 Effective July 1, 2014 V Explosives/Propellants 1y608 Effective July 1, 2014 VI Vessels of War 8y609 Effective January 6, 2014 VII Tanks/Military Vehicles 0y606 Effective January 6, 2014 VIII Aircraft 9y610 Effective October 15, 2014 IX Training Equipment 0y614 Effective July 1, 2014 X Personal Protective Equipment 1y613 Effective July 1, 2014
  24. 24. 24 ECR Status (cont’d) USML Description ECCNs Status XI Electronics 3y611, 9y620 Final rule TBD XII Fire Control/Sensors/Night Vision TBD Final rule TBD XIII Miscellaneous 0y617 Effective January 6, 2014 XIV Toxicological Agents 1y607 Final Rule TBD XV Spacecraft/Satellites 9y515 Final Rule TBD XVI Nuclear N/A Effective July 1, 2014 XVII Classified Articles and Services N/A Effective October 15, 2014 XVIII Directed Energy Weapons TBD Final rule TBD XIX Gas Turbine Engines 9y619 Effective October 15, 2014 XX Submersible Vessels 8y620 Effective January 6, 2014
  25. 25. May 09, 2014 25 What is the FCPA? In very general terms, the FCPA is a U.S. law prohibiting payments to foreign officials in exchange for preferential treatment.
  26. 26. May 09, 2014 26 What Constitutes a “Foreign Official?” • A “foreign official” is any “officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.” 15 U.S.C. § 78dd-1(f)(1)(A). • The FCPA also prohibits corrupt payments to foreign political parties and their officials, and to candidates for foreign political offices. • BUT WAIT- In addition, corrupt payments to an otherwise permitted individual may also be prohibited if the payer knows that such individual will, in turn, offer, give, or promise the payment (or part of the payment) to a foreign official, official of a foreign political party, or a candidate for foreign political office.
  27. 27. May 09, 2014 27 What Constitutes a “Corrupt Payment?” • Anything of value! – Travel Expenses – Gifts – Entertainment – CASH • Success = Irrelevant – The mere offering, promising, or authorization to provide a corrupt payment constitutes a violation of the FCPA. • Size = Irrelevant – The magnitude of the object or service given, offered, promised or authorized is wholly irrelevant. Furthermore, even idiosyncratic gifts, if considered valuable by the recipient, can constitute a corrupt payment.
  28. 28. May 09, 2014 28 What Does “Corruptly” Mean? In order for a payment to qualify as “corrupt,” it must be made with the intent to incentivize the recipient to abuse his/her authority by granting preferential treatment, failing to take action, or improperly directing business towards the payer.
  29. 29. May 09, 2014 29 Recent Enforcement Actions 1. Hewlett-Packard Company (April, 2014) • Hewlett-Packard subsidiaries in Mexico, Poland, and Russia orchestrated complex schemes through which they funneled millions of dollars to government officials in exchange for valuable contracts with the Office of the Prosecutor General of the Russian Federation, the Polish National Policy agency, and Pemex, respectively. • Total criminal and regulatory penalties: over $108,000,000 • TAKEAWAY: Monitor your subsidiaries! 2. Marubeni Corporation (March 19, 2014) • Marubeni used two consultants to pay officials of Perusahaan Listrik Negara, Indonesia’s state-owned and state-controlled electricity company, hundreds of thousands of dollars in exchange for the lucrative “Taharan” contract. • Total criminal fine: $88,000,000 • TAKEAWAY: Are your consultants really “consulting?” What is their precise role? 3. Alcoa World Alumina LLC (January 9, 2014) • Through using an intermediary with close ties to the Bahraini Royal Family, Alcoa’s Australian subsidiary made tens of millions of dollars in corrupt payments to foreign officials in exchange for a long-term supply agreement with a government- controlled aluminum smelter. • Total criminal and regulatory penalties: $384,000,000 • TAKEAWAY: Know your intermediaries!
  30. 30. May 09, 2014 30 Recent Advisory Opinions 1. March 17, 2014 • Summary: DOJ declined to take enforcement action against Requestor for its payments to a foreign official in exchange for the official’s minority interest in a business that he owned prior to his government service. • Key Considerations: – Intent – Independent Share Evaluation – Meaningful Disclosures 2. December 19, 2013 • Summary: DOJ declined to take enforcement action against Requestor for its payments of a foreign official’s daughter’s medical expenses. • Key Considerations: – Adequate Assurances – Intent – Hospital = Recipient 3. September 18, 2012 • Summary: DOJ declined to take enforcement action against Requestor, a U.S. lobbying firm for a foreign country, for its payments to a consultant whose ownership was connected to such country’s royal family. • Key Considerations: – Owner’s Representations and Powers – No Corrupt Influence – Focus on Compliance
  31. 31. May 09, 2014 31 FCPA Compliance Strategies for Emerging Markets Pre-Transaction Compliance Strategies 1. Legal, regulatory and cultural research • Identify controlling entities – Government? – Military? – Militias/Tribes? • Local presence requirements – Likely in flux, so distinguish formal from informal requirements • Permit requirements (if any) – Business licenses – Visas – Customs permits • Cultural pressure points – Is corruption concentrated in particular ministries and sectors? • Transparency International • Leverage in-country network 2. Identify and assess all intermediaries pre- transaction • Local representatives • Consultants • Logisticians • Close-protection security • Couriers • Transportation providers • Translators 3. Customize international party questionnaires, anti- corruption certifications, and training materials to each in-country party (including clients) • Translate everything! 4. Set Tone • Establish low tolerance for corruption at outset
  32. 32. May 09, 2014 32 FCPA Compliance Strategies for Emerging Markets Ongoing Compliance Strategies 1. Experienced cadre of in-country support staff • Lawyers • Accountants • Bankers 2. In-country situational awareness • Scheduled and unscheduled visits to intermediaries, support personnel, and clients • Communicate, communicate, communicate! 3. Sophisticated reporting requirements and mechanisms • Internal • External 4. Hyper-focused accounting personnel • Remember- the first signs of corruption will appear in irregular financial reporting 5. Alertness to political, legal, regulatory, military, and religious shifts 6. Adaptability • Continually assess and re-assess efficacy of compliance strategy in light of in-country events and evolving client requirements 7. Dynamic disclosure strategy 8. Ongoing communications with trade counsel
  33. 33. May 09, 2014 33 Navigating Intermediary Relationships 1. Thorough Due Diligence • Initiate Early • International Party Questionnaires • Anti-Corruption Certifications • Investigative Follow-Up • Red Flags 2. Effective Training • Practical Approach • Translated • In-Person • Training Modules – Assess responses! • Emphasize: – Consequences (legally and contractually) – Corporate Commitment 3. Sustained Monitoring • Robust Accounting Program • Frequent and In-Person Contact
  34. 34. May 09, 2014 34 Detection Mechanisms 1. Development of Transaction-Specific Red Flags 2. In-Country Presence 3. Robust Accounting Program 4. Routine and Non-Routine In-Country Audits 5. Anonymous Reporting Hotline 6. Private Investigative Services • Recommended for select occasions 7. Culture of Compliance • Leadership should encourage the reporting of non-compliance, and this message should be widely disseminated. 8. Reporting Requirements in Third-Party Contracts
  35. 35. U.S. ECONOMIC SANCTIONS May 09, 2014 35
  36. 36. Overview of U.S. Economic Sanctions Laws May 09, 2014 36
  37. 37. U.S. ECONOMIC SANCTIONS  U.S. economic sanctions prohibit trade and other dealings by U.S. persons with certain countries, entities and persons for national security or other foreign policy goals.  These laws and regulations are more likely to be violated by transactions that occur outside the United States.  Failure to comply can result in large penalties and even jail time for violators. May 09, 2014 37
  38. 38. Overview  The U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) is a United States administrative agency that primarily administers two sets of laws:  prohibitions on transactions with Specially Designated Nationals (“SDNs”) and Blocked Persons (terrorists, arms dealers, drug dealers, threats to national security) and Foreign Sanctions Evaders; and  restrictions on trade with several key countries and their nationals (Iran, Syria, Sudan, Cuba and, to a more limited degree, North Korea, among others).  These laws apply to U.S. companies, U.S. persons wherever located, and, in some cases, the activities of subsidiaries of U.S. companies. May 09, 2014 38
  39. 39. OFAC Specially Designated Nationals  What are OFAC Specially Designated Nationals (“SDNs”)?  OFAC publishes a list of Specially Designated Nationals and Blocked Persons (SDN List), which includes both individuals and entities with whom U.S. persons and entities are prohibited from transacting business and to whom U.S. persons cannot provide services.  SDNs are designated under one of several regulatory schemes designed to address perceived threats to U.S. national security and other foreign policy goals of the United States, such as international drug trafficking, human rights violations, international terrorism, proliferation of weapons of mass destruction and certain countries’ regimes or former regimes. May 09, 2014 39
  40. 40. Specially Designated Nationals  What are Specially Designated Nationals (“SDNs”)? (cont’d)  For example, SDNs may be individuals designated for the following reasons:  Based on affiliation with or connection to narcotics trafficking organizations under the Specially Designated Narcotics Traffickers Sanctions Regulations;  Based on affiliation with or connection to terrorist organizations such as under the Foreign Terrorist Organization Sanctions Regulations or Global Terrorism Sanctions Regulations;  Because of concerns related to the proliferation of weapons of mass destruction under Weapons of Mass Destruction Sanctions Regulations or the Weapons of Mass Destruction Trade Control Regulations; or  Based on a myriad of foreign policy concerns related to U.S. foreign relations under country- based sanctions regulations which extend to certain individuals, typically those associated with particular regimes or affiliated with the governments or former regimes of Belarus, Burma, Côte d’lvoire, Democratic Republic of the Congo, Iraq, Lebanon, Liberia, Libya, Russia, Somalia, South Sudan, Ukraine, the Western Balkans, Yemen and Zimbabwe. May 09, 2014 40
  41. 41. Specially Designated Nationals  What are Specially Designated Nationals (“SDNs”)? (cont’d)  Any entity at least 50% owned by an SDN is itself considered an SDN, regardless of whether that entity has been officially designated as such by OFAC.  Furthermore, OFAC also prohibits engaging in any transaction that “evades or avoids, has the purpose of evading or avoiding” U.S. sanctions. May 09, 2014 41
  42. 42. Specially Designated Nationals Facilitation  Facilitation prohibited  In addition to the prohibition on direct transactions, no U.S. person or entity may participate in any way in a transaction with an SDN that may be lawfully conducted by a foreign person or entity.  The term “facilitation” is construed broadly by OFAC to encompass even mere approvals and back-office services.  For example, U.S. persons may “facilitate” a transactions by:  supervising personnel;  approving business plans or credit; and  providing back-office services such as IT services. May 09, 2014 42
  43. 43. Specially Designated Nationals Blocked Property  What is blocked property?  Property and interest in property belonging to an SDN is “blocked,” or effectively frozen.  U.S. persons that have possession or control of the property or interest in property of an SDN are required to place such property in blocked, interest-bearing accounts and report the blocked property to OFAC within 10 business days.  Annual reporting requirements also apply. May 09, 2014 43
  44. 44. Foreign Sanctions Evaders (“FSEs”)  OFAC publishes a list of foreign individuals and entities determined to have violated, attempted to violate, conspired to violate, or caused a violation of U.S. sanctions on Syria or Iran.  The Foreign Sanctions Evaders list also identifies foreign persons who have facilitated deceptive transactions for or on behalf of persons subject to U.S. sanctions.  Transactions by U.S. persons or within the United States involving FSEs are prohibited. May 09, 2014 44
  45. 45. Country-Based Sanctions Regimes  OFAC regulations generally prohibit any and all transactions (such as exports of products and the provision of services) with, to, in, involving, or relating to countries subject to comprehensive U.S. sanctions or persons in these countries.  Comprehensive sanctions apply to Cuba, Iran, Sudan, Syria and, to a more limited extent, North Korea. May 09, 2014 45
  46. 46. Country-Based Sanctions Regimes Iran, Sudan, Syria and Cuba  What is prohibited?  Among other types of transactions, OFAC regulations largely prohibit financial transactions with nationals of sanctioned countries or “where a benefit may be received” in a sanctioned country.  Furthermore, the Cuban Assets Control Regulations prohibit dealing in any property in which a Cuban national has an interest.  Thus, transactions with Cuban nationals are prohibited regardless of whether a benefit may ultimately be received in the sanctioned country, subject to some limited exceptions.  Like SDNs, property belonging to Cuban nationals is “blocked.” May 09, 2014 46
  47. 47. Application of Country-Based Sanctions to Foreign Subsidiaries of U.S. Companies  Cuba sanctions have always applied to foreign subsidiaries of U.S. companies.  Since October 2012, Iran sanctions also apply to foreign subsidiaries of U.S. companies owned (50% or more) or controlled by U.S. companies. May 09, 2014 47
  48. 48. Overview of Ukraine-Related Sanctions May 09, 2014 48
  49. 49. Ukraine-Related Sanctions  List-based sanctions so far.  March 6, 2014 E.O. 13660 authorizing sanctions on persons:  undermining democratic processes in Ukraine; threatening the peace, security and stability of Ukraine; asserting governmental authority in the Crimean region without the authorization of the government of Ukraine or; misappropriating Ukrainian state assets.  March 17, 2014 E.O. 13661 authorizing sanctions on:  officials of the Government of the Russian Federation  individuals or entities that operate in the arms or related materiel sector in the Russian Federation  parties that provide “material or other support to any senior official of the Government of the Russian Federation”  and designating Russian and Ukrainian officials  Additional designations since then and discussion of sector-related sanctions (March 20, 2014 E.O. 13662). May 09, 2014 49
  50. 50. Ukraine-Related Sanctions (cont’d.)  Certain ITAR licenses have been revoked and policy for license applications is one of denial.  13 companies have been added to the U.S. Commerce Department Entity List: requires a license to export and policy is one of denial. May 09, 2014 50
  51. 51. Overview of the January 20, 2014 Joint Plan of Action Related to Iran May 09, 2014 51
  52. 52. January 20, 2014 Joint Plan of Action between the United States, the United Kingdom, Germany, France, Russia, China and Iran  No change to Iran sanctions for U.S. companies and their owned or controlled non- U.S. affiliates.  Temporary suspension until July 20, 2014 of potential U.S. sanctions on non-U.S. persons engaging in transactions related to:  exports of petrochemical products from Iran;  Iran’s purchase or sale of gold or other precious metals;  Iran’s automotive sector;  spare parts for civil aviation (also favorable licensing policy for U.S. persons); and  exports of petroleum and petroleum products from Iran to China, India, Japan, the Republic of Korea, Taiwan or Turkey. May 09, 2014 52
  53. 53. January 20, 2014 Joint Plan of Action (cont’d.)  Activities and services must be initiated and completed during the Suspension Period.  Other sanctions on Iran, including those targeting Iran’s energy and petrochemical sectors, remain in place.  Suspension may be lifted at any time. May 09, 2014 53
  54. 54. Overview of OFAC’s General and Specific Licensing Program May 09, 2014 54
  55. 55. OFAC’s General and Specific Licensing Program: Exceptions to the OFAC Prohibitions  OFAC often issues general licenses, which authorize the performance of certain transactions that otherwise would be prohibited.  Upon request, OFAC also issues specific licenses on a case-by- case basis under certain limited situations and conditions. May 09, 2014 55
  56. 56. Examples of General Licenses: Iran  Iran General License - Authorizing the exportation or reexportation of medicine and basic medical supplies to Iran  Iran General License - Authorizing the Exportation or Reexportation of Food Items  Iran General License - Authorizing the Exportation or Reexportation of Replacement Parts for Certain Medical Devices  Iran General License​ - Related to Consular Funds Transfers and to the Transportation of Human Remains  Iran General License Related to Personal Communication Services - Exportation of certain services and software over the internet  Iran General License (No. 2) - Authorizing U.S. persons who are employees or contractors of six international organizations to perform transactions for the conduct of the official business of those organizations in or involving Iran  Iran General License (No. D) - General License with Respect to the Exportation and Reexportation of Certain Services, Software, and Hardware Incident to the Exchange of Personal Communications  Iran General License (No. D-1) - Iranian General License D-1 ("GL D-1"), amends Iran General License D and clarifies certain aspects of GL D and adds certain new authorizations.  Iran General License (No. E) - Authorizing Certain Services in Support of Nongovernmental Organizations’ Activities in Iran  Iran General License (No. F) - Authorizing Certain Services in Support of Professional and Amateur Sports Activities and Exchanges Involving the United States and Iran​  Iran General License (No. G) - Certain Academic Exchanges and the Exportation or Importation of Certain Educational Services Authorized May 09, 2014 56
  57. 57. Application for a Specific License  Most license applications are to be made by letter with a detailed description of the proposed transaction, including the names and addresses of any individuals or companies involved.  Can also apply online at OFAC’s website.  There is a specific form to be filed to apply for the release of blocked funds that is available on OFAC’s website.  License applications submitted under TSRA (Trade Sanctions Reform and Export Enforcement Act of 2000) for agricultural or medical goods should be submitted by hard copy. May 09, 2014 57
  58. 58. OFAC Specific Licensing Policies  OFAC periodically changes and publishes specific licensing policies.  For example:  Policy for specific licenses regarding transactions with Iran is one of denial.  Policy is favorable for transactions involving telecommunications and agriculture sectors in Iran.  Specific license applications can take months to process. May 09, 2014 58
  59. 59. Best Practices for International Trade Compliance: Compliance Programs, Detection Mechanism and Crisis Response May 09, 2014 59
  60. 60. Compliance Programs May 09, 2014 60
  61. 61. Effective Compliance Program Key Steps for an effective program:  Management Commitment: “Tone at the Top”  Risk Assessment: “Risk Based Approach”  Written Policies and Procedures  Responsible Personnel  Compliance Training  Recordkeeping  Monitoring and Auditing  Handling and Reporting Violations  Remediation May 09, 2014 61
  62. 62. Effective Compliance Program (cont’d.) Specific Export Control Steps:  Understand Jurisdiction: ITAR v. EAR.  Determine classification of item to be exported and whether a license is needed (certain countries may require a license for exports of certain items; also, ensure parties are not identified on Entity, Denied Persons, or Unverified Lists maintained by U.S. Department of Commerce, Bureau of Industry and Security).  Monitor post-shipment activities, including compliance with license conditions and whether there are re-exports, transfers, servicing or returns.  Prohibited end-uses. May 09, 2014 62
  63. 63. Effective Compliance Program (cont’d.) Specific OFAC Steps:  Companies engaging in international transactions need to screen third-parties: employees, customers, and vendors.  Companies also must ensure that transactions do not involve or otherwise relate to embargoed countries.  Screening can be done manually using information at http://www.treasury.gov/resource- center/sanctions/SDN-List/Pages/default.aspx and http://www.treasury.gov/resource- center/sanctions/SDN-List/Pages/fse_list.aspx.  Also, various vendors offer screening services that can be built into electronic systems.  Companies should also monitor changes in economic sanctions laws by visiting the OFAC Press Center at http://www.treasury.gov/press-center/Pages/default.aspx.  You can sign up for OFAC press alerts such as additions to or deletions from the SDN list and the FSE list.  Contracts with third parties should include compliance provisions to ensure that they do not conduct business in a manner that would cause you to violate economic sanctions laws. May 09, 2014 63
  64. 64. Effective Compliance Program (cont’d.) Specific Anti-Corruption Steps:  Contracts with third parties should include compliance provisions to ensure that they do not conduct business in a manner that would cause you to violate anti-corruption laws.  Companies should perform due diligence on any third-party agents and make sure that all contracts with such entities contain anti-corruption provisions.  Monitor sales to or other interactions with non-U.S. government officials entities. May 09, 2014 64
  65. 65. • Dedicate adequate resources immediately • Estimate the scope and severity first • Initial notification vs. final disclosure • Investigative best practices • Good writing counts • New School of Corrective Actions 65 Crisis Response: VSD Considerations
  66. 66. May 09, 2014 66 CLE PROCESSING The Knowledge Group offers complete CLE processing solutions for your webcasts and land events. This comprehensive service includes everything you need to offer CLE credit at your conference:  Complete end-to-end CLE credit Solutions  Setting up your marketing collateral properly.  Completing and filing all of the applications to the state bar.  Guidance on how to structure content meet course material requirements for the state Bars.  Sign up forms to be used to check & confirm attendance at your event.  Issuing official Certificates of Attendance for credit to attendees. Obtaining CLE credit varies from state to state and the rules can be complex. The Knowledge Group will help you navigate the complexities via complete cost effective CLE solutions for your conferences. Most CLE processing plans are just $499 plus filing fees and postage. To learn more email us at info@knowledgecongress.org or CALL 646-202-9344
  67. 67. May 09, 2014 67 PRIVATE LABEL PROGRAM & INTERNAL TRAINING The Knowledge Group provides complete private label webcasts and in-house training solutions. Developing and executing webcasts can be a huge logistical nightmare. There are a lot of moving parts and devolving a program that is executed smoothly and cost effectively can prove to be a significant challenge for companies who do not produce events on a regular basis. Live events require a high level of proficiency in order to execute proficiently. Our producers will plan and develop your webcast for you and our webcast technicians will execute your live event with expert precision. We have produced over 1000 live webcasts. Put our vast expertise to work for you. Let us develop a professional webcast for your firm that will impress all your clients and internal stakeholders. Private Label Programs Include:  Complete Project Management  Topic Development  Recruitment of Speakers (Or you can use your own)  Marketing Material Design  PR Campaign  Marketing Campaign  Event Webpage Design  Slides: Design and Content Development  Speaker coordination: Arranging & Executing Calls, Coordinating Slides & Content  Attendee Registration  Complete LIVE Event Management for Speaker and Attendees including: o Technical Support o Event Moderator o Running the Live event (All Aspects) o Multiple Technical Back-ups & Redundancies to Ensure a Perfect Live Event o Webcast Recording (MP3 Audio & MP4 Video) o Post Webcast Performance Survey  CLE and CPE Processing Private Label Programs Start at just $999
  68. 68. May 09, 2014 68 RESEARCH & BUSINESS PROCESS OUTSOURCING The Knowledge Group specializes in highly focused and intelligent market and topic research. Outsource your research projects and business processes to our team of experts. Normally we can run programs for less than 50% of what it would cost you to do it in-house. Here are some ideal uses for our services:  Market Research and Production o List Research (Prospects, Clients, Market Evaluation, Sales Lists, Surveys) o Design of Electronic Marketing Collateral o Executing Online Marketing Campaigns (Direct Email, PR Campaigns) o Website Design o Social Media  Analysis & Research o Research Companies & Produce Reports o Research for Cases o Specialized Research Projects  eSales (Electronic Inside Sales – Email and Online) o Sales Leads Development o eSales Campaigns  Inside Sales people will prospect for leased, contact them and coordinate with your sales team to follow up.  Our Inside eSales reps specialize in developing leads for big-ticket enterprise level products and services. o Electronic Database Building – Comprehensive service which includes development of sales leads, contacting clients, scoring leads, adding notes and transferring the entire data set to you for your internal sales reps.  eCustomer Service (Electronic Inside Sales – Email and Online) o Real-Time Customer Service for Your clients  Online Chat  Email o Follow-Up Customer Service  Responds to emails  Conducts Research  Replies Back to Your Customer Please note these are just a few ways our experts can help with your Business Process Outsourcing needs. If you have a project not specifically listed above please contact us to see if we can help.
  69. 69. ► You may ask a question at anytime throughout the presentation today. Simply click on the question mark icon located on the floating tool bar on the bottom right side of your screen. Type your question in the box that appears and click send. ► Questions will be answered in the order they are received. Q&A: May 09, 2014 69 Jennifer S. Huber Partner Fluet Huber + Hoang PLLC Laura Fraedrich Partner Kirkland & Ellis LLP J. Scott Maberry Partner Sheppard, Mullin, Richter & Hampton LLP
  70. 70. ► You may ask a question at anytime throughout the presentation today. Simply click on the question mark icon located on the floating tool bar on the bottom right side of your screen. Type your question in the box that appears and click send. ► Questions will be answered in the order they are received. Contact Info. April 03, 2014 70 Jennifer S. Huber Partner Fluet Huber + Hoang PLLC T: (703) 590-1234 E: jhuber@fluetlaw.com J. Scott Maberry Partner Sheppard, Mullin, Richter & Hampton LLP T: (202) 469-4975 E: smaberry@sheppardmullin.com Globaltradelawblog Laura Fraedrich Partner Kirkland & Ellis LLP T: (202) 879-5990 E: lfraedrich@kirkland.com
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  72. 72. May 09, 2014 72 Knowledge Group UNLIMITED PAID Subscription Programs Pricing: Individual Subscription Fees: (2 Options) Semi-Annual: $299 one-time fee for a 6 month subscription with unlimited access to all webcasts, recordings, and materials. Annual: $499 one-time fee for a 12 month unlimited subscription with unlimited access to all webcasts, recordings, and materials. Group plans are available. See the registration form for details. Best ways to sign up: 1. Fill out the sign up form attached to the post conference survey email. 2. Sign up online by clicking the link contained in the post conference survey email. 3. Click the link below or the one we just posted in the chat window to the right. https://gkc.memberclicks.net/index.php?option=com_mc&view=mc&mcid=form_157964 Discounts: Enroll today and you will be eligible for the “Triple Play” program and 3% off if you pay by credit card. Also we will waive the $49 CLE/CPE processing fee for today’s conference. See the form attached to the post conference survey email for details. Questions: Send an email to: info@knowledgecongress.org with “Unlimited” in the subject.
  73. 73. May 09, 2014 73 ABOUT THE KNOWLEDGE GROUP, LLC. The Knowledge Group, LLC is an organization that produces live webcasts which examine regulatory changes and their impacts across a variety of industries. “We bring together the world's leading authorities and industry participants through informative two-hour webcasts to study the impact of changing regulations.” If you would like to be informed of other upcoming events, please click here. Disclaimer: The Knowledge Group, LLC is producing this event for information purposes only. We do not intend to provide or offer business advice. The contents of this event are based upon the opinions of our speakers. The Knowledge Congress does not warrant their accuracy and completeness. The statements made by them are based on their independent opinions and does not necessarily reflect that of The Knowledge Congress' views. In no event shall The Knowledge Congress be liable to any person or business entity for any special, direct, indirect, punitive, incidental or consequential damages as a result of any information gathered from this webcast. Certain images and/or photos on this page are the copyrighted property of 123RF Limited, their Contributors or Licensed Partners and are being used with permission under license. These images and/or photos may not be copied or downloaded without permission from 123RF Limited

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