Complying with Trade Controls and Sanctions
United States (US) trade controls and sanctions have been enacted to enforce US foreign policy, safeguard national security, and deter terrorist activity. They are designed to control access to products, services, and information that could be used in ways contrary to the best interests of the US and its citizens. As the movement of goods and services across national borders, and the risks to national security increase, the US and other countries have increased their regulation and enforcement of a growing number of trade control and anti-corruption laws.
BBNC’s global reach puts us under the jurisdiction of many of these laws and regulations. These regulations apply to every employee and the subcontractors, brokers, and related entities involved in our business operations. It is important for all of us to be aware of the laws and regulations that apply, even if your job does not directly involve the export or import of products, services or data.
What is an Export?
An export is any item, technology or data that is transferred from one country to another. An export can exist even if there is no actual sale or compensation involved in the transaction. It can also exist if it is not transferred physically but, instead, is transferred electronically, by mail, by air or by ground transportation.
Both items and individuals involved in the export transaction are covered under US trade controls and sanctions. In fact, there has been a dramatic increase in prosecutions for violations of trade sanctions, export laws and related anti-corruption regulations in recent years. The penalties associated with these successful prosecutions have escalated just as dramatically, with some settlements with companies reaching into the hundreds of millions of dollars.
Why are violations increasing? In part, the increase in violations can be attributed to the sheer number of products exported from the US, the long distribution chains sometimes associated with those products, and the increase of applicable laws both domestic and foreign. Some of the laws, policies and regulations that relate to the export of products include the Arms Export Control Act (AECA), the International Traffic in Arms Regulations (ITAR), the Economic Espionage Act (EEA), the Export Administration Regulations (EAR) and the Foreign Corrupt Practices Act (FCPA), customs regulations and sanctions. Even individual government agencies including the US Food and Drug Administration and the Environmental Protection Agency may have specific trade control requirements for products under their jurisdiction.
What You Can Do?
Export/Import laws, trade controls, sanctions and anti-corruption laws are complex, not just in the US but in countries that import our products. That’s why we devote considerable resources, both human and technical, to managing BBNC’s international business and exports. We don’t expect all our employees to be experts but it is essential that all orders and requests for proposals be screened. Here are some of the most important questions you should consider when you handle an international transaction:
-What is the item to be exported? Some items are tightly restricted, such as weapons. Screen all export items to make sure they do not appear on any of the US government’s list of restricted items – and make sure you use the most current list. New items are added or deleted on a regular basis.
-Where is the item going? The US imposes embargoes on certain restricted countries including Iran, Cuba and Syria. Less restrictive sanctions have been applied to other countries. Check to see if the US State Department has lifted or applied new sanctions to any country importing any of our products, services or data.
-Who is receiving the item? Export transactions require clear identification of the item’s recipient. Screen transactions to make sure they don’t involve any individuals, companies, organizations or entities that are considered Restricted Parties.
-Does the transaction seem to have high-risk factors? There are many possible red flags that you may have to follow up. Is the company seeking to purchase newly established services or lacking a track record of compliant activity? Does the company conduct most of its business in countries that are embargoed under US law? Is the location of the country high-risk for corruption or fraud, especially related to customs, import restrictions or government licensing? Does the company rely on a network of distributors, brokers or agents that may be “invisible” to us? Any of these situations might trigger a red flag that deserves to be followed up by our International Trade Department.
-Are there boycott issues involved? US anti-boycott laws are designed to prevent US firms from participating in foreign boycotts that the US does not sanction. The laws prevent US companies from being used to support foreign policies of other nations when those policies contradict US policy. Proposal requests and contract language may include boycott-related requests. Report these immediately to BBNC’s Legal or Compliance teams.
-What is the item’s end-use. US law prohibits the export and re-export of products if they will be used in countries of concern for activities such as nuclear production or technology, missile technology, and chemical or biological weapons. Here’s an example: recently a Chinese company purchased epoxy paint from a China-based company that sold the product made by its parent company in the US. The purchaser of the paint intended to use it in the construction of a nuclear power plant in Pakistan. The twists and turns of this situation illustrate how complex compliance can be for the US manufacturer, who is still liable for ensuring that its products comply with US export rules. BBNC’s subsidiary clients must be clear about the final disposition of the product involved in the transaction – and we must be diligent about ensuring the accuracy of their statements.
-Are we potentially in violation of another country’s laws or policies? As other nations intensify their own trade controls, it is imperative that we exercise care in conducting international trade agreements. In the European Union, for example, our products may be regulated under the REACH law, which regulates the safety and handling of chemicals entering the EU.
-Are we violating domestic or international anti-corruption laws? Although the US Foreign Corrupt Practices Act (FCPA) specifically applies to bribery involving foreign government officials, a number of other countries have enacted legislation that is even more restrictive. The UK Bribery Act, for example, prohibits the taking or giving of bribes in any commercial or government context and countries ranging from China to Brazil have enacted strict anti-corruption measures. We are committed to compliance with all applicable anti-corruption laws and regulations and have developed in-depth guidance about how to recognize potential risks and comply with all relevant requirements. Check BBNC’s Code of Ethics about our policy or speak directly with the Compliance Department about any questions associated with particular contracts or customers.
Strict Laws, Serious Consequences
The increase in domestic and international trade control laws and sanctions reflects a global concern about national defense, terrorism, counterfeit products, financial misconduct and the theft of intellectual property. Companies found guilty of violating trade sanctions can be – and, in recent years, have been – liable for hundreds of millions of dollars in penalties and settlement costs. Just as important, individuals found guilty of violating trade controls have been sentenced to jail terms and significant financial penalties.
BBNC is committed to upholding both the letter and spirit of relevant trade control laws. We are equally committed to providing all our employees with the resources needed to meet their job responsibilities and comply with applicable laws. If you are involved in a transaction that has any association with export and import control, economic sanctions or international boycotts, seek advice from BBNC’s Legal or Compliance teams.
Q&A
An international client refuses to provide full information about a product’s end-user. Can I proceed without this information?
No. Explain that this information is needed to meet U.S. export control regulations. If you cannot obtain this information from the customer, contact BBNC’s Legal or Compliance teams.
I plan to take my laptop on an international business trip. The laptop contains technical data and software. Am I subject to trade control laws?
Generally, company laptops carried for business use are exempt from documentation and customs requirements. However, certain countries require licensing of encryption software on laptops being carried into the country. Check with BBNC’s Legal or Compliance teams.
A pending contract with a company in Saudi Arabia states that they expect BBNC to abide by all laws of their country. Since our company always obeys overseas laws, this does not seem to be a problem. Is it?
This a potential boycott issue. Agreeing to abide by certain laws amounts to signing a contract to support an unsanctioned boycott, which violates anti-boycott laws. Report this request to BBNC’s Legal or Compliance teams.
I am processing an export order. I am not satisfied that the information provided accurately describes the products’ end use. However, the distributor has provided all required information. Should I proceed with the order?
No. If you suspect that any transaction involves prohibited end-use, investigate further. It is possible that the distributor’s representative does not understand the end-use well enough to provide accurate information. You may need to speak with a more knowledgeable representative. If they refuse, or if you want to discuss the situation before proceeding, contact your supervisor or BBNC’s Legal or Compliance teams.