WorldECR EU facing Crimea sanctions dilemma 2

Russia sanctions: the view from Space 6

Russia and EU sanctions: a German perspective 15

Why non-U.S. companies are concerned 18 about the use of the STA Exception

The line between commercial and military 21 jurisdiction over cybersecurity exports

An introduction to Brazilian export controls 25

Export controls in UK offshore centres 27

Moving items from the USML to the CCL 32

SpECiAL foCUS: WAShinGTon DC 33

ISSUE 31. May 2014 www.WorldECR.com News and alerts News and alerts

U.S. industry welcomes reform of export controls over satellites and related items

The U.S. departments of Association welc omed the Commerce and State have changes. In a statement, the published new regulations association’s president, reforming export controls for Patricia Cooper said: ‘This satellites and related items. action marks the end of a 15- The new regulations move year period during which all controls on commercial U.S. satellite exports were communic ations satellites licensed as munitions, and some remote sensing creating unnecessary satellites, along with tens of constraints on U.S. satellite thousands of associated competitiveness inter - parts, components, and nationally. ground terminals, from the ‘The Ad min istrat ion U.S. Munitions List to the issued final rules less than 18 Reform moves control of commercial satellites from the USML to the CCL Commerce Control List months after the U.S. (‘CCL’). reduction in the licensing microelectronic micro - Congress passed legislation In a statement, Under burden on U.S. exporters.’ circuits, and added, ‘In many permitting satellite export Secretary of Commerce Eric A spokesperson for the instances, the updated control reform, with L. Hirschhorn said: ‘For the Commerce Depart ment said regulations also allow the bipartisan and bicameral many American businesses that the items moving to the commercial, scientific and support… With a more that compete in this key CCL include comm uni cations civil satellites transferred to modern regulatory environ- technology sector, it means a satellites that do not contain Commerce jurisdiction to ment for exports in place, we stronger United States classified components, incorporate parts and com - look forward to unleashing defense industrial base, the certain remote sensing ponents listed on the USML the full force of American ability to focus the govern - satellites, spacecraft parts, and remain under Commerce ingenuity and innovation at ment’s limited resources on components, accessories, licensing authority.’ work in the international the technologies and attachments, equipment, or The U.S. Satellite Industry market.’ destinations of greatest systems that are not concern, an increase in the specifically identified in the For further information, see: competitiveness of the U.S. revised category, and all http://www.state.gov/r/pa/prs/ps/2014/05/226014.htm satellite industry, and a radiation-hardened

He added: ’As the crisis EU facing Crimea sanctions dilemma in Ukraine deepens, at the time of writing and ahead of In late April, the Reuters be found that at the same of the proposals: ‘Banks and the presidential election, news agency reported it had time support the territorial other stakeholders subject to France and Germany seem seen a document suggesting integrity of Ukraine, do not EU law already struggle to to be pushing other EU that the EU ‘may ban recognize the illegal determine the legality of countries to implement or transactions with financial annexation of Crimea, financial flows to some threaten further economic institutions in Crimea as defend European interests Ukrainian banks. Although sanctions against Russia, part of its response to the in this region and do not those Ukrainian banks may including a potential ban on annexation of the Ukrainian penalize the Crimean not be directly targeted by deals with all banks in peninsula by Russia’. It said people,’ the document said, EU sanctions, guidelines Crimea. the proposals were separate adding that one way to issued by the European ‘Such a move would from other discussions on discourage or penalise Council suggest that, to the considerably increase the the stepping up of sanctions financial institutions in extent they are owned or difficulty in trading in and against Russia if Moscow Crimea that cooperated with controlled by targeted with the region, and could failed to de-escalate tensions the annexation could be to individuals or entities, compound the current in eastern Ukraine. restrict capital movements providing them with funds uncertainty as to how far the The document, it was between the EU and those or economic resources are sanctions affect entities that reported, spelt out practical banks, and bar EU citizens presumed to be problematic. are directly or indirectly difficulties involved in or businesses from carrying This creates uncertainty as related to the targeted implementing sanctions out transactions with them. shareholding structure and individuals and entities, specifically against Crimea, Yohan Benizri, of Sidley other relevant information with important reper - now that it is de facto a part Austin, provided WorldECR may be scarce, if at all cussions possibly extending of Russia:‘Solutions need to with the following analysis available.’ outside the region.’

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Japan imposes mild sanctions against Russia over the situation in Ukraine

In the light of the recent whom remained undisclosed particularly in the shape of same time, will need to take developments in Ukraine, to the public. The Ministry of energy supplies flowing certain measures to prevent Japan has expressed grave Economy, Trade and from Russia to Japan. Ever a negative economic impact concerns over Russia’s Industry (‘METI’) and since the nuclear plant resulting from the sanctions. actions in the annexation of Ministry of Finance (‘MOF’), accident in Fukushima in Although the United the Crimean peninsula. which govern international March 2011, Japan has States has adopted a tough Following the statement of trade and financial suspended the operation of stance against Russia, it is the G7 leaders on April 26, transactions, respectively, all nuclear electricity plants, unlikely that Japan will by which it was agreed that have since kept silent about now mostly relying on follow in its footsteps and all member states would the possibility of imposing imports of natural gas. As a impose similar measures. move swiftly to impose any additional sanctions. At result, the Japanese energy In its press release, sanctions on Russia, the this point in time, no other sector has increased the MOFA stated that ‘Japan will Japanese government sanctions on Russia have import of liquefied natural continue to play a proactive announced its own sanctions been announced (asset gas (‘LNG’) from Russia. role for the diplomatic against Moscow on 29 April freezing, or financial Moreover, about 80% of all solution of the issues 2014. However, they were transaction or export and Japanese exports to Russia surrounding Ukraine,’ limited in scope and were import restriction). Com- are of transportation following the decision made expected to have only a pared to the sanctions equipment and machinery, by the G7 leader, but it is modest impact on business. imposed on Russia by the both of which are important more likely that Japan’s According to a press Unites States and the EU, the cash cows for the Japanese response will continue to release by the Ministry of potential impact of Japan’s industry. stay ‘behind’ the actions of Foreign Affairs of Japan sanctions is insignificant for In these circumstances, if the Unites States and the EU (‘MOFA’), Tokyo agreed ‘to traders. the Japanese government – and remain mild for the stop issuing visas to a total of One of the reasons why tries to expand its sanctions time being. 23 individuals for the time Japanese sanctions are less against Russia over the being’ by imposing travel severe in this situation is the situation in Ukraine, Japan bans on certain Russian increasing economic bond will face a considerable Tatsuya Kanemitsu, individuals, the identity of between the two countries, economic risk, and, at the Ernst & Young, Tokyo

UN lifts Ivory Coast diamonds ban and eases arms embargo

The UN Security Council has relaxed a Moreover, the resolution also well as supplies intended for use by a ban on imports of diamonds from Côte states that it is no longer necessary to state evacuating its nationals and d’Ivoire as part of its review and declare supplies of non-lethal others for whom it had consular modification of UN sanctions against equipment and the provision of responsibility in the country and that country. technical aid, training or financial supplies intended for use in security Under the newly adopted resolution services intended to enable the Ivorian sector reform, were exempt from the 2153 (2014), member states have security forces to maintain public regime. agreed that ‘in light of the country’s order to the relevant sanctions Ivorian diplomat Youssoufou progress towards implementing the committee. Similarly, supplies Bamba expressed satisfaction with his Kimberley Process Certification intended solely for the support of or country’s progress and declared Scheme and its improved governance use by the United Nations operation in himself hopeful at the possibility of the of the sector,’ the import of rough Côte d’Ivoire (‘UNOCI’), and those Council putting an end to the diamonds by any state from Côte transiting the country for use by United sanctions regime altogether during the d’Ivoire shall no longer be prohibited. Nations peacekeeping personnel, as next review.

The WorldECR Archive at www.worldecr.com includes all past journal and website news PLUS every article that has ever appeared in WorldECR. The upgrade for Archive Access costs just £100/USD165 a year. For details, contact the publisher, Mark Cusick, at [email protected]

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Russia demands $3.8bn security deposit from credit card companies

On 5 May, Russian President its daughter company Vladimir Putin signed a new Sobinbank – both of which law that imposes stiff were affected by the first requirements on inter - round of Western sanctions national payment systems against Russia; as well as operating in Russia, clients of SMP Bank, co- including Visa Inc. and owned by brothers Arkady MasterCard Inc., which and Boris Rotenberg, two of could face unprecedented the most influential transactional difficulties, businessmen in Russia. according to spokespersons In an official statement, for both companies quoted Visa said: ‘Several provisions by the Russian magazine in the law are unprecedented Snob. The law also stipulates and will have a severe impact the creation of a rival on the payments market in national payment system to Russia – particularly Card companies including Mastercard and Visa will need to pay large facilitate cashless trans - cardholders, financial deposits if they are to continue doing business in Russia. actions by 1 July. institutions and merchants. According to the new services to Russian clients. MasterCard combined, is We intend to work closely regulations, international Moreover, they will have to said to amount to the with the government in order payment systems wanting to place a security deposit with equivalent of $3.8bn. The to resolve these issues.’ do business in Russia will Russia’s central bank equal legislation follows Visa and It is not yet clear whether have to base their processing to the average value of two MasterCard’s decision earlier the two financial companies centre in Russia and will not days’ worth of transactions, this year to stop servicing are considering leaving be allowed to cut off their which, for Visa and clients of Rossiya Bank and Russia.

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Bryan Cave closes Asia trade consultancy

U.S. law firm Bryan Cave is services. Consequently, we say, ‘Bryan Cave remains the Singapore office of BCIC closing its trade consulting decided to exit the committed to Asia, where we and a member of business in Asia, WorldECR consulting business and have had a presence since WorldECR’s editorial board, has learnt. In a statement over the past several months the early 1990s. We has established his own sent to WorldECR, Don G. have been winding down our maintain offices in Hong consulting practice: Global Lents, chair of Bryan Cave subsidiary, Bryan Cave Kong, Shanghai and Trade Security Consulting LLP, said: International Consultants Singapore and are committ - Pte Ltd. Tatsuya Kanemitsu, ‘Some time ago, the firm (‘BCIC’). We wish our BCIC ed to our continued growth also a poular and valued decided to focus our Asia colleagues well in their and investment in the contributor to the journal, is resources on our core future endeavors.’ region.’ to join the Japanese practice business of providing legal The statement went on to George Tan, formerly of of Ernst & Young. human Rights Watch urges crackdown on surveillance exports to Ethiopia

A report published by the software, and to require equipment sold to policies and procedures to campaigning group Human such companies … operating governments that may be stop or address misuse of Rights Watch is urging abroad to report on any used to facilitate illegal products and services, governments – in particular human rights policies and surveillance or censorship, including contractual those of China, the UK, Italy due diligence activity to and that assessments should provisions that designate end and Germany – to recognise prevent rights abuses and also address the risk of use and end-users, ‘the that surveillance equipment remedy them if they arise. customizing products and violation of which would exports are increasingly It also carries services for law enforcement, allow the company to being used for oppressive recommendations for intelligence, and security withdraw services or cease means by the government of businesses: amongst these agency customers.’ technical support or Ethiopia, which has now are that vendors of such Another suggestion is that upgrades’, while the misuse acquired some of the most equipment ‘should address as part of a tender or contract of products or services sophisticated equipment in the risk of misuse of non- negotiation process, ‘should be promptly the world for such purposes. customized, “off-the-shelf” businesses should adopt investigated’. The report notes that while ‘all governments around the world engage in Sanctions taking heavy toll on North Korean healthcare system surveillance … in most countries at least some International sanctions against North Korea have on the health system to provide quality judicial and legislative contributed to the country’s healthcare system preventive and curative services,’ indicating that mechanisms are in place to deteriorating gravely in recent years. So reports a sanctions – supposed to target the country’s protect privacy and other paper published by Ricky Y. Choi and Sanghyuk weapons programme and luxuries for its elite – rights. In Ethiopia these S. Shin in the Journal of Critical Asian Studies. had hit the broader economy. mechanisms are largely ‘The perfect storm of a financial collapse, According to the World Health Organisation, loss of the Soviets as trading partner, a just 6% of the country’s spending was invested in absent. The government’s sequence of meteorologic disasters, and healthcare in 2008, while Ethiopia, a country actual control is exacerbated sanctions has left the health care system in with a similarly-sized economy, spent almost by the perception among shambles,’ said Choi, a U.S. doctor specialising double that figure. Ethiopia’s population that in North-Korean public health issues. A 2010 paper by Amnesty International government surveillance is ‘The downstream effects are food shortages, painted a bleak picture of North Korean medical omnipresent.’ a shortage of domestically produced conditions, with reports of unsanitary and even Amongst its recomm - pharmaceuticals, breakdown of the sanitation inhumane treatment being administered to endations for those system, shortage of medical supplies, a patients without anaesthetics. One North Korean governments, it urges them resurgence of infectious disease, and ultimately interviewed in China later talked about people to regulate the export and a rise in mortality and morbidity,’ he added. using methamphetamines as medicine because The paper’s co-author Sanghyuk Shin, a post- they cannot afford to buy drugs. trade of dual-use surveill- doctoral scholar at the University of California ance and censorship Los Angeles, said that ‘the widespread food Further reading: technologies such as deep shortages, lack of access to clean water, and http://criticalasianstudies.org/issues/vol45/no4 packet inspection equip - poor living conditions have placed a great strain /misdiagnosis-and-misrepresentations.html ment and intrusion

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Russia sanctions: the view from Space

As the U.S. continues to Mullin, Richter & Hampton and development of Edward Goetz is an tighten sanctions against LLP, in Washington, DC. She humanity in general, it is International Trade Analyst Russia, many have turned said: ‘Dmitry Rogozin’s hard to imagine that the at Crowell & Moring LLP in their attention to the fragile comment was provocative - Obama administration did Washington, DC. He told state of collaboration that has for now it is true that U.S. not take all of these factors WorldECR that it seems as kept the two countries astronauts have to hitch a into consideration before though the United States is together since the end of the ride on a Russian shuttle to embarking on a mission to looking to end its Cold War in the field of space lower orbit. However, pressure Moscow publicly. dependence on Russian exploration, now seemingly following through to that And we hope that cooler rockets, and observed: under threat. Increasingly, threat would be a bit like heads will prevail when it ‘It is true that since the there is doubt as to how final flight of the Space sanctions on Moscow may Shuttle in 2011, the U.S. has impact on international and been reliant on the Russian even national space Soyuz launch vehicle to ferry exploration missions, since personnel to and from the Russia has been using its ISS. This situation will likely own rockets to launch last for the next several years, European satellites and take as the replacement manned NASA astronauts to and space flight/vehicle program, from the International Space Constellation, was termin - Station (‘ISS’) since 2011. ated in 2011 due to cost and Earlier this month, schedule concerns. To regain Dmitry Rogozin, Russia’s Russia has been launching European satellites and taking NASA an indigenous capability to astronauts to and from the International Space Station since 2011. Deputy Prime Minister transport astronauts to overseeing defence and space shooting yourself in the foot, comes to cooperating and destinations in low-earth programmes and one of the because Russia still needs the collaborating on space orbit, NASA has adopted a many designated individuals U.S. to operate the space exploration. non-traditional approach target, warned that the latest station and profits ‘One impact of the featuring public partnerships sanctions on Russia's science handsomely from the sale of announcement of the to develop multiple industry had the potential to those seats. I believe that it is restrictions seems to be that spacecraft designs. hurt the U.S. space industry, in both countries’ best it is igniting the U.S. space ‘The goal of this multi- which he said, is dependent interest to continue to industry into action. The phase effort is to achieve first on Russian technology and cooperate on this matter for founder of [privately-owned launch by 2017. Initially, the logistics for its survival. as long as possible. Californian satellite agency awarded $1.4bn ‘The U.S. introduced ‘Currently, the ISS, which company] SpaceX, Elon under two Commercial Crew sanctions against our space is a $100 billion project, is Musk, responded to Development and Comm - industry. God knows, we exempt from any Rogozin’s comment with his ercial Crew Integrated warned them: we respond to restrictions. Last month, on own tweet, indicating that it Capability initiatives. These declarations [with] declarat - 28 April, the U.S. State might be time to unveil projects moved several ions, to actions [with] Department did announce SpaceX shuttles for launch. promising concepts forward actions,’ Rogozin tweeted, that new licences for certain SpaceX was also involved in including capsules, winged later adding: ‘After analyzing hi-tech exports to Russia, a lawsuit, claiming that one spacecraft, and a variety of the sanctions against our which may include space- of its competitors may be launch vehicles. Subsequent - space industry, I suggest the related technologies, would violating the Ukraine-related ly, NASA awarded U.S. delivers its astronauts to be put on hold. But that sanctions because of that Certif icat ion Products the ISS with a trampoline.’ didn’t affect existing licences. company’s use of Russian Contracts to three U.S. How may this affect Yes, the U.S. government has rocket engines. companies to enable future collaboration between certainly put a framework in ‘Even though a federal certification of commercial the U.S. and Russia when it place to further toughen the judge issued an injunction on systems as safe to carry comes to astronautics? Does restrictions that could a deal involving the engines, astronauts to the ISS. The it make sense for the U.S. to potentially disrupt these she lifted the injunction after next phase, called the penalise the country it relies missions, but at the moment, the U.S. government made Commercial Crew on to shuttle back and forth things are changing at assurances that the sale Transportation Capability, between the ISS? WorldECR breakneck speed – so it is didn’t violate the sanctions. will result in separately canvased the opinions of two hard to predict exactly how This recent case clarifies the competed contracts and is export control practitioners more sanctions could affect limited nature of the expected to be awarded later with space industry space exploration projects in currently implemented this year. Specific service expertise. the long term. sanctions and potentially the contracts would then follow.’ ‘However, because this is limited impact on the space fatema K. Merchant is an such an important industry, despite their broad WorldECR continues to associate at Sheppard, endeavour for the progress scope and potential.’ watch this space…

6 WorldECR www.worldecr.com The WorldeCr exporT ConTrols and sanCTions ForuM 2014 dexter house, The royal Mint, london programme to follow.

15-16 oCTober 2014

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CANADA

Broadened scope of Russia sanctions and prosecution involving iran sanctions By Clifford Sosnow and Sean Stephenson, Fasken Martineau DuMoulin LLP www.fasken.com

On 4 May 2014, Canada broadened the are involved with such as SMP Bank, which gives effect to UN Security scope of its sanctions against certain Stroygazmontazh Corporation (or SGM Council resolutions – in this case Iran. Russian individuals and companies. Group), and TPS Group LLC. In this The guilty plea comes after an These sanctions were implemented regard, companies should ensure that extensive investigation by the under the Special Economic Measures their due diligence checks cover all Canadian Border Service Agency Act (‘SEMA’) with separate regulations individuals and their dealings. (‘CBSA’) and the RCMP. In January for both Russian and Ukrainian The sanctions also include a general 2012, a shipment of Viton O-rings from individuals and companies. Canada’s duty on every person in Canada and Lee Specialities Ltd. destined for Iran sanctions now target 41 Russian Canadians abroad to disclose without was detained by the CBSA. The O-rings individuals and 19 Russian companies delay to the Commissioner of the are valued roughly at $15 each. Viton is which include Bank Rossiya, Bank RCMP the existence of property in their a brand of synthetic rubber and ExpoBank, and RosEnergoBank and 11 possession or control of a person if fluoropolymer elastomer commonly Ukrainian individuals along with one there is a reason to believe that that used in O-rings and has high Ukrainian company, Chernomornefte- property is owned or controlled directly temperature and chemical resistance gaz. In Canadian sanctions law, these or indirectly by a designated person or characteristics. It has applications in are called ‘designated persons’. by an entity owned or controlled oilfields as well as the nuclear industry. The sanctions prohibit, amongst directly or indirectly by such person. Seals and gaskets made of Viton fluoro- other things, any person in Canada and Although these sanctions were elastomers have been prohibited for Canadians outside Canada from: implemented in concert with the export to Iran since 22 July 2010 by the broadening of sanctions by the U.S. SEMA Iran Regulations. l dealing in any property, wherever and EU, the individuals and entities The CBSA and the RCMP executed situated, held by or on behalf of a sanctioned by Canada are not identical three search warrants against Lee designated person; to those listed by the U.S. and the EU. Specialities Ltd. and on 27 February l entering into or facilitating, directly Consequently, compliance with either 2014, laid charges under several laws, or indirectly, any transaction related the U.S. or EU regimes as a proxy for including the SEMA and the United to such a dealing; compliance with Canadian sanctions Nations Act. Lee Specialities Ltd. opted l making any goods, wherever may raise serious risk of violation of for a plea agreement under the SEMA situated, available to a designated Canadian sanctions law. Iran Regulations. person; l providing any financial or related iran sanctions enforcement Sanctions are being enforced to service to or for the benefit of a On 14 April 2014, Lee Specialities Ltd., obtain foreign policy objectives designated person. an Alberta-based company, pleaded The Canadian government continues to guilty and was fined $90,000 CAD for view sanctions as an important means The sanctions may be construed by violating the Special Economic to obtain stated foreign policy the Canadian police enforcement Measures (Iran) Regulations (‘SEMA objectives. As the Lee Specialities Ltd. agency, the Royal Canadian Mounted Iran Regulations’). This is the first time case demonstrates, Canadian author - Police (‘RCMP’), and the courts to charges have been laid under the Special ities treat sanction offences seriously. include companies, partnerships or Economic Measures Act (‘SEMA’), the Authorities are prepared to invest funds that such designated persons umbrella legislation under which significant resources to ensure compli - own or control. The most recent round Canada unilaterally imposes sanctions ance. They are prepared to investigate of sanctions target Arkady and Boris against named countries (e.g., Iran, and prosecute violations. Accordingly, Rotenberg. The sanctions also Russia and other countries); and the we continue to advise companies to specifically target several businesses third time charges have been laid in implement and maintain a robust that the Rotenburg’s reportedly own or Canada under the United Nations Act, sanctions compliance programme.

WorldECR welcomes your News and Bulletins. Contact the editor: [email protected]

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USA

Ukraine: updated guidance for investment funds, financial institutions, and oCs By Hon. Mario Mancuso, Dr. Tobias Caspary, Adam M. Brenner, Elyse B. Feuer, Roxanne Lepore, Till Vere-Hodge, Fried, Frank, Harris, Shriver & Jacobson LLP. www.friedfrank.com

5 May 2014: At the end of April, the decision thus far to refrain from ‘sweeping sanctions regime’.5 The United States and the European Union imposing comprehensive sectoral articulated EU position has thus far (‘EU’) imposed additional, targeted sanctions, as ‘scalable’ and ‘flexible’.2 remained limited to the sanctions on certain Russian The Administration does not expect implementation of targeted sanctions government officials and companies there to be an immediate change in on individuals directly contributing to linked to President Vladimir Putin’s President Putin’s calculus with respect the crisis in Ukraine. While some inner circle, expanding upon to Ukraine in response to the sanctions individual EU Member States, notably previously announced U.S. and EU imposed thus far. However, the Poland and the Baltic states, have Ukraine-related sanctions. In addition, Administration has articulated a belief consistently pushed for wider-reaching President Obama’s administration (the that its incremental approach, coupled measures, there has also been strong ‘Administration’) imposed additional with the threat of comprehensive domestic opposition to more restrictive measures on exports that sectoral sanctions (which, as discussed comprehensive sanctions in certain EU ‘could contribute’ to Russia’s military below, have been authorised, pursuant Member States, notably Germany and capabilities. to Executive Order (‘EO’) 13662), will France, in part due to the EU’s The new U.S. and EU sanctions demonstrate to Russia that the U.S., ‘dependence on Russian energy were imposed in response to Russia’s and its European and other allies, are supplies and on Russia as a market for perceived failure to take concrete steps ready to inflict ‘much more severe European manufactured goods’.6 to meet its obligations under the 17 economic pain’, and that Russia has ‘far April Geneva Agreement, and Russia’s more to lose continuing these actions U.S. sanctions – regulatory continuing violation of the sovereignty over time than pursuing deescalation’.3 response to the crisis and territorial integrity of Ukraine.1 On 28 April 2014, the U.S. Department While the sanctions imposed to date The Administration has of the Treasury designated additional have been limited in scope, they have in word and deed persons under the Ukraine-related expanded considerably and, in recent sanctions, including seven Russian days, U.S. and EU officials have stated expressed a strong government officials and 17 entities, that they are prepared to impose more preference for pursuant to EO 13661, which comprehensive sanctions targeting key ‘authorizes sanctions on, among sectors of Russia’s economy – likely to implementing sanctions others, officials of the Russian include the financial and energy sectors in coordination with its Government and any individual or – in the event that Russia takes entity that is owned or controlled by, additional actions to escalate the partners in Europe. that has acted for or on behalf of, or situation in Ukraine. that has provided material or other Ultimately, the Administration has support to, a senior Russian policy context – the view from stated that it believes its calibrated and government official.’7 The newly- Washington and Brussels incremental approach will ‘affect designated persons are subject to an Over the past several months, in Russia’s calculus over time and give asset freeze and, in the case of natural response to Russia’s actions in [Russia] the incentive to deescalate this persons, a U.S. visa ban. The sanctions Ukraine, the Administration has situation’.4 included the designation of senior incrementally imposed sanctions on The Administration has in word and members of the Russian leadership, persons threatening the peace, deed expressed a strong preference for including Igor Sechin, the President sovereignty, and territorial integrity of implementing sanctions in and Chairman of the Management Ukraine, including Russian coordination with its partners in Board of Rosneft, Russia’s leading government officials, former Ukrainian Europe, believing that a coordinated petroleum company, and a key adviser government officials, and business approach would impose greater to President Putin, and Sergey leaders in President Putin’s inner economic and political costs on Russia. Chemezov, the Director General of circle. The Administration has However, the EU and its Member Rostec, a large, Russian industrial described its modular approach to States thus far have exhibited a conglomerate.8 Ukraine-related sanctions, and its reluctance to implement a more In addition to the Department of the

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Treasury designations, the U.S. 28 April, licences are required for all Finally, the U.S. departments of Department of Commerce added an exports, re-exports, and foreign State and Commerce announced the additional 13 entities on the Commerce transfers of items subject to the Export expansion of export restrictions on Department’s Entity List9 due to their Administration Regulations (‘EAR’) to items subject to the EAR and involvement or potential involvement any entity included on the Entity List, technologies and services regulated in activities in Ukraine that are even where a licence would not under the United States Munitions List inconsistent with U.S. national security otherwise be required, and there is now (‘USML’). The Administration will now and foreign policy interests. Effective a presumption of denial.10 ‘deny export applications for any high-

APPENDIX A: U.S. Department of Treasury designations

17 March 2014 VLADIMIR MICHAILOVICH TIMCHENKO AVIA GROUP NORD LLC, (a.k.a. OAO DZHABAROV, First Deputy http://www.ag-nord.ru STROYTRANSGAZ) SERGEY VALERYEVICH ALEKSANDR BORISOVICH Chairman of the AKSYONOV TOTOONOV, Member of the BANK SEVERNY MORSKOY SAKHATRANS LLC (a.k.a. International Affairs Committee on Culture, PUT (a.k.a. SMP BANK; OBSHCHESTVO S VLADIMIR ANDREYEVICH Committee of the Science, and Information, a.k.a. SMP BANK OPEN OGRANICHENNOI KONSTANTINOV Federation Council of the Federation Council of the JOINT-STOCK COMPANY), OTVETSTVENNOSTYU VIKTOR MEDVEDCHUK Russian Federation Russian Federation www.smpbank.ru SAKHA (YAKUTSKAYA) VIKTOR FEDOROVYCH ANDREI ALEXANDROVICH VLADIMIR YAKUNIN OLEG EVGENYEVICH TRANSPORTNAYA YANUKOVYCH, Former FURSENKO, Aide to the KOMPANIYA; a.k.a. SERGEI VLADIMIROVICH BELAVENCEV, Russian President of Ukraine President of the Russian Presidential Envoy to the SAKHATRANS OOO) Federation ZHELEZNYAK, Deputy SERGEY GLAZYEV, Speaker of the State Duma Crimean District, Member STROYTRANSGAZ LLC (a.k.a. Presidential Advisor ALEXEI GROMOV, First Deputy of the Russian Federation of the Russian Security OOO STROYTRANSGAZ) Chief of Staff of the Council ANDREI KLISHAS, Chairman ALEKSEI KONSTANTINOVICH Presidential Executive ARKADY ROTENBERG of the Russian Federation SERGEI CHEMEZOV PUSHKOV ,Chairman of Office, First Deputy Head of BORIS ROTENBERG Council Committee on State Duma Committee on Presidential Administration, CJSC ZEST (a.k.a. ZEST Constitutional Law, Judicial International Affairs First Deputy Presidential LEASING), http://www.zest- and Legal Affairs and the Chief of Staff 11 April 2014 leasing.ru IGOR SECHIN Development of Civil ALEKSEI MIKHAILOVICH INVESTCAPITALBANK (a.k.a. STROYTRANSGAZ HOLDING Society SERGEI IVANOV, Chief of Staff CHALIY, Mayor of of the Presidential OPEN JOINT STOCK (a.k.a. STG HOLDING VALENTINA IVANOVNA Sevastopol, Chairman of Executive Office COMPANY LIMITED; a.k.a. STG MATVIYENKO, Federation the Coordination Council INVESTCAPITALBANK; HOLDINGS LIMITED; a.k.a. Council Speaker, Chairman VICTOR PETROVICH IVANOV for the Establishment of INVESTKAPITALBANK; STROYTRANSGAZ HOLDING of the Russian Federation VLADIMIR IGOREVICH the Sevastopol Municipal a.k.a. OJSC LIMITED; a.k.a. STGH) Council KOZHIN Administration INVESTCAPITALBANK), STROYTRANSGAZ GROUP YELENA MIZULINA, State YURI VALENTINOVICH CHERNOMORNEFTEGAZ24,(a http://www.investcapitalba (a.k.a. STROYTRANSGAZ; Duma Deputy, Chairman of KOVALCHUK .k.a. NJSC nk.ru a.k.a. STG GROUP), the State Duma Committee SERGEI MIKHAILOVICH CHERNOMORNEFTEGAZ) JSB SOBINBANK (a.k.a. www.stroytransgaz.ru on Family, Women and MIRONOV, Member of the MIKHAIL GRIGOREVICH SOBINBANK), STROYTRANSGAZ-M LLC Children http://www.sobinbank.ru Council of the State Duma, MALYSHEV, Chair of the VOLGA GROUP (a.k.a. VOLGA DMITRY OLEGOVICH Leader of A Just Russia Crimea Electoral DMITRY KOZAK, Deputy GROUP INVESTMENTS; ROGOZIN, Deputy Prime Party, Member of the State Commission Prime Minister of the f.k.a. VOLGA RESOURCES Minister of the Russian Duma Committee on VALERY KIRILLOVICH Russian Federation GROUP; f.k.a. VOLGA Federation Housing Policy and Housing MEDVEDEV, Chair of the STROYGAZMONTAZH (a.k.a. RESOURCES) LEONID SLUTSKY, State and Communal Services Sevastopol Electoral LIMITED LIABILITY VYACHESLAV VOLODIN, First Duma Deputy Chairman of SERGEY YEVGENYEVICH Commission COMPANY Deputy Chief of Staff of the the Committee on Affairs of NARYSHKIN RUSTAM ILMIROVICH STROYGAZMONTAZH; a.k.a. Presidential Executive the Commonwealth of VIKTOR ALEKSEEVICH TEMIRGALIEV, Deputy STROYGAZMONTAZH Office Independent States (CIS), OZEROV, Chairman of the Chairman of the Council of CORPORATION; a.k.a. First Deputy Chairman of Security and Defence Ministers of Crimea, SGM), www.ooosgm.com the Committee on Federation Council of the Crimean Deputy Prime TRANSOIL (a.k.a. LIMITED 11 April 2014 International Affairs, Russian Federation Minister LIABILITY COMPANY CHERNOMORNEFTEGAZ Chairman of the Russian TRANSOIL; a.k.a. TRANSOIL World Fund Administration OLEG EVGENEVICH SERGEY PAVLOVICH TSEKOV LLC; a.k.a. OBSHCHESTVO PANTELEEV, First Deputy YURIY GENNADIEVYCH VLADISLAV YURIEVICH S ORGANICHENNOI 28 April 2014 Chairman of the Committee ZHEREBTSOV, Counselor to SURKOV, Presidential Aide OTVETSTVENNOSTYU STROYTRANSGAZ HOLDING on Parliamentary Issues the Speaker of the Crimean TRANSOIL; a.k.a. Rada VOLGA GROUP NIKOLAI IVANOVICH TRANSOYL SNG LTD.), 20 March 2014 AQUANIKA RYZHKOV, Senator in the PYOTR ANATOLIYOVYCH ZIMA, http://transoil.com BANK ROSSIYA, (a.k.a. Russian Upper House of Head of the Crimean SBU AVIA GROUP LLC THE LIMITED LIABILITY AKTSIONERNY BANK Parliament, Member of the (Security Service of COMPANY INVESTMENT AVIA GROUP NORD LLC RUSSIAN FEDERATION), Committee for Federal Ukraine) COMPANY ABROS LLC IC www.abr.ru Issues, Regional Politics CJSC ZEST and the North of the ABROS(a.k.a. LLC IC EVGENI VIKTOROVICH SAKHATRANS LLC Federation Council of the 28 April 2014 ABROS) BUSHMIN, Deputy Speaker STROYGAZMONTAZH Russian Federation EVGENIY ALEKSEYEVICH of the Federation Council of AQUANIKA (a.k.a. AQUANIKA MUROV, Director of the STROYTRANSGAZ GROUP the Russian Federation, IGOR DMITRIEVICH SERGUN, LLC), Federal Protective Service Chairman of the Council of Lieutenant General, Chief http://www.aquanika.com STROYTRANSGAZ LLC of the Russian Federation the Federation Budget and of the Main Directorate of AVIA GROUP LLC (a.k.a. AVIA STROYTRANSGAZ-M LLC the General Staff Army General Financial Markets GROUP LTD), STROYTRANSGAZ OJSC Committee GENNADY NIKOLAYEVICH http://www.avia-group.su STROYTRANSGAZ OJSC TRANSOIL

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APPENDIX B: EU designations

17 March 2014 DZHABAROV VITKO VALERY VLADIMIROVICH MENYAILO KULIKOV SERGEY VALERYEVICH ANDREI ALEKSANDROVICH ANATOLIY ALEKSEEVICH OLGA FEDOROVNA KOVATIDI AKSYONOV KLISHAS SIDOROV VLADISLAV YURIEVICH LUDMILA IVANOVNA SURKOV VLADIMIR ANDREYEVICH NIKOLAI IVANOVICH RYZHKOV ALEKSANDR GALKIN SHVETSOVA KONSTANTINOV EVGENI VIKTOROVICH MIKHAIL MALYSHEV SERGEI IVANOVICH NEVEROV RUSTAM IILIROVICH BUSHMIN 21 March 2014 VALERY MEDVEDEV IGOR DMITRIEVIVH SERGUN TEMIRGALIEV ALEKSANDR BORISOVICH DMITRY OLEGOVICH LT. GEN. IGOR TURCHENYUK VALERY VASILEVICH DENIZ VALENTINOVICH TOTOONOV ROGOZIN ELENA BORISOVNA MIZULINA GERASIMOV BEREZOVSKIY OLEG EVGENEVICH SERGEY GLAZYEV GERMAN PROKOPIV ALEKSEI MIKHAILOVICH PANTELEEV VALENTINA IVANOVA 29 April 2014 VALERIY BOLOTOV CHALIY SERGEI MIKHAILOVICH MATVIYENKO DMITRY NIKOLAYEVICH ANDRIY PURGIN PYOTR ANATOLIYOVYCH ZIMA MIRONOV SERGEI EVGENEVICH KOZAK DENYS PUSHYLIN YURIY ZHEREBSTOV SERGEI VLADIMIROVICH NARYSHKIN ZHELEZNYAK OLEG YEVGENYVICH TSYPLAKOV SERGEY SERGEY PAVLOVYCH TSEKOV DMITRY KONSTANTINOVICH BELAVENTSEV LEONID EDUARDOVICH GENNADEVICH VIKTOR ALEKSEEVICH KISELYOV SLUTSKI OLEG GENRIKHOVICH IGOR STRELKOV (IHOR OZEROV ALEXANDER MIHAILOVICH SAVELYEV ALEKSANDR VIKTOROVICH STIELKOV) VLADIMIR MICHAILOVICH NOSATOV SERGEI IVANOVICH technology items that could contribute undermining or threatening the Russian economy, such as financial to Russia’s military capabilities’ and territorial integrity, sovereignty, and services, energy, metals and mining, take the necessary steps to ‘revoke any independence of Ukraine.16 The engineering, and defense’. The existing export licenses that meet these measures follow legislative steps taken Administration has further emphasised conditions’.11 While it is unclear what by the EU on 17 March and 21 March that, if the U.S. and EU decide to classes of items, technology, and 2014, which added 21 and 12 impose sectoral sanctions, such services will be restricted under the individuals, respectively, to the list of sanctions would have a very significant more restrictive export control policy, a individuals subject to the restrictive impact on Russia’s economy. Also, a senior Administration official indicated measures.17 The restrictive measures senior Administration official stated that microelectronics is one category of imposed against the 48 individuals that sectoral sanctions are already items that is being closely scrutinised.12 listed to date include asset freezes and being prepared in coordination with the The sanctions and designations that travel bans. The additional individuals EU. occurred [at the end of April] follow a were listed in connection with Russia’s While there is little doubt that the long list of previous actions and failure to abide by the steps described imposition of sectoral sanctions would designations that have occurred since in the Geneva Agreement. There have have an impact on the national early March.13 Appendix A is a list of all been indications that the EU may economies of a number of European the individuals and entities which have decide at a later point to broaden the countries, senior Administration been designated in connection with the legal basis for sanctions to include officials have expressed confidence that crisis in Ukraine to date. companies as well as individuals.18 ‘the Europeans are with us in their While the executive branch has Appendix B is a list of all the individuals commitment. to impose sectoral spearheaded the Ukraine-related who have been designated by the EU in sanctions’.19 The EU has been less vocal sanctions initiative, Congress has connection with the crisis in Ukraine about this commitment, likely due to become more engaged on this issue, thus far. strong domestic opposition to sectoral including by passing non-binding sanctions within certain Member States resolutions supporting the swift U.S. and EU – future sanctions of the EU.20 imposition of sanctions by the executive outlook U.S. and EU officials have been clear branch, and by passing economic aid Recently, there has been a great deal of that sectoral sanctions will almost legislation to provide loan guarantees to discussion regarding the possibility of certainly be imposed in the event that Ukraine of up to $1 billion.14 Notably, a the U.S. and EU implementing Russia moves its troops into Ukraine.21 number of Republican members of coordinated and comprehensive Senior Administration officials have Congress have expressed dissatisfaction sectoral sanctions that would target indicated that activities short of with the Administration’s response and critical sectors of Russia’s economy. Russian troops crossing into Ukraine, have called for the imposition of The Administration has repeatedly but that further escalate the situation in tougher sanctions targeting key sectors emphasised that the Administration Ukraine, may also trigger the of Russia’s economy.15 ‘remains prepared to impose still imposition of tougher sanctions greater costs on Russia if the Russian measures.22 However, it is unclear what EU sanctions – additional leadership continues [its] provocations events other than a military incursion measures implemented instead of deescalating the situation,’ might trigger the imposition of sectoral On 29 April 2014, the EU Council and as evidence of its commitment to sanctions. implemented legislative measures do so, cites the implementation of EO adding 15 persons to its list of 13662, which authorises the imposition Recommendations individuals subject to restrictive of sectoral sanctions on ‘individuals and While the U.S. and EU sanctions are measures because of actions entities operating in key sectors of the targeted in nature, the situation in

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Ukraine has continued to escalate and Links and notes comprehensive sectoral sanctions 1 The April 17 Geneva Agreement – which was negotiated by Russia, the Ukraine, the US, and the EU – included a remain a distinct possibility. number of steps for deescalating the situation in eastern Ukraine, including requiring Russia and Ukraine to refrain from further violence or acts of provocation, commitments that US and EU officials believe Russia has failed to satisfy. In order to mitigate the risk of 2 Press Release, Office of the Press Sec’y, The White House, Background Conference Call on Ukraine Sanctions (Apr. 28, violating applicable sanctions and 2014), available at http://www.whitehouse.gov/the-press-office/2014/04/28/background-conference-call-ukraine- export control requirements, we sanctions. 3 Id. recommend that companies consider 4 Id. the following, at a minimum: 5 Broder, Jonathan & Tim Starks, U.S. Toughens Sanctions on Russia over Ukraine Interference, Cong. Q. News (Apr. 28, 2014). 6 Id. The Administration has stated that the sanctions administered thus far have had a significant impact on Russia’s l Conduct screenings of current and economy, citing sharp drops in Russia’s economic growth forecasts, the $70 billion in capital that has ‘fled the Russian financial system’ during the first quarter of 2014 (exceeding capital outflows for all of 2013), substantial ‘declines in the potential counterparties (including, value of Russian equities,’ the significant downgrade of Russia’s credit rating, and sharp declines in the value of the where possible, affiliates, directors, ruble, ‘which has depreciated almost 9 percent against the dollar since January 1st.’ Background Conference Call on Ukraine Sanctions, supra, note 2; Press Release, Sec’y of State John Kerry, U.S. Dep’t of State, Remarks on Ukraine officers, and shareholders thereof) (Apr. 28, 2014), available at http://www.state.gov/secretary/remarks/2014/04/225166.htm. See also Press Release, against applicable restricted parties U.S. Dep’t of the Treasury, Statement of Treasury Sec’y Jacob J. Lew (Apr. 28, 2014), available at http://www.treasury.gov/press-center/press-releases/Pages/jl2368.aspx. However, many remain skeptical of the lists maintained by the U.S. and the impact of US sanctions on Russia’s leadership and view the limited, targeted sanctions as more of a ‘slap on the wrist’ EU; unlikely to have any significant deterrent effect on Russia’s leadership or to effect a change in President Putin’s calculus regarding Ukraine. l Determine whether current or 7 Press Release, Office of Public Affairs, U.S. Dep’t of the Treasury, Announcement of Additional Treasury Sanctions on potential counterparties are owned Russian Government Officials and Entities (Apr. 28, 2014), available at http://www.treasury.gov/press-center/press- releases/Pages/jl2369.aspx; Exec. Order 13661, 79 Fed. Reg. 15535 (Mar. 19, 2014). or controlled by designated parties, 8 Background Conference Call on Ukraine Sanctions, supra, note 2. While Sechin was individually sanctioned, Rosneft has and are thus also subject to not been directly targeted by US sanctions. 9 The Department of Commerce’s Bureau of Industry and Security administers the Entity List, which is a list of certain sanctions, regardless of whether the businesses, research institutions, government organisations, individuals, and other legal persons that are subject to actual counterparties appear on a heightened license requirements for the export, reexport, and/or transfer of certain items. 23 10 Press Release, U.S. Dep’t of Commerce, Bureau of Industry and Security, Commerce Department Announces restricted parties list; Expansion of Export Restrictions on Russia (Apr. 28, 2014), available at http://www.bis.doc.gov/index.php/about- l If you identify current bis/newsroom/press-releases/107-about-bis/newsroom/press-releases/press-release-2014/665-commerce-dept-ann ounces-expansion-of-export-restrictions-on-russia. counterparties that are subject to 11 Press Release, Office of the Press Sec’y, The White House, Statement by the Press Secretary on Ukraine (Apr. 28, sanctions, take the necessary steps 2014), available at http://www.whitehouse.gov/the-press-office/2014/04/28/statement-press-secretary-ukraine. to block the property of such 12 Background Conference Call on Ukraine Sanctions, supra, note 2. 13 The executive branch framework for the Ukraine sanctions was established on March 6, 2014, when President Barack persons and file any necessary Obama signed EO 13660 in response to ‘[the] unusual and extraordinary threat to the national security and foreign reports with the Department of the policy of the United States’ posed by the situation in Ukraine. Exec. Order 13660, 79 Fed. Reg. 13493 (Mar. 10, 2014). On March 17, 2014, President Obama issued a second executive order which expanded the sanctions authorized to Treasury’s Office of Foreign Assets include the sanctioning of the Russian arms sector. Exec. Order 13661, supra, note 7. Subsequently, on March 20, 2014, President Obama issued EO 13662, which expanded upon EOs 13660 and 13661 by authorizing the Secretary Control within the applicable of the Treasury to sanction and subject to an asset freeze persons who operate in certain Russian markets, including period; energy, engineering, mining, and financial services. Exec. Order 13662, 79 Fed. Reg. 16169 (Mar. 24, 2014). While EO 13662 authorizes the Administration to impose sanctions on key sectors of Russia’s economy, the Administration has l Insert or amend contract language resisted implementing such sectoral sanctions thus far. to provide suitable comfort that 14 The Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014, H.R. 4152, 113th Cong. (2014) (enacted). counterparties are not subject to 15 Broder, supra, note 5. On April 30, 2014, U.S. Senator Bob Corker, ranking member of the Senate Foreign Relations U.S. or EU sanctions, including the Committee, introduced Ukraine-related legislation with 20 Senate Republicans addressing what many conservative members of Congress have deemed a ‘weak’ and ‘insufficient’ response by the Administration. The bill, among other Ukraine-related sanctions; things, provides for immediate new sanctions on (i) any Russian officials involved in the illegal occupation of Crimea, as l Assess the impact of the well as on corrupt Russian officials and their supporters, and (ii) persons tied to the destabilisation of eastern Ukraine, including four key Russian banks (Sberbank, VTB Bank, VEB Bank, and Gazprombank), as well as the Gazprom, Administration’s more restrictive Novatek, and Rosneft energy monopolies, and Rosoboronexport, the major Russian arms dealer. In addition, under Sen. export control policy on your Corker’s bill, in the event of further Russian aggression toward Ukraine or other nations, tougher sanctions would be implemented, including, among other things, comprehensive sectoral sanctions relating to the arms, defense, energy, business, including whether any financial services, metals, and mining sectors of Russia, and sanctions cutting off from the U.S. financial system all current export licences may be Russian financial institutions. It is likely that the bill will be referred to the Senate Foreign Relations and Banking Committees, neither of which have indicated at this time that a markup of this bill would occur. Thus, it does not appear revoked under the new policy, and likely that the bill will be added to the Congressional calendar in the near future and it does not appear to have sufficient support within the Senate at this time, and consequently, it is more likely that any additional sanctions whether additional export licences measures in the near term will originate with the Administration. may now be required; 16 Council Implementing Regulation (EU) No 433/2014 (L 126/48) (Apr. 29, 2014); Council Implementing Decision l Exercise caution when investing in 2014/238/CFSP (L 126/55) (Apr. 29, 2014). 17 Council Regulation (EU) No 269/2014 (L 78/6) (Mar. 17, 2014); Council Decision 2014/145/CFSP (L 78/16) (Mar. 17, or dealing with counterparties that 2014); Council Implementing Regulation (EU) No 284/2014 (L 86/27) (Mar. 21, 2014); Council Implementing Decision operate in the sectors of the 2014/151/CFSP (L 86/30) (Mar. 21, 2014). 18 UK Foreign Secretary William Hague updated the UK House of Commons on the situation in Ukraine on April 28, Russian economy that have been suggesting that the EU was preparing for additional, stricter measures against Russia: ‘We are in further discussions in identified as likely targets of future the EU about future steps, including preparations for a third tier of sanctions involving far-reaching economic and trade measures. These preparations are now well advanced and the European Commission has sent proposals to each sanctions, including financial member state.’ William Hague, U.K. Foreign Sec’y, Speech Before the House of Commons (Apr. 28, 2014), available at https://www.gov.uk/government/speeches/foreign-secretary-updates-parliament-on-the-crisis-in-ukraine. However, services, energy, metals and some observers doubt that the EU could stomach ‘sweeping moves, as the result would be a trade war that would mining, engineering, and defence; damage a weak European economy.’ See, e.g., Mark Tran, Ukraine: EU Imposes New Sanctions on Russia, The Guardian (Apr. 29, 2014), available at http://www.theguardian.com/world/2014/apr/29/ukraine-eu-imposes-new-sanctions-on- and russia-live-updates. l For U.S. citizens or permanent 19 Background Conference Call on Ukraine Sanctions, supra, note 2. residents employed by U.S. 20 Broder, supra, note 5. 21 See, e.g., id.; Statement by the Press Secretary on Ukraine, supra, note 11; Background Conference Call on Ukraine companies outside the U.S. or by Sanctions, supra, note 2. non-U.S. companies within or 22 Statement by the Press Secretary on Ukraine, supra, note 11. 23 Any entity which is majority owned (50 percent or greater) by an individual or entity that is designated on a restricted outside the U.S., exercise caution to parties list is also deemed subject to sanctions. Entities that have significant ownership by an individual or entity that is ensure that you do not violate U.S. designated, but that does not reach the 50 percent or greater threshold, are not deemed to be subject to sanctions per se absent other indicia of control. legal requirements, which apply to 24 The designation refers only to the entity by this name in Crimea, and does not include its parent company. individual U.S. persons wherever located.

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USA

Conflict Minerals Rule: SEC says DC Circuit ruling has not changed reporting deadline By Lee M. Caplan, Jennifer A. Fischer, David R. Hamill and David Salkeld, Arent Fox www.arentfox.com

In guidance issued on 29 April required to file a conflict minerals National Association of regarding the Conflict Mineral Rules, report, the report should include a Manufacturers v. Securities and the Securities and Exchange description of the due diligence that the Exchange Commission, the court held Commission (‘SEC’) has announced company undertook. that requiring regulated entities to that reporting companies are not If the company has products that report to the commission and on their required to describe their products as fall within the scope of Items 1.01(c)(2) website that their products have ‘not ‘DRC conflict free’, having ‘not been or 1.01(c)(2)(i) of Form SD (i.e., the been found to be “DRC conflict free”’ found to be “DRC conflict free”’, or product descriptions under the due violated the First Amendment. In an ‘DRC conflict undeterminable’, as diligence provisions for companies that order issued concurrently with the originally required in the Conflict are required to file a conflict minerals decision, the Court of Appeals withheld Minerals Rule (‘CMR’). report), it would not have to identify the issuance of its mandate until seven The CMR, however, continues to the products as ‘DRC conflict days after disposition of any timely require that companies must undeterminable’ or ‘not found to be petition for rehearing or petition for undertake other reasonable country of “DRC conflict free”,’ but should rehearing en banc. The 29 April origin inquiries and due diligence disclose, for those products, the statement notes that the earliest date requirements and that companies must facilities used to produce the conflict on which the court’s mandate is likely still file any reports required by the minerals, the country of origin of the to issue is 5 June 2014. CMR on or before the 2 June 2014 due minerals, and the efforts to determine The ultimate effect of the decision is date. the mine or location of origin. unclear as the free speech holding may This guidance has been posted on No company is required to describe be affected by an upcoming en banc the SEC website1 in response to the its products as ‘DRC conflict free’, decision of the court in American Meat ruling by the U.S. Court of Appeals for having ‘not been found to be “DRC Institute v. United States Department the DC Circuit that struck down certain conflict free”’ or ‘DRC conflict of Agriculture (the hearing is portions of the CMR2 as undeterminable’. scheduled for 19 May 2014). The 29 unconstitutional. According to the 29 April statement, April statement leaves open the if a company voluntarily elects to possibility for further SEC action or new guidance on filing describe any of its products as ‘DRC court action before the 2 June 2014 requirements after DC Circuit conflict free’ in its conflict minerals CMR reporting deadline. ruling report, it would be permitted to do so According to the 29 April statement, provided it had obtained an the Form SD (Conflict Minerals independent private sector audit Reporting Form)3 and any related (‘IPSA’) as required by the rule.4 Links and notes conflict minerals report should comply Pending further action, an IPSA will 1 www.sec.gov/News/PublicStmt/Detail/Public Stmt/1370541681994#.U2Dl5uZZ5QR with, and address, those portions of the not be required unless a company 2 Rule 13p-1 (codified at 17 C.F.R. § 240.13p- CMR and Form SD that the court voluntarily elects to describe a product 1); Form SD is codified at 17 C.F.R. § upheld. as ‘DRC conflict free’ in its conflict 249b.400. Companies that do not need to file a minerals report. 3 SEC forms are available here. conflict minerals report should disclose 4 The April 29 statement cites to the SEC’s Frequently Asked Questions (FAQs) on the their reasonable country of origin Background on DC Circuit ruling Conflict Minerals Rule for further explanation inquiry and briefly describe the inquiry On 14 April, the U.S. Court of Appeals - FAQ #15 at they undertook. for the DC Circuit stuck down portions http://www.sec.gov/divisions/corpfin/guidan ce/conflictminerals-faq.htm. For those companies that are of the CMR as unconstitutional. In

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13 WorldECR www.worldecr.com Editorial Editorial

The surface scratched

ast weekend, hastily assembled advance of the result of the poll country or otherwise, have demon - ‘electorates’ in two previously intended to create it. strated the potential for bloodletting. L obscure regions of Ukraine Disputes over sovereignty have a declared their intention to carve nasty habit of playing out badly, even DC does it themselves out of their existing national where they are ‘solved’ (just take a look You won’t fail to miss the Washington borders, and requested that they be at South Sudan, where OFAC has by Focus in this issue – based on soldered on to their large, ursine power implication made Mercutio-like conversations with leading DC-based next door (which in turn says it comment by designating parties on sanctions and export control advisors. ‘respects’ the wishes of its smaller both sides of the current conflict in that It was fascinating to learn the extent to neighbour to wish to be absorbed which this area of law is overlapping within it.) Disputes over and enmeshing with others in Kiev has described the so-called sovereignty have a sometimes surprising ways – every - referendum as farcical, and more thing from real estate deals, IP, private objective commentators have pointed nasty habit of playing equity-backed acquisitions, employ - to the chaotic scenes at polling scenes, out badly, even where ment contracts and CFIUS reviews. an out-of-date voting list, and What also came through was that widespread uncertainty as to the extent they are ‘solved’. while the practitioners I spoke to had a of the turnout. Given what we know of passion for representing their clients the ethnic/linguistic mix of the regions, new, and still raw country). Also, while with tenacity and the experience born the very unambiguous results – more the democratic credentials of this of long practice, so also did they for the than 80% in favour in both cases – apparent act of unilaterally-declared values and imperatives underpinning seems jarringly high. To top it all, even independence may be risible, that’s not export control and sanctions regimes – the question appearing on the ballot to say that there isn’t genuine and all other parts of the national papers: ‘Do you support the act of self- dissatisfaction with Kiev in parts of security agenda, and for the fascinating rule for the Donetsk People’s eastern Ukraine – and perhaps genuine foreign affairs context in which the law Republic?’ appears rhetorical and self- grievances. The referendum itself continues to evolve. legitimising – seemingly presuming the should not be laughed at: already, both Tom Blass, May 2014 existence of such a ‘republic’ even in ‘sides’, whether they belong to the same [email protected]

Foreign Trade and Logistics Export controls Dual-use and licensing Economic and nancial sanctions Extra-territorial application of US law Customs duties and imports Risk analysis Compliance programmes

Graf von Westphalen Attorneys-at-law and Tax Advisors

Berlin Düsseldorf Frankfurt Hamburg Munich Alicante Brussels Istanbul Shanghai Contact in Brussels: Dr Lothar Harings, [email protected] Contact in Hamburg: Marian Niestedt, [email protected] gvw.com

14 WorldECR www.worldecr.com Germany Germany

Russia and EU sanctions: a German perspective

Dr. Philip Haellmigk provides an overview of the heads of state and government of the current trade restrictions with practical advice on EU requested that the European Commission, on 21 March 2014, draw the necessary internal compliance measures. up an action plan for a reduction of dependence on Russian oil and gas imports by the next summit in June 2014. On top of this, with foreign direct investments amounting to approx- s a result of the current political facilitation planned for March 2014 imately 19bn euros into Russia, the ties events in the Ukraine, and and an economic agreement were of German companies with the country A Russia’s actions in the suspended. As a second step, individual should not be forgotten. situation, the U.S. and the EU have entry bans on Russian and Ukrainian both now imposed sanctions on Russia. persons entering EU countries, as well Legal basis for sanctions Arguably the current restrictions are as the freezing of their EU foreign The starting point and legal basis for fairly limited in their content as well as accounts, were imposed. This step of the EU sanctions against Russia is their scope, since the EU – in sanctions is temporally limited to six decision 2014/145/GASP dated 17 particular, Germany – continues to months, subject to a possible March 2014 concerning restrictive focus on a dialogue (instead of extension. The third and most relevant measures in respect of actions confrontation) with Russia. undermining or threatening the The regulatory content and As a second step, territorial integrity, sovereignty and efficiency of the individual penalties independence of Ukraine. are, however, far greater than one individual entry bans on Decision 2014/145/GASP has been might at first sight assume. The current Russian and Ukrainian implemented into directly-applicable sanctions already force (exporting) persons entering EU law by way of Council Regulation (EU) companies to take internal compliance No. 269/2014 dated 17 March 2014 measures when conducting their countries, as well as the concerning restrictive measures in business with Russia, and these have freezing of their EU respect of actions undermining or had to be implemented rapidly. Given threatening the territorial integrity, Russia's stance, which so far remains foreign accounts, were sovereignty and independence of unchanged, it cannot be ruled out that imposed. Ukraine. Regulation (EU) No. the EU may impose further sanctions 269/2014 has been supplemented and on Russia which will extend the expanded by Council Implementing content and scope of the current step from an external trade point of Regulation (EU) No. 284/2014 dated restrictions. view provides for sanctions in a range 21 March 2014 on the implementation This article summarises the legal of economic areas. The of Regulation (EU) No. 269/2014, basis, content and scope of the implementation of the third step will be concerning restrictive measures in sanctions to date and provides subject to Russia taking further action respect of actions undermining or companies with advice on which in destabilising the situation in the threatening the territorial integrity, compliance measures to take in order Ukraine, in particular if it carries out a sovereignty and independence of to bring their export business in line military intervention in the East of the Ukraine. with the applicable legal controls. country in addition to Crimea. These regulations apply: There was disagreement among EU Background Member States as to the definition of l within the territory of the EU Following the current political the specific trade sanctions, in including its airspace; developments in Ukraine, the presence particular with regard to the internal l to all nationals of EU Member of Russian troops in Crimea, and the burden-sharing of the consequences of States within and outside of the EU; referendum on the annexation of the the sanctions on the markets of the l aboard all aircraft and ships subject Crimean peninsula to Russia, the EU Member States, as well as the to the sovereignty of an EU Member has now imposed sanctions on Russia. safeguarding of energy supplies – State; While the U.S. immediately responded above all, the energy supply is the EU’s l to legal persons, entities or bodies with economic sanctions, the EU, key economic connection to Russia. founded or registered pursuant to because of its large trade volume with While the Federal Republic of the law of an EU Member State Russia, chose instead to use a three- Germany covers about 35% of its gas within or outside of EU territory; step sanctions plan. Firstly, on the needs through Russia, this figure and basis of the EU summit decision of 6 amounts to 100% in some Eastern l to legal persons, entities or bodies March 2014, the talks on visa European countries. Therefore, the with regard to business conducted

15 WorldECR www.worldecr.com Germany Germany

entirely or partly in the EU politicians and business people. contractual relations between the (compare in this regard article 17 of Moreover, the U.S. has also placed the concerned bodies, the relevance of the Regulation (EU) No. 269/2012). Russian bank Rossija on its sanctions non-listed body to the listed body, or list. The Rossija Bank, with its widely the characteristics of the funds or Note: The abovementioned acts are branched corporate network, is economic resources made available related to Council Regulation (EU) No regarded as the economic centrepiece can be referred to as (not conclusive) 208/2014 of 5 March 2014 concerning of the Putin clan. In response, criteria. restrictive measures directed against American credit card companies It should also be borne in mind that certain persons, entities and bodies in Mastercard and Visa have ceased an indirect 'making available' can also view of the situation in Ukraine and providing payment services to occur when a non-listed person or Council Implementing Regulation customers of Rossija. body not even controlled by a listed (EU) No 381/2014 of 14 April 2014 It must be considered in this context person or body receives supplies, implementing Regulation (EU) No that the term ‘economic resources’ is to funds, economic resources. 208/2014 concerning restrictive be understood in a very broad sense. measures directed against certain ‘Economic resources’ are assets of any Article 4 of Regulation (EU) No. persons, entities and bodies in view of kind, regardless of whether they are 269/2014 the situation in Ukraine. These tangible or intangible, personal or real Pursuant to article 4 of Regulation regulations sanction members of the property, which are not monetary (EU) No. 269/2014, the competent former Ukrainian government and funds but can be used for obtaining authorities may authorise the release people close to them. funds, goods or services (article 1 lit. d) of certain frozen funds or economic of Regulation (EU) No. 269/2014). resources or the making available of Article 2 of Regulation (EU) No. The provision of article 2 (2) of certain funds or economic resources. 269/2014 Regulation (EU) No. 269/2014, This requires that the respective funds Pursuant to article 2 (1) of Regulation according to which, neither funds nor and economic resources are necessary (EU) No. 269/2014, all funds and economic resources may be made to satisfy the basic needs of the listed economic resources belonging to, available directly or indirectly to the persons, including payments for owned, held or controlled by any listed persons, is particularly relevant foodstuffs, rents or mortgages, natural or legal persons, or entities or to export companies. medicines and medical treatment, bodies associated with them as listed in While the immediate, i.e. direct, taxes, insurance premiums and public Annex I shall be frozen. Article 2 (2) of ‘making available’ of funds or economic utility charges; those intended Regulation (EU) No. 269/2014 resources (payment, supply of goods, exclusively for payment of reasonable stipulates that no funds or economic etc. directly to a listed person) is easy professional fees or reimbursement of resources shall be made available, (or at least easier) to identify for incurred expenses associated with the directly or indirectly, to or for the companies, in practice it can be provision of legal services; those benefit of the natural persons listed in difficult for German and other intended exclusively for payment of European companies to check whether fees or service charges for routine The EU is not ready to an intermediate, i.e. indirect, ‘making holding or maintenance of frozen available’ to a listed person or body is funds or economic resources or sanction Russia’s taking place. necessary for extraordinary expenses. highest political and This question is particularly relevant in practice as a breach of Article 5 of Regulation (EU) No. economic elite (yet). embargoes may subject the company to 269/2014 penalty (for Germany: section 18 (1) Article 5 of Regulation (EU) No. Annex I, or any natural or legal No. 1 lit b) German Foreign Trade and 269/2014 further stipulates that the persons, entities or bodies associated Payments Act). authorisation of the release or the with them. The EU Member States have making available of funds and Annex I of Regulation (EU) No. provided European companies with economic resources is possible if they 269/2014 contains a total of 21 natural corresponding principles of are subject to an arbitral, judicial or persons. Twelve more persons were interpretation in the form of new administrative decision rendered prior added to this list of persons with sanctions guidelines (‘Guidelines on to the date on which the listed person Implementation Regulation (EU) No. implementation and evaluation of was included in Annex I, are 284/2014. restrictive measures (sanctions) in the exclusively used to satisfy claims Note: As opposed to the U.S., this framework of the EU Common Foreign secured by the decision, and the list does not contain persons in and Security Policy – new elements’, decision is not for the benefit of one of President Putin's closest inner circle. dated 1 February 2013, Council the listed persons. The EU is not ready to sanction document no. 5993/13). Pursuant to article 6 of Regulation Russia’s highest political and economic According to these guidelines, (EU) No. 269/2014, the authorities elite (yet). The U.S. is, however, relationships of ownership or control may finally authorise the release of considerably more confrontational. Its are indeed supposed to refer to the certain frozen funds or economic sanctions are similar to the EU indirect 'making available' in principle. resources if a payment by a listed sanctions in terms of content (freezing Nevertheless, this isn't always the case, person is due under a contract of accounts, prohibition of making and a risk analysis may lead to concluded before the date on which available economic values) but are different results in certain that listed person was included in the directed at high-ranking Russian circumstances The date and type of Annex to the Regulation.

16 WorldECR www.worldecr.com Germany Germany

Article 9 of Regulation (EU) No. 269/2014 Internal compliance measures Article 9 of Regulation (EU) No. As a result of the sanctions discussed in this article, companies in Germany and Europe 269/2014 makes clear that it is with trade ties with Russia or Russian companies should immediately take internal prohibited to participate knowingly and compliance measures so as to avoid, or at least minimise, the risk of breaching the intentionally in activities the object or Russia embargo regulations. This applies all the more since breaches of embargo effect of which is to circumvent the regulations may be subject to penalty (for Germany: cf. sec. 18 (1) no. 1 lit. B German measures referred to in article 2 of Foreign Trade and Payments Act (AWG)). Furthermore, companies face, in addition to Regulation (EU) No. 269/2014 administrative fines, potentially severe administrative law consequences. Thus, in (freezing and prohibition of making Germany, an exporter’s reliability is a requirement for the grant of export permissions. A available funds and economic resources breach of embargo regulations may cast serious doubt on the exporter’s reliability. It to listed persons). must also be borne in mind that the company concerned may not be granted or may be stripped of its authorised economic operator (‘AEO’) status. The basic compliance measures that require individual adaptations and adjustments Article 10 of Regulation (EU) No. depending on subject matter, scope and orientation of the respective company’s trading 269/2014 activities in view of businesses with Russia are: Article 10 of Regulation (EU) No. 269/2014 contains an exoneration from l comprehensive screening of all people involved in intended future transactions, liability, important for companies and shipments and other business activities (e.g. contracting parties, banks, customers) the responsible employees. According that could gain (pecuniary) advantage from the listed persons (Schedule I of the to this article, natural and legal persons Regulation (EU) No. 269/2012); cannot be held liable for their actions if l comprehensive screening of all people involved in ongoing transactions, shipments they did not know and had no etc. (contracting parties, banks, customers etc.) in order to identify possibly listed persons; reasonable cause to suspect that their l where a listed person is identified as being involved in businesses with Russia, actions would infringe the measures set immediate suspension or termination of all business activities connected with them; out in the Regulation. l contacting and coordinating with the national authorities (German Federal Office of Note: Exemption clauses of this kind Economics and Export Control, BAFA) in cases of doubt or other ambiguity; consulting are also contained in other embargo the legal department or external legal counsel; regulations (see, for example, article 42 l coordination with the national authorities (BAFA) if requested or already granted of the Iran Embargo Regulation permission for exports to Russia will be denied or withdrawn; (Regulation (EU) No. 267/2012 of 23 l special care when drafting (supply) agreements with Russian customers. Particular March 2012)). It may be true that these attention should be paid to the clauses on export control; risks of sanctions and the provisions – apart from their wording (civil law) liability for them should be explicitly included in the wording of the contract; including the legal department and/or obtaining external legal advice makes great and their history – actually only apply sense; to civil law claims in the context of l revising and updating the internal compliance structures and processes. Ensure that contracts and business. However, any departments concerned with the shipments/ transactions with international according to current legal reports, the customers (sales, etc.) are aware of the updated processes and also comply with legislative content of the provisions is to them immediately; and be extended to public responsibility. l follow closely current political developments and corresponding amendments of laws That means that the natural and legal with regard to the trade restrictions with Russia in order to initiate further compliance persons cannot be made liable to measures if necessary. penalty or administrative fines if they did not know nor had no reason to believe that their actions were in breach Rather, it is just as likely that the additional administrative (and thus of one of the sanctioning provisions. sanctions will be further intensified and also financial) effort for the companies. tightened (as for example in the form of However, such outlays will be outlook goods-related bans on sale and supply). considerably lower than the cost and Given that the confrontation between In order to avoid breaches and possible other consequences arising out Russia and the EU (and the U.S.) may corresponding consequences (possibly of a breach of the embargo regulations. yet heat up further, it can not currently subject to penalty), companies should As always: compliance pays! check any business with Russia or their [P]ersons cannot be Russian partners for compliance with made liable to penalty the current embargo regulations. Apart from screening the persons involved in Dr. Philip Haellmigk, LL.M., is or administrative fines transactions, this would involve counsel at Bird & Bird (Munich, if they did not know nor reviewing and updating the internal Germany) and a member of the compliance structures accordingly. In firm’s international practice had no reason to believe cases of doubt, it is advisable to area ‘Customs and Trade’. He that their actions were correspond with the national primarily advises on European and international trade matters, in breach of one of the authorities (in Germany, that is BAFA) – in due time (!) – and to possibly seek including customs, export sanctioning provisions. external legal counsel. controls and sanctions When new embargoes are imposed compliance. be assumed that the embargo against or existing embargoes are tightened, [email protected] Russia will be lifted in the near future. this does admittedly always equal

17 WorldECR www.worldecr.com Export Control Reform Export Control Reform

Re-exporters beware! Why non-U.S. companies are concerned about the use of the STA Exception

U.S. government approval of an export and an agreement to submit to audit by the U.S. government are among the requirements for use of License Exception STA even for non-U.S. companies. Sandra Strong examines the issues arising from this key feature of the U.S. export control reforms.

he Export Control Reform (‘ECR’) receiving goods under this exception is The requirements for the use of the being undertaken in the U.S. is that the requirements and sequence of STA Exception are therefore important T seen by many as a sensible move events is the same for a foreign party for both U.S. and non-U.S. companies from having strict controls on to understand as both the U.S. or everything military to ‘higher fences’ The requirements and foreign party using License Exception around a smaller number of strategic STA must comply with all the items (and their related technology, sequence of events is the requirements in §740.20(d). software, technical assistance, etc). same for a foreign party There are nine general limitations Companies based outside the U.S. have re-exporting or re- on the use of the STA, including limits been watching the amendments with on any optical sensors or equipment interest, with two main questions in the transferring as for the and components controlled within background: U.S. party conducting ECCNs 6A002 that need to be understood, and four limitations 1) Will these reforms make U.S. the initial export. specific to ‘600 Series’: businesses more competitive than their non-U.S. counterparts with re-exporting or re-transferring as for 1) The License Exception is not stricter controls – and will the U.S. party conducting the initial available if specific ‘600 series governments outside the U.S. take export. ECCN identifies an item as not steps to remedy any discrepancy? Thus: if a company in Australia, being eligible for STA’ 2) Will there be benefits to non-U.S. Japan, Sweden, the United Kingdom or 2) The License Exception may be used businesses when goods and other eligible country were to receive for ‘600 series’ items only: technology have been transferred controlled items under the STA a) If the ultimate end-user is the out of ITAR control? Exception from the U.S., it would still armed forces, police, para - require an STA statement from military, law enforcement, Leaving the first question to one whomever in the STA-36 group they customs, correctional, fire, or a side, let’s look at the second – through want to transfer/export to prior to that search and rescue agency of a the prism of the new License Exception transfer/export occurring. And, of Country Group A:5 country (See available for the movement of certain course, they can only onward Supp. No. 1 to EAR Part 740 and former ITAR items now controlled transfer/export the goods to countries also the table below) or the U.S. under the ‘600 series’, the Strategic within the 36 named in Country Group government; Trade Authorization (STA CFR A (though a few more countries are b)For the ‘development’, 740.20). eligible under certain conditions.) ‘production’, operation, install - The ECR has, in effect, moved U.S. export control from two lists to three: the U.S. Munitions List (‘USML’) 36 countries fully eligible for License Exception STA within ITAR, the Commerce Control (Country Group A:5 in Supp. No 1 to EAR Part 740) + United States List (‘CCL’) within EAR, and the ‘600 series’ within the CCL. The transfer of Argentina Estonia Japan Portugal many military parts and components Australia Finland Korea, South Romania from the Department of State’s USML Austria France Latvia Slovakia to Commerce’s ‘600 series’ means that Belgium Germany Lithuania Slovenia the EAR de minimis rule and licence Bulgaria Greece Luxembourg Spain exceptions are available for such items. Canada Hungary Netherlands Sweden A key tool for taking advantage of Croatia Iceland New Zealand Switzerland the ECR was the creation of the STA Czech Republic Ireland Norway Turkey Exception. But what is perhaps not Denmark Italy Poland United Kingdom clearly understood by non-U.S. parties

18 WorldECR www.worldecr.com Export Control Reform Export Control Reform

ation, maintenance, repair, items in the contract requiring their 4) The exporter or re-exporter/ overhaul, or refurbishing of an export exceeds $25,000,000. transferor must obtain a 7- item in one of the countries listed paragraph statement from the in Country Group A:5 or the Of particular interest to non-U.S. consignee before shipment acknowl - United States that will ultimately parties is the note to paragraph 1c edging, the use and limitations of be used by any such government which says that the License Exception License Exception STA. agencies, the United States STA may be used only if government, or a person in the Commerce/BIS or State/DDTC have The use of the STA Exception may United States; or previously approved all foreign parties be great news for many U.S. businesses, c) The U.S. government has issued on a licence! Very difficult for non-U.S. but non-U.S. parties need to ensure a licence that authorises the use parties to verify! that they’re aware of the additional of License Exception STA, the Other conditions of use for the STA responsibilities that pass to them as licence is in effect, and the that pass to the non-U.S. party include: consignees and, if they’re consignee provides a copy of such uncomfortable with any of the authorisation to the exporter. 1) That the foreign consignee agrees to limitations or conditions, ask suppliers 3) License Exception STA may not be permit a U.S. government end-use to apply for a specific BIS licence. used to export, re-export, or transfer check with respect to the items. (In (in-country) end items described in other words – a company must give ECCN 9A610.a until after BIS has permission for an audit by approved their export under STA government officials from a foreign under the procedures set out in EAR government.) Sandra Strong is the managing § 740.20(g) 2) When the STA Exception is used, de partner of Manchester, UK, 4) License Exception STA may not be minimis cannot apply. import/export consultancy used to export, re-export, or transfer 3) You must send notification to the Strong & Herd. (in-country) ‘600 series’ items if consignee the ECCN of each item to they are ‘600 Series Major Defense be shipped that it is being shipped www.strongandherd.co.uk Equipment’ and the value of such under the STA Exception, and

Perspectives: using the Strategic Trade Authorization

As a complement to Sandra Strong’s cases, they have found the notification, Tatsuya Kanemitsu, Ernst & Young observations on the use of Licence recordkeeping, and other require ments (Tokyo, Japan): Exception STA, WorldECR asked of STA to be too burdensome. In other When it comes to License Exception lawyers in different jurisdictions cases, their custom ers have been STA, I haven’t heard a great deal of about their experience of issues reluctant to sign the ‘prior consignee positive feedback from traders. It arising following the introduction of statement’, which, as is pointed out, creates multiple obligations for both License Exception STA... imposes significant additional re-exporters and end-users. A responsibilities on the customers common perception among Japanese Rob Torresen, Partner, Sidley Austin (including the requirement to submit traders is that if other types of licence LLP (Washington DC, USA): to U.S. government end-use checks). exception are available, there isn’t a Companies have had almost three As has been noted by Sandra great deal of incentive to use the STA. years of experience with License Strong, License Exception STA As for the ‘600 series’, re-exporters Exception STA. Although the 600- requires the foreign consignee to jump are growing increasingly concerned: If series ECCNs (export control through the same hoops (i.e., the 600 series is to be incorporated classification numbers) have been furnishing the correct ECCN, into a Finished Goods rule eligible for added more recently, License obtaining a signed ‘prior consignee de minimis on export from the U.S. to Exception STA has been in place since statement’, providing shipment-by- Japan, that would be fine as it counts June 2011. shipment notifications, etc.) vis-à-vis as NLR (No Licence Required). Ever since STA was introduced in any subsequent consignee – whether However, if Japanese traders do not 2011, BIS has stated clearly that its use re-exported to a party in a third recognise it as such (600 series are is ‘optional’. Companies are permitted country or transferred to a party in the incorporated less than 25%) and to apply for specific export licences if same country – and to push these subsequently re-exported to China, they prefer that to using STA. same requirements down to any where no de minimis rule applies, When given the choice between a subsequent consignee. what would happen? It would be very applying for a specific licence and Finally, the STA rule (in section difficult to manage 600 series items using a License Exception, exporters 740.20 of the EAR) runs on for six operationally. almost always opt for the License pages and is relatively complicated. So Exception, yet this is not necessarily as a consequence of all of these Doron Hindin, Advocate, Herzog Fox & the case with respect to STA. factors, STA does indeed create Neeman (Tel Aviv, Israel): Several of our clients have opted difficulties for some clients, to the Exporters worldwide have been not to use STA, but to continue point that some have opted not to following the U.S. Export Control applying for specific licences. In some bother with it at all.’ Reform initiative closely in the hope

19 WorldECR www.worldecr.com Export Control Reform Export Control Reform

that local regulators might follow suit. items which, as a result of the STA, export to another STA designated In Israel, however, initial optimism have shifted to the CCL have not been country or national has been fast- has been replaced with a degree of impacted under Israeli law, remaining tracked due to its series 600 series frustration among exporters. fully controlled by Israel's onerous ECCN, it should be kept in mind that Specifically, while the STA and the Ministry of Defence export control Israeli export controls may impose attendant easing of control over regime. In short, the major transition additional licensing requirements. former-USML items is greatly of items to the dual-use control In sum, items shifted from ITAR to important to certain U.S. exporters, environment in the U.S. has not been the CCL, once developing an Israel its impacts vis-à-vis returning or re- reflected under Israeli law, the munit - nexus, generally become controlled by exports from Israel has not generally ions list of which has remained static. Israeli law as defence equipment and been viewed as significant, and has What has happend on occasion is require comprehensive Israeli export even caused added confusion. that 600 series items now under BIS's licences. More broadly, exporters The added confusion is in some purview in the U.S. are, after touching worldwide as well as U.S. companies measure a function of the following down in Israeli territory, being receiving goods and technologies from two elements. Firstly, the Wassenaar misclassified by Israeli exporters as STA designated states or nationals Munitions List (‘WAML’), upon which dual-use items and not as defence should avoid developing any the USML is partially based, was items. While fragmentation of misplaced complacency, thinking that almost completely incorporated into international trade rules has always the STA has perhaps obviated the the Israeli Combat Equipment List been a subject requiring close need for close scrutiny of local export (‘ICEL’). Secondly, the ICEL attention by exporters and compliance control laws in STA listed states. additionally contains certain broad managers worldwide, the complexities Many states, especially those catch-all entries not present in the in Israel are exacerbated in light of the designated by the STA, contain WAML, which empower the Israeli STA's designation of Israel and Israeli unique export control features that regulators to assert control over items nationals as eligible to benefit from should not be ignored. which are entirely civilian in nature the STA (at least with respect to items but which in some way serve the controlled due to national security Eva Galfi, Principal at International defence or homeland security sector (§740.20(c)(2)). Trade Advisors (Sydney, Australia): (see, for example, ICEL section 21). So where an Israeli exporter or While some of the primes may have As a consequence of these two even a U.S. re-exporter of Israeli received items under STA, few have features of the ICEL, the U.S.-origin products may be advised that re- had to then send those same items back out or retransfer them. Those that I’ve asked assure me that they are doing everything by the book. In speaking to my clients, many of them are still undertaking EAR training and updating compliance policies, procedures and manuals. I'm sure there will be many violations of the requirements of STA over the next 24 Learn WHEN, HOW & WHERE it is convenient for YOU! months as industry gets up to speed U.S. Export Controls & Embargoes with the EAR's nuances and requirements. The biggest difficulty I EAR, ITAR & OFAC Compliance Training can identify for my clients in Australia is making the paradigm shift from the ITAR to the EAR and getting them to Train from your home or understand that their former ITAR oce computer... classifications are wrong now in many instances. at YOUR convenience.

Now it is easier than ever to get the Dr Baerbel Sachs, Noerr, Berlin: best in export compliance training for The parties who will use the STA your company. Exception in the future, the big system houses, are in my view fully Easy to use e-Seminars include all aware of how the new system and the of the content of our highly praised exceptions work. The clients who are live seminars and combine: - ITAR Controlled Items having difficulties with the new * Video instruction - ITAR Controlled Activities system are rather the SMEs further * Slides highlighting key concepts - ITAR Licenses down the supply chain for whom the - ITAR Agreements * Searchable, comprehensive - Much more... introduction of the 600-series makes e-Manual Use Promo it much more complicated to handle Code ECR-10 their U.S. products and who will try for 10% everything they can to avoid having Visit www.LearnExportCompliance.com/e-Seminars e-Seminar ITAR, and now also 600 series, items or call +1 540 433 3977 (USA) for details or registration. discount! in their portfolios.

20 WorldECR www.worldecr.com Cybersecurity Cybersecurity

Drawing the line between commercial and military jurisdiction over cybersecurity exports

Exporters and re-exporters of U.S. items for cybersecurity projects have historically faced difficult classification questions under the ITAR, But will that all change with Export Control Reform? And if so, when? Curtis Dombek examines the situation.

t has been 18 years since the United wise to pause a moment and reconsider cybersecurity efforts in such a wide States transferred export licensing the sometimes very fuzzy line between variety of settings, from the purely Ijurisdiction over a large number of State and Commerce jurisdiction of commercial, to the obviously military, encryption items from the U.S. State cybersecurity exports. Companies and but also with every conceivable shade Department to the U.S. Commerce governments around the world are of grey in between. The steady progress Department. Those of us practising in racing to deploy cybersecurity of the U.S. Export Control Reform the encryption export control field back equipment and systems, and U.S. makes such reconsideration especially then had no way of imagining the scale companies and their non-U.S. timely. of the explosion in global computing Drawing this line is a challenge and telecommunications that would Hardly a day passes faced by exporters under all the follow in the years ahead. Issues of without some new multilateral regimes, but for the sake of encryption technology, privacy and keeping this article manageable, I will cybersecurity have come to permeate regulatory development limit my comments to the U.S. legal our daily lives in a manner that at least important to those framework, although many of them lawyers like me never foresaw. could also be found relevant to the Since the recent cause celèbre of affected by jurisdictional line in the EU between Mr. Snowden, the issue of cyber - cybersecurity. dual-use control and the Member security has entered our daily States’ military controls. discourse. Just a few years ago cybersecurity evoked mostly thoughts counterparts are being offered a Current USML treatment of anti-terrorism efforts and protecting seemingly endless stream of business For purposes of illustrating the points private information from abusive opportunities across the globe. The in this article, the key provisions in the marketing tactics, hackers or spies. difficulty arises from the current ITAR are found in Cat. XI(b), Now the Securities and Exchange unprecedented expansion of as follows: Commission (‘SEC’) is conducting examinations of broker-dealer cybersecurity standards1, deeply offended European governments speak of curtailing the scope of the EU-U.S. privacy safe harbour2, and industry engagement and interest in cybersecurity information-sharing has reached the point that the U.S. Department of Justice and Federal Trade Commission have had to weigh in with special guidance to companies about the antitrust compliance implications of their cybersecurity information-sharing3. Hardly a day passes without some new regulatory development important to those affected by cybersecurity, which means basically everyone who is not cloistered within the walls of a monastery. Against this background, it seems

21 WorldECR www.worldecr.com Cybersecurity Cybersecurity

Military origin surveillance systems

TEMPEST electronics

Spread Spectrum

Burst Techniques

Configuration of standard electronics for enhanced security

BOM for standard electronics to be installed Specification of physical placement of systems

Specification of architectural elements Gathering and review of data from public sources ATC Fire Fleet Hotel Police Missile City Hall Instillation Army Base Army Office Tower Coast Guard Coast Shopping Mall Shopping Border Control Border College Campus College

Current USML Cat. XI(b): suppress the compromising emanations important implications as explained of information-bearing signals. This below. (b) Electronic systems or equipment covers TEMPEST suppression If we consider the diagram above, specifically designed, modified, or technology and equipment meeting or we can quickly begin to appreciate the configured for intelligence, security, or designed to meet government TEMPEST nature of the line drawing exercise. An military purposes for use in search, standards. This definition is not important basic principle in U.S. reconnaissance, collection, monitoring, intended to include equipment export control law is, of course, that the direction-finding, display, analysis and designed to meet Federal classification of an item depends upon production of information from the Communications Commission (FCC) what that item is, not who the end-user electromagnetic spectrum and commercial electro-magnetic is. This means that, as a basic building electronic systems or equipment interference standards or equipment block in our analysis, we can safely designed or modified to counteract designed for health and safety. conclude that the export of military electronic surveillance or monitoring. A origin surveillance systems or system meeting this definition is The line drawing that results from TEMPEST electronics (under the controlled under this subchapter even this approach to regulation can be current Cat. XI) is subject to ITAR in instances where any individual pieces portrayed on two axes, as shown in the control regardless of where it is to be of equipment constituting the system diagram above. Needless to say, this used. TEMPEST, however, is not may be subject to the controls of diagram is provided only for illustrative limited to electronics. It is a term of another U.S. Government agency. Such purposes to aid discussion here, and very broad scope covering publicly systems or equipment described above the lines shown should not be taken in available standards like ICD 705 that include, but are not limited to, those: any sense as reflecting legal refer not merely to electronics with conclusions. special security standards that meet (1) Designed or modified to use The term ‘specification’ in some the apparent intent of Cat. XI(b)(3), cryptographic techniques to generate entries on the left axis reflects the fact but also a large number of variously the spreading code for spread spectrum that on many cybersecurity projects the more or less mundane design practices or hopping code for frequency agility. supplier is not merely filling the order for buildings or offices meant to have a This does not include fixed code for a discrete product specified by the good security profile, many of which techniques for spread spectrum. customer but is creating the right seem not to be what Cat. XI(b)(3) has ‘shopping list’ or bill of materials in mind. Indeed, at least some in the (2) Designed or modified using burst (‘BOM’) for the customer’s U.S. government will say, if asked, that techniques (e.g., time compression requirements, often from readily if the sale is not about the electronic techniques) for intelligence, security or available commercial sources. This, of equipment, it is not meant to be military purposes. course, implicates the possibility of controlled by the reference to ITAR control of a defence service, but TEMPEST in Cat. XI(b)(3). (3) Designed or modified for the it also suggests that the supplier may be Now consider the familiar principle purpose of information security to providing a ‘system’, which has that exporting an EAR item does not

22 WorldECR www.worldecr.com Cybersecurity Cybersecurity

require an ITAR licence even if sold to foreign fire department or air traffic the U.S. government over the years that a military end-user. If one tests this by control? What about a police controls of items meeting TEMPEST considering the activities involved in department, especially if the country should be taken as a reference to supplying EAR items for cybersecurity involved is one whose ‘police’ were part electronics. In this regard, the new Cat. as reflected in our diagram above, an of a Ministry of Interior suspected or XI refers to TEMPEST only in important issue is that current Cat. believed to have ‘security’ functions paragraph (a)(5(iv), as follows: XI(b) includes the statement that ‘[a] that go beyond ordinary cops-and- system meeting this definition is robbers policing? And what about a Proposed New Cat. XI(a)(5)(iv): controlled under this subchapter even border control agency? At what point is in instances where any individual there too much risk that one could be (5) Command, control, and pieces of equipment constituting the accused of exporting a Cat. XI ‘system’ communications (C3); command, system may be subject to the controls (albeit consisting of EAR items) or that control, communications, and of another U.S. Government agency.’ even if one is not exporting hardware computers (C4); command, control, As applied to the BOM case in our that one has delivered a defence service communications, computers, diagram above, this means the sale by recommending the EAR items? intelligence, surveillance, and could be regarded as controlled if it Although seemingly even further reconnaissance (C4ISR); and amounted to a ‘system’ meeting removed from specification of a identification systems or equipment, government TEMPEST standards, and system, at what point could the that [are] if that is true it does not matter that all specification of architectural elements the components are EAR items. In this for a cybersecurity facility no longer be . . . regard, remember that Cat. XI(c) has viewed as an EAR activity? There an express exception for ‘such items as seems to be no basis under the (iv) Specially designed, rated, certified, are in normal commercial use,’ which regulations for treating this activity as or otherwise specified or described to means that the items on the exporter’s an ITAR-controlled cybersecurity be in compliance with U.S. Government BOM are controlled for export under activity when the facility is a shopping NSTISSAM TEMPEST 1–92 standards or ITAR in our hypothetical only if they mall, office tower, or even a police CNSSAM TEMPEST 01–02, to amount to a ‘system’, since as building, but one would be reluctant to implement techniques to suppress individual items they would be in say this if it were being done for a compromising emanations of normal commercial use and would be cybersecurity facility at an army base or information bearing signals. . . . analysed under the EAR. Some of these missile installation. may require BIS export licences, but Such are a few of the imponderables This proposed revision is many will be encryption items of the reflected in summary form by the noteworthy not only because specific type transferred to the Commerce diagram above. Space limitations versions of TEMPEST are specified but Department back in 1996 that have prevent me from spinning out the also because the reference is found in since been made the subject of export many others suggested by the diagram, paragraph (a), which concerns C3, C4, licence exception ENC. See 15 C.F.R. but the diagram points the way. C4ISR and identification systems or § 740.17 (ecfr 2014). equipment, not general security. This is With this special ‘system The proposed Category Xi not the end of our analysis, however. A aggregation’ principle reflected in Export Control Reform broader category that preserves part of current Cat. XI(b), one might still feel The proposed new Category XI, the prior Cat. XI(b) without using the confident enough that recommending Amendment to the International word ‘TEMPEST’ is found in the new ordinary commercial EAR items Traffic in Arms Regulations: Revision Cat. XI(b)(17): (without modification) for a BOM for of U.S. Munitions List Category XI, 78 cybersecurity purposes at a hotel, Fed. Reg. 45018 (July 25, 2013), would Proposed New Cat. XI(b)(17): shopping mall, commercial building or do at least two important things college campus should be viewed as an pertinent to this conundrum. First, it Parts, components, or accessories EAR exercise, but what to make of a confirms the view expressed by some in specially designed for an information assurance/information security system or a radio controlled in this subchapter that modify its published properties (e.g., frequency range, algorithms, waveforms, CODECs, or modulation/ demodulation schemes). . . .

This paragraph would continue to capture various electronics meeting TEMPEST that were captured by the earlier Cat. XI(b)(3), but it also takes us back to the famous concept of ‘specially designed’. Those who have read this far and are still reading will know that this is the subject of its own new, rather complex definition that is found in new ITAR section 120.41:

23 WorldECR www.worldecr.com Cybersecurity Cybersecurity

§120.41 Specially designed. enumerated on the U.S. Munitions electronics will seldom be the case). List and also commodities not on the Paragraph (b)(2) has no application to (a) Except for commodities or software U.S. Munitions List; or the electronics on the BOM. described in paragraph (b) of this Paragraphs (b)(3), (4) and (5), section, a commodity or software (see (5) Was or is being developed as a however, should be of considerable §121.8(f) of this subchapter) is general purpose commodity or help provided no customisation has specially designed if it: software, i.e., with no knowledge for occurred that would undermine the use in or with a particular commodity ‘same or equivalent’ test in (b)(3) or the (1) As a result of development, has (e.g., a F/A-18 or HMMWV) or type of ‘intent’ tests in (b)(4) and (5). properties peculiarly responsible for commodity (e.g., an aircraft or So, assuming that the final version achieving or exceeding the controlled machine tool). of new Cat. XI retains the above performance levels, characteristics, approach in paragraph (b), there is or functions described in the cause for hope that in our BOM case, relevant U.S. Munitions List Armed with this new definition, let the exporter will achieve much greater paragraph; or us consider how our BOM case above clarity about the scope of ITAR control would be analysed under the proposed and the ability to rely upon EAR (2) Is a part (see §121.8(d) of this new Cat. XI. Assuming we did not have control in many routine cases. subchapter), component (see C3, C4, C4ISR or identification systems §121.8(b) of this subchapter), or equipment, Cat. XI(a) would not be Looking to the future accessory (see §121.8(c) of this applicable. We would then be thinking New Category XI remains in draft subchapter), attachment (see about Cat. XI(b)(17), and the question form, and no final conclusions can be §121.8(c) of this subchapter), or (setting aside the radios mentioned in drawn until it is published in final form software for use in or with a defense (b)(17)) would be whether we have (expected later this year), and it cannot article. ‘[p]arts, components, or accessories be relied upon until it takes effect specially designed for an information (which will likely be 180 days after it is (b) For purposes of this subchapter, a assurance/information security published in final form). Until then, part, component, accessory, system….’ The question is whether the U.S. exporters and EU and other non- attachment, or software is not specially items in our BOM case are ‘specially U.S. parties involved in re-exports of designed if it: designed’. U.S. items for cybersecurity projects The ordinary EAR items we have in will continue to face the many difficult (1) Is subject to the EAR pursuant to mind in our BOM case are not caught classification questions left open by the a commodity jurisdiction by section 120.41, paragraph (a)(1) existing ITAR, but with Export Control determination; above, but note the wording of Reform they should arrive at greater 120.41(a)(2). That paragraph catches clarity about what does and does not (2) Is, regardless of form or fit, a all parts, components and accessories require an ITAR licence on fastener (e.g., screws, bolts, nuts, ‘for use in or with’ a defence article. international cybersecurity projects. nut plates, studs, inserts, clips, Ordinary commercial items we might Among the benefits should be the rivets, pins), washer, spacer, supply even to the shopping mall for its ability to specify and supply existing insulator, grommet, bushing, spring, cybersecurity are covered by (a)(2), it commercial items for cybersecurity wire, or solder; seems, if the shopping mall is going to purposes with less cause for anxiety use them ‘with’ any items meeting the about the issues noted above. Greater (3) Has the same function, technical criteria elsewhere in Cat. XI. focus will return to what is being performance capabilities, and the Answering that question could exported, a result that industry should same or “equivalent” form and fit as require the U.S. exporter (or re- readily welcome in what has to date a commodity or software used in or exporter in the EU or elsewhere) to try been quite a vaguely regulated area. with a commodity that: to obtain a lot of (probably unobtainable) information about what (i) Is or was in production (i.e., not other cybersecurity equipment the in development); and shopping mall is installing. Must the Curtis Dombek is the Office exporter assume that the other Managing Partner of the (ii) Is not enumerated on the U.S. equipment will be state-of-the-art in Brussels office of Sheppard Munitions List; the absence of concrete, credible Mullin Richter & Hampton LLP. information to the contrary? Our He divides his time between (4) Was or is being developed with exporter might be tempted to throw up Brussels and Los Angeles. He knowledge that it is or would be for his or her hands in despair at this was appointed to the President’s use in or with both defense articles point, but one must keep reading. Export Council Subcommittee on Once caught by 120.41 (or Export Administration in 2011, sufficiently in fear of being caught), the and the Regulations and Links and notes exporter proceeds to the ‘release’ part, Procedures Technical Advisory 1 www.reuters.com/article/2014/04/16/us-sec- which is 120.41(b). There, the exporter Committee of the Commerce exams-cybercrime-idUSBREA3F1V820140416 finds that the EAR items on the BOM Department Bureau of Industry 2 www.law360.com/articles/517796/eu-parliament- and Security in 2012. backs-privacy-reform-bashes-nsa-spying are not released by (b)(1) except where 3 www.justice.gov/atr/public/guidelines/305027.pdf there is a commodity jurisdiction [email protected] ruling (which for standard EAR

24 WorldECR www.worldecr.com Brazil Brazil

A brief introduction to Brazilian export controls

Fundamental to the control of export of goods from Brazil is the requirement that payment for such goods is received within the country or within an overseas account. Carlos Eduardo de Arruda Navarro outlines the regulations and also those controls specific to certain exports.

he main Brazilian export control b) empty reusable containers and default, for instance), the documents rules are set forth in Ordinance packages, (b.1) for storing goods to related to such export must be rectified T 23/2011, issued by the Foreign be imported or (b.2) to be returned to indicate the amount as R$0.00. In Trade Secretariat (‘SECEX’), a board to their origin; such cases, the exporter must keep the that sits under the Brazilian Ministry of c) temporary exports of ores and documents evidencing the default to Development, Industry, and Foreign metals to be recovered or processed, avoid the above-mentioned penalties. Trade (‘MDIC’). within certain conditions; Alongside the requirement to obtain d) donation or exchange of animals; 2) Export on consignment the tax and corporate registrations e) goods for sporting competitions; It is generally permitted to send goods necessary for the incorporation and f) temporary exports of certain goods abroad to an appointed consignee in operation of legal entities in Brazil, in certain situations that are legally expectation of a future sale and later companies intending to import and provided for; export goods must request a special g) sending abroad goods that had been In the event the registration (referred to by the acronym admitted in Brazil on a temporary ‘RADAR’) in order to be authorised to basis; Brazilian exporter carry out international sales and h) replacement of products made in breaches the control purchases of goods. A Brazilian Brazil, within their warranty company that intends to export goods deadline; rules, it may be subject must also be aware of some specific i) Brazilian investment abroad; to fines that range from export control rules, as follows: samples, which do not typify 10% to 100% of the price commercial purposes, under certain 1) Exports without the conditions; of the goods, in addition corresponding entry of funds j) inheritance goods, as provided for to being prohibited In principle, all exports of goods from in a partition or adjudication letter; Brazil must correspond to an inflow of and donation of goods, in the event from importing and funds into the country (or into an that the exporter is a religious or exporting any goods for overseas account – since 2006 receipt philanthropic entity, a teaching or of cash by the Brazilian exporter in its scientific institution, or if the goods a period of two years. bank account abroad has been have been allocated for considered an ‘inflow’ of funds). In humanitarian, philanthropic or settlement of the corresponding other words, as a rule, a Brazilian cultural exchange purposes or will exchange. All the products of the exporter should receive the amount be used to train staff. Brazilian export agenda may be sold on corresponding to the value of the goods consignment, except for those listed exported. However, the law allows Thus, a simple donation of goods under Exhibit XX of Ordinance 23/11, some specific cases where the abroad by a Brazilian company, except such as meat, soya beans and respective entry of funds is not for in the above-mentioned cases, is cigarettes, for instance. mandatory. Exports which do not not allowed by Brazilian law. In the Exporting on consignment requires demand a corresponding payment are event that a Brazilian exporter the exporter to undertake to prove, established in Exhibit XIX of breaches the above control rules, it may within up to 720 days of the shipment Ordinance 23/11, among which we be subject to fines that range from 10% date, the entry of the corresponding would particularly note: to 100% of the price of the goods, in foreign currency paid for the sale of the addition to being prohibited from goods abroad upon exchange a) any human blood by-product importing and exporting any goods for regulations, or the return of the goods. presented as a finished product and a period of two years. ready to use, without commercial Moreover, it is important to stress 3) Exports with non-cash margin purposes, resulting from that in the event that the exporter has or exchange retention international agreements or for not received payment for the export The export of products whose sale and research purposes; carried out (in the event of a client’s purchase agreement provides that the

25 WorldECR www.worldecr.com Brazil Brazil

exported with non-cash margin or Production – ‘DNPM’; Banned exports exchange retention and the ceiling h) Federal Police Department – Certain rules prohibit the export percentages admitted are listed under ‘DPF’; from Brazil of (i) art work, books, Exhibit XXI of Ordinance 23/11. i) Brazilian Institute of Environment documents, and other antiques and Renewable Natural Resources from the 16th through the 19th 4) Exports subject to prior – ‘IBAMA’; centuries; (ii) rough amphibian and consent j) Ministry of Science, Technology reptile skins and furs; and (iii) arms Some products are subject to prior and Innovation – ‘MCTI’; and and war materiel to certain authorisation issued by certain k) Ministry of Defence. countries, pursuant to the agencies before they are exported. Such resolutions of the United Nations agencies are in charge of – within their On the MDIC’s website1, readers can Security Council. field of expertise – establishing specific find the list of products subject to prior rules and conditions for a certain consent for their import, listed in product to be exported. accordance with their codes in the The consenting agencies are: Mercosur Common Nomenclature, settlement of the transaction should be with mention to the respective carried out after its final checking a) Brazilian Electricity Regulatory consenting agency. abroad (based on analysis certificates Agency – ‘ANEEL’; or on any other evidentiary documents b) Brazilian Oil Agency – ‘ANP’; with or without an exchange retention c) Brazilian Health Surveillance clause) is permitted in certain Agency – ‘ANVISA’; Carlos Eduardo de Arruda circumstances. The goods liable to be d) National Nuclear Energy Navarro leads the customs and Commission – ‘CNEN’; international trade practice at e) Brazilian Army; Machado Associados in São Links and notes f) Brazilian Foreign Trade Paulo, Brazil. 1 www.desenvolvimento.gov.br/arquivos/ dwnl_1392315279.pdf Department – ‘DECEX’; [email protected] g) National Department of Mineral

“US Export Controls on Non-US Transactions” plus US Export Reform Updates SEMINAR SERIES

AMSTERDAM THE NETHERLANDS October 6-9, 2014 at the Hilton Amsterdam Apollolaan 138, 1077 BG Amsterdam, The Netherlands

Persons and Items Subject to US Jurisdiction (ITAR, EAR & OFAC) US De Minimis Content Calculation US Defense Trade Controls Technical Data Considerations Enforcement Issues, Practical Advice...and MUCH MORE

Seminars also coming to: WASHINGTON DC, SAN FRANCISCO & more...

Visit www.LearnExportCompliance.com/schedule or call +1 540 433 3977 (USA) for details or registration.

26 WorldECR www.worldecr.com British Overseas Territories British Overseas Territories

Export controls in UK offshore centres

The offshore centres British Virgin Islands and the Cayman Islands are British Overseas Territories and corporate entities established there will be subject to UK and EU export controls and sanctions. Jeff Richardson reviews the regulations and urges due diligence in the establishment of investment funds and other corporate vehicles.

any private equity and introduces additional unforeseen or commissioner, an elected investment funds are export control compliance complex - legislature, and ministers. Her Majesty M organised as limited ities. Providing answers to these due The Queen appoints a governor for the partnerships or companies of offshore diligence questions requires an Overseas Territory based upon the entities. Similarly, companies may understanding of how EU and UK advice of her ministers. Generally, a structure mergers and acquisitions by export controls extend to the Overseas governor is responsible for external utilising offshore holding entities. The Territories. affairs, defence, internal security British Virgin Islands and Cayman (including the police), and the Islands are common jurisdictions for overseas Territories of the appointment, discipline and removal of creating these offshore entities. These United Kingdom public officers. jurisdictions are ‘Overseas Territories’ Within the British Empire, an Overseas The UK provides the following of the United Kingdom, and, as such, Territory is not formally annexed; support to the Overseas Territories: an entity organised within the rather, the Crown receives power and Overseas Territories, as well as its U.S. jurisdiction by treaty, grant, or other l Defence and security: The UK affiliates and international affiliates, lawful means. Each Overseas Territory commits to defend the Overseas must be cognisant of the potential has an independent constitution, Territories, assist with protection applicable item-based export controls, government, and local laws. As a matter from crime, and provide support in sanctions, and embargoes (‘export of constitutional law for each Overseas the event of natural disaster; controls’), which may originate from Territory, however, the UK Parliament l Economic assistance: The UK the European Union, UK, or has unlimited power to legislate for the provides substantial need-based organically from the Overseas Overseas Territories. An Overseas budgetary assistance; Territory itself. Territory’s constitution sets forth the l International support: The UK Prior to organising a business entity powers and responsibilities of the assumes, and is responsible for, the sensitive to export controls within the institutions of government within the Overseas Territories’ international Overseas Territories, consider the territory, usually including a governor relations, using diplomatic resources following due diligence: l Will item-based export controls for the Overseas Territory apply to transactions conducted by the new entity, thereby limiting or inhibiting the conduct of its intended business? l Will country-based export controls for the Overseas Territory apply to the new entity, its directors or senior officers, thereby limiting or inhibit ing the conduct of its intended business? l Will end-user based export controls for the Overseas Territory apply to the new entity, its directors or senior officers, thereby increasing the financial sanctions which apply to transactions with listed legal pers ons, entities (companies) or bodies? These due diligence questions provide a basis for going beyond the question of ‘business fit’ to determine whether forming a business entity within the Overseas Territories

27 WorldECR www.worldecr.com British Overseas Territories British Overseas Territories

and influence to promote the measures shall not adversely affect the Overseas Territories’ interests; and conditions of competition in the The 14 British Overseas l Reputational benefits: The internal market regarding products Territories reputation of the Overseas Territory which are not intended specifically Akrotiri and Dhekelia govern ment and businesses are military purposes.’ EU Directive Anguilla strengthened by association with 2009/43/EC distinguishes between Bermuda the UK. exports of ‘defence related products’ to British Antarctic Territory destinations outside of the EU as British Indian Ocean Territory The UK has 14 Overseas Territories. opposed to transit of ‘defence related British Virgin Islands Of those, the British Virgin Islands and products’ within the EU. As such, Cayman Islands the Cayman Islands remain popular export controls for military goods from Falkland Islands centres for organising business entities a Member State outside of the EU are Gibraltar for international business transactions not directly covered by the EU Military Montserrat and are the focus of this article. Any Goods Directive, but rather created Pitcairn Islands reference to ‘Overseas Territories’ independently by each Member State. Saint Helena, Ascension and Tristan within this article includes the British The EU Dual-Use Goods da Cunha Virgin Islands and the Cayman Islands. Regulation, Council Regulation (EC) South Georgia and the South No 428/2009, provides a community- Sandwich Islands EU and UK legislation affecting wide regime for controlling the exports, Turks and Caicos Islands the overseas Territories transfers, brokering, and transit of The EU, consisting of 27 Member dual-use items. This regulation applies States, governs through seven when an export is made from the EU, directly applicable to the Overseas institutions established pursuant to the with the place of export determining Territories, so to extend the EU Treaty on the Functioning of the applicable Member State jurisdiction. sanctions, the UK Foreign and European Union (‘TEFU’). The two Although the EU Dual-Use Goods Commonwealth Office (‘FCO’) drafts most important EU institutions are the Regulation imposes mandatory EU- an Implementing Order in Council to EU Council and the EU Commission. based rules, many of the provisions the UK Overseas Territories (‘UK EU legislative measures arise in simply provide that the Member State Overseas Territory Sanction Orders’). different forms. First, EU legislative must (or may) take action, but the EU These apply to all companies and measures may be self-executing, such Dual-Use Goods Regulations do not partnerships established within the as EU regulations, whereby Member detail the required action. Overseas Territory, and usually include State compliance is mandatory without Under the Lisbon Treaty of 2009, all aspects of the United Nations and further execution by the Member State. sanctions adopted by the CFSP may EU sanctions measures stated within When enacted, it forms a part of the include sanction measures agreed upon the EU Council Decision. The UK national law of the Member State. at an international level by the United Overseas Territory Sanction Orders Conversely, EU legislative measures Nations, as well as EU-imposed include enforcement provisions and may simply provide instructions, such unilateral sanctions. Unilateral EU information-gathering powers, requir - as EU directives requiring Member sanctions apply globally to the acts of ing the Overseas Territory to States to independently adopt specific EU nationals, including any person implement the extended sanctions supportive measures within their own holding nationality of a Member State, against individuals and businesses. The national laws through the process of EU sanctions are wide in scope, often ‘transposition’. Current UK government capturing direct and indirect dealings The TEFU sets forth the limits on policy is to ensure that with specified countries, as well as EU legislative actions. As to EU export persons or business entities within controls, EU jurisdiction can be Overseas Territories are those countries. summarised as follows: (1) export of legally and practically The current UK government policy military goods remains subject to is to ensure that Overseas Territories national jurisdiction of the Member enabled to implement are legally and practically enabled to State; (2) export of dual-use goods is the sanctions agreed implement the sanctions agreed upon within the exclusive jurisdiction of the by the UN and EU, so as to ensure the EU; and, (3) pursuant to the Lisbon upon by the UN and EU. UK’s compliance with international Treaty of 2009, the Member States commitments. Also, under the British coordinate the adoption of unilateral as well as any third-country person or Virgin Islands constitution, the UK has country-based sanctions through entity doing business ‘in part’ within authority to make laws for the ‘peace, Common Foreign and Security Policy the EU. However, the enforcement of order and good of the government’, (‘CFSP’). EU sanctions remains a matter of while the Cayman Islands constitution The EU Military Goods Directive, national law for individual Member empowers the governor to withhold TEFU Article 346(b)(1), provides ‘any States, and Member States may royal assent in cases where the Member State may take such measures maintain differing thresholds as to legislation appears repugnant, as it considers necessary for the sanction enforcement against a specific inconsistent with the constitution, or protection of its essential security sanctioned country. affects the rights and privileges of the interests as connected with the Since 2011, many EU sanctions have legislative assembly or the royal production of, or trade in, arms, been extended to the Overseas prerogative. While the UK does not munitions and war material; such Territories. EU legislation is not have an obligation to extend EU export

28 WorldECR www.worldecr.com British Overseas Territories British Overseas Territories

controls to the Overseas Territories, in Thus, EU Syria sanctions include ability to delegate his powers for practice it chooses to do so to maintain prohibitions applicable to entities of enforcement. The UK Overseas compliance with international policy the Overseas Territories with regard to Territory Syria Sanctions apply to commitments. Although the UK the following: extends many EU export controls to the (i) any person in the British Virgin Overseas Territories, as exemplars this l The sale, supply, transfer or export Islands or Cayman Islands, and article focuses on how the UK extends of equipment or software intended other enumerated Overseas the EU sanctions against Syria, Iran, for use by the Syrian regime in Territories, and the munitions embargo against monitoring or interception of (ii) any person who is a ‘British citizen, China to the Overseas Territories (see internet and telephone a British overseas territories the box ‘Application of the EU China communications; citizen, a British subject, a British military embargo to Overseas l The supply or transfer of specified National (Overseas), or a British Territories’). equipment or technology to be used protected person and is ordinarily in certain oil and natural gas sectors resident in the territory,’ and EU sanctions against Syria in Syria or to Syrian-owned (iii)any ‘body incorporated or cons - applicable to overseas Territories enterprises outside Syria; tituted under the law of the In response to the Syrian government’s l Participation in the construction of [Overseas] Territory’ (collectively violent reprisals against civilian new power plants for the production known as “UK sanctions covered protests, the EU enacted sanctions of electricity in Syria, including persons’”). against Syria in May 2011 by imposing through the provision of finance or asset freezes on natural and legal financial assistance for such EU iran sanctions applicable to persons, entities and bodies, as well as projects or the acquisition of shares overseas Territories restrictions on the provision of in, or formation of joint ventures The EU Iran sanctions and UK Iran economic resources to such persons with, enterprises in Syria engaged in sanctions are blowing in the political initially through Council Regulation such projects; winds of change. The time-limited EU 442/2011. As the situation in Syria l Prohibiting Syrian banks from Joint Plan of Action (‘JPOA’) affecting continued to disintegrate, the EU opening new branches, subsidiaries Iran, adopted by the EU on 20 January enacted Council Regulation EU or representative offices in EU 2014, suspends the enforcement of 36/2012, increasing the scope of Member States and from certain EU Iran sanctions. Similar to an sanctions affecting Syria on 19 January establishing joint ventures or EU directive, to bring effect to the 2012. Later, on 17 June 2012, the EU acquiring an interest in banks changes outlined in the JPOA, the UK imposed further sanctions through within the EU; must implement the JPOA within its l The provision of re/insurance to the own legal system. Currently, the UK While the UK does not Syrian government or entities policy is that there will be no changes have an obligation to controlled by the Syrian to UK legislation as a result of the government; and, JPOA-based revisions reflected within extend EU export l A comprehensive list of legal the EU Iran sanctions. controls to the Overseas persons, entities (companies) or Be that as it may, the foundation for bodies to which financial sanctions Iran sanctions applicable to the Territories, in practice it apply. Overseas Territories are premised chooses to do so to upon Council Regulation (EU) EU Member States cannot provide 267/2012 from 24 March 2012, maintain compliance loans or other forms of financial replacing EU Regulation 961/2010, with international support to the Syrian government, and implementing the EU Council Decision are subject to restrictions on the supply 2012/35/CFSP, and providing the policy commitments. of banknotes and coinage to the Central main source of authority for the EU Bank of Syria. The EU Syria sanctions Iran sanctions. The EU Iran sanctions Council Regulation EU No. 509/2012 apply extraterritorially to any EU include prohibitions applicable to amending EU Regulation 36/2012. national, to any legal person entities of the Overseas Territories with The EU Syria sanctions are directly incorporated under the law of a regard to the following: applicable to the UK. In order to detail Member State, and to any legal person the enforcement of certain restrictive in respect of any business done in l The supply of arms to, or purchase measures provided by the EU Syria whole or in part within the EU. of arms from, Iran; sanctions, the UK has implemented the Enforcement of the EU Syria sanctions l The sale or supply of goods and EU Syria sanctions through statutory is left to the Member States. technology which could contribute instruments, including the Export The UK Syria sanctions include an to Iran’s proliferation activities; Control Syria Sanctions and asset freeze on certain persons and l Providing assistance or financing in Miscellaneous Amendments Order entities, an arms embargo, trade relation to prohibited goods; 2012 (SI 2012/810). On 18 July 2012, restrictions, and restrictions on l The importation or transportation the UK further extended the EU Syria financial services as outlined under EU of oil from Iran; sanctions to the UK Overseas Regulation 36/2012. As extended to l The importation or transportation Territories through the Syria Order the Overseas Territory, a governor has of petrochemical products from 2012 No. 1755 (‘UK Overseas Territory the power to enforce the UK Overseas Iran; Syria Sanctions’). Territory Syria Sanctions, including the l Financing any Iranian person or

29 WorldECR www.worldecr.com British Overseas Territories British Overseas Territories

Application of the EU China military embargo to Overseas Territories

On 27 June 1989 in Madrid, the n Any equipment which might be relation to the provision of WMD. The European Council of Ministers used for internal repression. UK Embargoed Destination Order provided a Declaration on China, 2004 also extends the EU’s Dual-Use subjecting the country to a partial Exporters may apply for an export Council Regulation No. 1334/2000 to arms embargo and further restricting licence as to items controlled under the the Overseas Territories as if they were transit controls for military goods, UK Military List with the Export Control part of the European Community. ‘strongly condemn[ing] the brutal Organisation (‘ECO’), part of the Schedule 1 of Export Control Order repression taking place in China, Department for Business, Innovation 2003 specifies military, para-military [expressing] dismay at the pursuit of and Skills. The UK ECO reviews these goods, software and technology, while executions and requesting an end to export licence applications on a case- controlled dual-use goods, software repressive actions against those by-case basis in line with the and technology are set forth in legitimately claiming their democratic Consolidated EU and National Arms Schedule 2 of the UK Protectorate rights.’ In support of this policy, the Export Licensing Criteria. Export of Goods Order 2004. ministers adopted a measure The UK China Arms Embargo The Export Control Order 2003, as requesting ‘interruption by the extends to the Overseas Territories. As extended to the Overseas Territories, is Member States of the Community of mentioned, the UK has the authority to divided into six parts: military cooperation and an embargo extend export controls to the Overseas on trade in arms with China,’ called Territories, under the Export Control Act n Part I addresses controls for the the EU China Arms Embargo. The 2002. In 2003, the UK passed The export of military goods, dual-use scope of the EU China Arms Embargo Export of Goods, Transfer of Technology goods and goods in transit with a is not clearly defined, leaving Member and Provision of Technical Assistance WMD end-use; States the power to interpret it (Control) Order 2003 No. 2764, also n Part II addresses controls for the differently by implementing known as ‘Export Control Order 2003’ electronic transfer of military and enforcement policies within their own which was subsequently extended to dual-use technology and the national laws. the Overseas Territories in The Trade in transfer of technology with a WMD The UK Export Control Order 2008 Controlled Goods (Embargoed end-use by both electronic and non- delineated the UK’s position on the EU Destinations)(Overseas Territories) electronic means; China Arms Embargo and requires a Order 2004 No. 3101-3103 (‘UK n Part III addresses controls for the licence for any product listed upon the Embargoed Destination Order 2004’). provision of WMD technical UK Military List or UK Dual-Use List Although, ultimately, the Export Control assistance; being exported to China. The order Order 2008 revoked the UK Export n Part IV provides exceptions to the lists China within Schedule 4, Part 3, Control Order 2003, it remains controls in Parts I, II and III; as subject to transit controls for applicable to the Overseas Territories n Part V provides for the granting of military goods (‘UK China Arms through the UK Embargoed Destination licences, record keeping and Embargo’). Order 2004 which incorporates the appeals; and The scope of the UK China Arms definition of ‘controlled goods’ from the n Part VI addresses penalties and Embargo covers items listed on the UK otherwise-revoked UK Export Control means of enforcement for breach Military List and includes the following: Order 2003. of the controls in parts I, II and III. The UK Embargoed Destination n Lethal weapons, such as machine Order 2004 provides for the control of The exceptions listed within Part IV guns, large calibre weapons, strategic goods, software and of Export Control Order 2003 do not bombs, torpedoes, rockets and technology within the Overseas apply to the exceptions applying to missiles; Territories, bringing together controls embargoed destinations listed in n Specially designed components for the export or transfer of military Schedule 3. Because none of the Part and ammunition for the lethal and dual-use goods, software and IV exceptions apply to China, a licence weapons listed above; technology and controls on goods, from an Overseas Territory’s governor n Military aircraft and helicopters, software and technology related to is required to export items on the UK vessels of war, armoured fighting weapons of mass destruction (‘WMD’), Military List or UK Dual-Use List from vehicles and other such weapons including the transfer of technology or an entity organised in the Overseas platforms; and provision of technical assistance in Territory to China.

entity engaged in certain products gas, or for use in the petrochemical transactions to or from Iranian from Iran; industry in Iran; persons or entities; l Financing any Iranian person or l The sale or purchase of gold, l The purchase of Iranian bonds; and, entity engaged in certain nuclear- precious metals or diamonds to or l A comprehensive list of legal per - related activities; from Iran; sons, entities (companies) or bodies l Supplying equipment to any Iranian l The supply of newly printed to which financial sanctions apply. person, or for use in Iran for the banknotes and coins to Iran; exploration and production of oil or l Restrictions on financial The EU Iran sanctions apply

30 WorldECR www.worldecr.com British Overseas Territories British Overseas Territories

extraterritorially (i) to any person who create national laws related to security Council, extend any provision under is a national of an EU Member State, regarding ‘the production of or trade in the UK Export Control Act 2002 ‘to any (ii) to any legal person incorporated arms, munitions and war material,’ British overseas territory’ providing under the law of a Member State, and while Council Regulation (EC) No ‘with such exceptions and (iii) to any legal person in respect of 428/2009 (‘EU Dual-Use Goods modifications as appear to Her Majesty any business done, in whole or in part, Regulation’) provides a community to be appropriate[.]’ This enables the within the EU. Enforcement of the EU regime for controlling the exports, UK to extend EU directives and EU Iran sanctions is left to the Member transfers, brokering, and transit of regulations to the Overseas Territories States, with the UK enacting dual-use items. Again, the UK passes by implementing UK Orders in enforcement measures through legislation implementing EU directives Council. UK Orders in Council are sanction orders. and providing details of issued by the Queen under the powers The EU Iran sanctions are extended implementation for the EU regulations. of a given act due to the constitutional to the Overseas Territories in the same The fundamental UK legislation impact of extending legislation to the manner and process as the EU Syria supporting export controls is the Overseas Territories. sanctions. EU Iran sanctions are EU Export Control Act 2002 (‘UK Export regulations directly applicable to the Control Act 2002’). The act provides Conclusion UK, which has implemented the authority for the UK government to Each entity organised within an sanctions through statutory extend the export controls set forth in Overseas Territory, as well its U.S. instruments, including the Export the UK Export Control Act 2002 affiliates and international affiliates, Control (Iran Sanctions) Order 2012 through secondary legislation, i.e. must be aware of and understand all (SI 2012/81243). Specifically, the UK orders eexercisable by statutory applicable EU, UK and Overseas has extended these to the UK Overseas Territory export controls. At a Territories through The Iran Enforcement of the minimum, compliance will be (Restrictive Measures) (Overseas EU Iran sanctions is left necessary and certain transactions Territories) Order 2012 No. 1756 (‘UK conducted by the business entity and Overseas Territories Iran Sanctions’). to the Member States, its affiliates could be limited or The UK Overseas Territories Iran with the UK enacting inhibited by application of the Sanctions effectively provide an asset applicable export controls. Due freeze on certain persons and entities, enforcement measures diligence directed toward clarifying the an arms embargo and trade through sanction source of export control law providing restrictions, and restrictions on the item-based, country-based, end- financial services as outlined under the orders. use based, and end-user based EU Iran sanctions. restrictions could provide the As with the Syria sanctions, the instruments. The main piece of fundamental information necessary for Overseas Territory governor has the secondary legislation under the UK tailoring an export controls compliance power to enforce the UK Overseas Export Control Act 2002 is the Export programme effective within the Territories Iran Sanctions, and Control Order 2008 (‘UK Export Overseas Territories. delegate any of its powers as necessary Control Order 2008’) which controls: to enforce them. Also, similar to the (1) the export of strategic goods; (2) the Syria Sanctions, the UK Overseas transfer of technology; (3) trade in Jeffrey G. Richardson is a senior Territories Iran Sanctions apply to UK goods; (4) trade in dual-use goods; attorney at Miller Canfield sanctions covered persons. and, (5) trade with countries subject to where he advises multinational non-binding sanctions of the UN and clients in the information EU arms embargoes and export EU, as well as (6) the UK Military List technology, automotive, controls extended to overseas (‘UK Military List’), and (7) UK aerospace and defence sectors on Territories Controlled Dual-Use Goods, Software matters including export As discussed above, the EU extends to and Technology (‘UK Dual-Use List’). controls, mergers and the UK directives for the export of (Collectively (1) – (7) comprise the ‘UK acquisitions, and strategic military goods and regulations for the Strategic Controls List’.) corporate structuring relating to export of dual-use items. TEFU Article This UK Strategic Controls List controlled technologies. 346(b)(1) regulating EU military goods applies to the Overseas Territories, as [email protected] vests Member States with the ability to Her Majesty may, by UK Order in

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31 WorldECR www.worldecr.com U.S. controls on re-exports U.S. controls on re-exports out of control?

Under U.S. export control reform, the control of Since the actuator is made to certain items has moved from the USML to the EuroAero’s specifications for its aircraft, it is highly unlikely that it Commercial Control List. Using a case study, could be considered ‘specially Scott Gearity examines the issues arising from designed’ for one of the U.S. aircraft such a transfer. types listed in paragraph (h)(1). Next, we turn our attention to the items described in paragraphs (h)(2)- his article is the second in a series The response (26). None of these controls mentions examining how U.S. export The ITAR now takes a very different either canopies or actuators more T control reform impacts non-US approach to controls on aircraft parts generally. The probable conclusion – firms. In this and future articles, we and components than it did prior to 15 this actuator is no longer controlled will include case studies in export October 2013, when U.S. reforms under the ITAR. (It is worth noting that control reform to identify answers to began to come into effect. In the past, it is still possible to have an ITAR- common questions. the U.S. Munition List (‘USML’) took controlled actuator if, for example, that a general and somewhat vague actuator is ‘specially designed’ for an The case: EuroAero approach to controls on these items. A automatic rotor blade folding system.) As U.S. exporters acclimatise to the handful of things were identified by The ITAR may no longer control major changes to their country’s export name, but virtually any aircraft part this actuator, but that does not mean control system which began to come could be subject to strict Department of that no U.S. export controls apply to it. into effect last year, many non-U.S. State controls in USML Category To identify the relevant controls, the firms affected by export control reform VIII(h) if it were ‘specifically designed next step is to review the Commerce are just starting to appreciate what the or modified’ for a military aircraft. Control List (‘CCL’) within the Export new rules mean to them. (And the U.S. government never Administration Regulations, in To illustrate some of the issues defined what was meant by ‘specifically particular the new 600 series ECCN facing non-U.S. companies as a result designed or modified’ resulting in (export control classification number) of the U.S. reforms, consider a scenario widely varying interpretations by 9A610 which was created largely to involving a fictional Belgian aerospace exporters and re-exporters.) control military aircraft and related and defence firm which we will call items no longer described on the EuroAero. The ITAR may no longer USML. Some paragraphs of ECCN EuroAero is the prime contractor 9A610 do identify specific aircraft for a fourth-generation fighter aircraft control this actuator, components (e.g. aircrew life support assembled in Belgium. Since the but that does not mean equipment in 9A610.g and certain inception of the programme, EuroAero radar altimeters in 9A610.v), but catch- has purchased the aircraft canopy that no U.S. export all paragraph ECCN 9A610.x is now actuator from its longtime U.S. controls apply to it. one of the most common classifications supplier California Actuation. The for military aircraft parts. actuator is made to EuroAero’s Under export control reform, that is ECCN 9A610.x controls virtually specifications in order to fit properly no longer the case. Now there are only any part, component, accessory or and integrate with the other two ways in which an aircraft part may attachment ‘specially designed’ for a components of the canopy assembly. be controlled on the USML. Either it is military aircraft controlled in USML California Actuation has always (a) ‘specially designed’ for a handful of Category VIII(a) or ECCN 9A610.a, obtained U.S. Department of State the most advanced U.S.-origin aircraft which is not otherwise controlled on licences to authorise the export of the types such as the B-2, F/A-18E/F/G or the USML or by ECCN 9A610.y. If the actuators to Belgium and onward to the F-35 or (b) actually identified by canopy actuator is ‘specially designed’ various governments operating the characteristics or functions in a specific for EuroAero’s fighter jet, ECCN aircraft. entry within Category VIII(h). A few 9A610.x is now the most likely EuroAero’s legal director calls you examples of these items which are now classification. Of course, in practice, into her office. You immediately notice enumerated on the USML are you would want to confirm this with a newspaper clipping about U.S. export automatic rotor blade folding systems, the actuator manufacturer. control reform on her desk. She says, ‘I weapons pylons, and air-to-air just read this article about the new U.S. refueling systems. In some instances, export control regulations and I have a specially designed parts and Scott Gearity is an instructor for few questions: Will these U.S.-origin components of these identified items the Export Compliance Training actuators still be controlled by the are also ITAR-controlled. Institute, offering comprehensive Department of State under the ITAR Now let’s apply these concepts to United States export compliance (International Traffic in Arms EuroAero – a Belgian firm procuring a training to companies around Regulations)? If not, will they be canopy actuator for its modern fighter the world. controlled at all by the U.S.?’ How do aircraft. This is an aircraft component, [email protected] you answer her? so we review USML Category VIII(h).

32 WorldECR www.worldecr.com WorldECR

Chris Parypa Photography DC FOCUS The city. The law. The lawyers. Special focus: Washington, DC Special focus: Washington, DC trekandshoot Capitol pRaCtiCEs

Washington, DC, capital of the United States of America, is home to Congress and the Senate, the Department of Justice, the Directorate of Defense Trade Controls, the Bureau of Industry and Security within the Department of Commerce, and the Office of Foreign Assets Control. It’s no surprise that DC has the largest concentration of export controls and sanctions lawyers in the world – and they’re busier than ever. WorldECR visits the home of trade controls.

ith a population of less than concerns are with the crucial nexus world to be a sanctions and export one million people, it is still between the needs of business and control lawyer – and a great time to be W possible to stroll around national security and foreign policy practising,’ says Sidley Austin partner Washington, DC and conclude that concerns, including trade security, Rob Torresen. ‘So much of what we do one’s pitched up in a sleepy provincial export controls, sanctions and CFIUS is coloured by what’s happening within town, proud of its folksy history and applications. the agencies or on Capitol Hill. monuments and its architectural For this ‘band of brothers’ (and Alongside that, it’s the fact that there’s heritage – all the while forgetting how sisters), DC is not the only place to a very large community of powerfully decisions made on and build a practice, but it possesses the practitioners, probably the world’s around Capitol Hill reverberate across distinct advantage of proximity to the greatest concentration of sanctions and the world. agencies and institutions charged with export control lawyers, so we can share Notwithstanding the distance- making, enforcing and interpreting a ideas and information and discuss shrinking impact of modern suite of legal regimes that can change trends.’ communication technologies, there is a with remarkable rapidity. Torresen says that all branches of pool of lawyers whose day-to-day ‘This must be the best place in the what might be called trade and

2 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

national security law, not only political stripes, and in their own way a Department of Justice (‘DOJ’), the sanctions and export controls, but anti- part of the ecosystem of national various organs of the U.S. State boycott, anti-money laundering security. Department, including the Directorate (‘AML’), Committee on Foreign Investment into the United States. (‘CFIUS’), Homeland Security and Foreign Corrupt Practices Act (‘FCPA’) ‘So much of what we do is coloured by have grown rapidly as practice areas in what’s happening within the agencies the years since the terrorist attacks on or on Capitol Hill.’ the World Trade Center and DC is the natural hub of those activities. Rob torresen, sidley austin It is of course the seat of the legislative branch of government, the White House, Congress, and Senate. It’s also where the trade associations naturally congregate and, alongside But just as importantly, this is of Defense Trade Controls (‘DDTC’) them, many of the think tanks and where the institutions and agencies are responsible for the administration of policy institutes, each with their own headquartered: amongst them, the the International Traffic in Arms Regulations (‘ITAR’); the Bureau of Industry and Security (‘BIS’) within the Key agencies involved in export control and sanctions policy Department of Commerce, under the auspices of which the Export Most of the key agencies and institutions involved in the development, debating of, Administration Regulations (‘EAR’) imposition and enforcement of embargo and export control policies are based in functions, and the Office of Foreign Washington, DC. These include: The Office of the President (White House): Authority vested in the office of the President empowers the holder to issue Executive Orders that Assets Control (‘OFAC’), part of the take immediate effect on issue. The lead role in developing and implementing foreign U.S. Treasury. policy, including policy relating to sanctions is however, taken by The Department of State Thompson Coburn partner Robert – within which, key offices include those of: Shapiro points out that while its trade group operates out of the Washington, n The Under Secretary of State for Arms Control and International Security – DC office, his firm is actually currently headed by Rose E. Gottemoeller – and which leads the policy process on headquartered in the city of St. Louis, nonproliferation and manages global U.S. security policy, principally in the areas of Missouri – one of the cities in United nonproliferation, arms control, regional security and defence relations, and arms States’ industrial heartlands. While transfers and security assistance. that has advantages, enabling the firm n The Bureau of Political-Military Affairs (‘PM’), headed by Assistant Secretary Puneet Talwar – which is the Department of State's principal link to the Department of to keep a finger on the pulse of its core Defence, and provides policy direction in the areas of international security, security client base, ‘DC is where the regulators assistance, military operations, defence strategy and plans, and defence trade. are. A lot of [export control sanctions n The Directorate of Defense Trade Controls (‘DDTC’) which is charged (in accordance practice] is about relationship building with the International Traffic in Arms Regulation – ITAR) with controlling the export – as much, even, as legal argument. It’s and temporary import of defence articles and defence services covered by the United a really important thing,’ he says. States Munitions List (USML). An office in DC puts the law firm at n The Bureau of Arms Verification and Compliance (‘AVC’) which advances national the heart of the action. As Larry E. and international security through the negotiation and implementation of effectively Christensen of Miller & Chevalier notes verifiable and diligently enforced arms control and disarmament agreements involving of current pressures, ‘The nearly daily weapons of mass destruction and their means of delivery as well as certain conventional weapons. policy and regulatory interpret ation develop ments on the Ukraine/Russia Other key agencies include the Office of Foreign Assets Control (‘OFAC’), which sits front require close contacts with OFAC, within the U.S. Treasury, and the role of which is to ‘administer and enforce economic and BIS and DDTC, and that is typical of trade sanctions based on U.S. foreign policy and national security goals against targeted every new regulatory response to an foreign countries and regimes, terrorists, international narcotics traffickers, those international hot spot.’ engaged in activities related to the proliferation of weapons of mass destruction, and Being in close physical proximity other threats to the national security, foreign policy or economy of the United States.’ means being able to read between the OFAC ‘acts under Presidential national emergency powers, as well as authority lines of rules that are complex, new and granted by specific legislation, to impose controls on transactions and freeze assets untried. Covington & Burling’s Kim under U.S. jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with Strosnider explains: ‘One of the main allied governments.’ advantages of a Washington presence The Bureau of Industry and Security (‘BIS’) sits within the Department of Commerce lies in the ability to interact on a less and regulates the export of sensitive goods and dual-use goods, i.e. goods that are on the formal basis with the enforcement Commerce Control List (‘CCL’) through the issuance of the Export Administration agencies. You’ve got to remember that Regulations (‘EAR’) and thus can be classified according to the Export Control there’s very little or no “case law” or Classification Number (‘ECCN’) system, and thus require a licence from the Commerce other published materials on, for Department prior to export. example, licensing decisions and the little that is published is heavily

3 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

redacted. Having these kinds of Peabody, concurs: ‘If, for example, previously a public defender for the contacts, which are built up over time, you’re working on a disclosure, you’re District of Columbia; Cari Stinebower enables you, as an adviser, to anticipate going to get better results if you have of Crowell & Moring is a former problems on your client’s behalf. It also face-to-face interactions with, say, counsel and programmes officer at paves the way for more formal OFAC or BIS. It really can make a great OFAC; Mario Mancuso of Fried, Frank, Harris, Shriver & Jacobson LLP is a former Under Secretary of Commerce for Industry and Security; Steve Pelak ‘If, for example, you’re working on a of Holland and Hart was National disclosure, you’re going to get better Coordinator of Export Control/ results if you have face-to-face Embargo Enforcement from 2007 until interactions with, say, OFAC or BIS.’ 2013. Firms are anxious to recruit lawyers who have experience on the Grayson Yeargin, Nixon peabody other side of the fence, whether within the Treasury, OFAC, Commerce, or the intelligence services. Stinebower, whose experience as a programmes requests, by having addressed any deal of difference if you can show that officer for OFAC included advising on sensitivities earlier on.’ you’re on the straight and narrow. But sanctions and anti-terrorism Amongst the kinds of issues that it also helps to be able to ask questions legislation and drafting UN Security Strosnider is referring to would be: directly.’ Council Resolutions and related What might constitute ‘facilitation’ in a Perhaps to a greater extent than in executive orders, says that that given circumstance – or how should a other areas of legal practice, many experience ‘certainly opened the particular specially designated national export controls/sanctions lawyers curtains on how things “work” in (‘SDN’) be properly interpreted? ‘The enter private practice having cut their government’. FAQs [on the agency websites] are teeth within the agencies themselves. good,’ says Strosnider, ‘but they don’t Amongst the lawyers spoken to for the Converging expertise have all the answers.’ purposes of this Focus, Amit Mehta of But there are other convergences within Grayson Yeargin, a partner at Nixon Zuckerman Spaeder LLP was the export controls/sanctions rubric. In

                             

WWW.CROWELL.COM/INTERNATIONAL-TRADEWWW.CROWELL.COM/INTERNANTERNAATIONAL-TRADETIONAL-TRADE

4 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

the course of researching these articles, national economic interest. Mark International Trade and Government practitioners have spoken of how they Plotkin, co-chair of Covington’s Regulation practice. ‘I recently advised often provide what could be described National Security and Defense a Middle Eastern entity on an issue as specialist auxiliary support to Industry Group notes, for example, where its dealings with Iran were colleagues within their firms with quite that: ‘We on the CFIUS team find under discussion. And that involved separate skills sets, such as banking, ourselves often working surprisingly speaking to multiple agencies – the M&A, data protection or employment. closely with our export Commerce Department, the Treasury – and the intelligence community. Think of it this way: respectively, they ‘Experience suggests that if a company are concerned with the flow of items, is being lax about who it’s doing funds and people.’ business with in one area, e.g. under the It could plausibly be argued that terms of the FCPA, it’s possibly lax in over the course of the past decade or another – like sanctions.’ two there’s been a sea-change in the way that business conducted overseas Kay Georgi, arent Fox – particularly in or with so-called ‘exotic’ destinations – is now perceived. Behaviour once considered They say it is time to ‘unbundle’ the control/sanctions colleagues. Clients out of sight and thus out of mind has perception of export controls and often see CFIUS as being in a separate been brought into the fold not only of sanctions practice and to recognise the workstream but ultimately, the vast the increasing territoriality of some overlap that exists with other areas of majority of CFIUS reviews have a trade regulatory regimes, but also what trade compliance – with many firms control/sanctions element to them. might be called the moral censure of an creating a wider ‘trade security’ Also we’re seeing more foreign increasingly globally aware world umbrella that also includes FCPA, investments from China and a higher community. Bribery, for example is CFIUS and anti-money laundering. percentage of those are seen as risky, now regarded both in law and public CFIUS is a good case in point. As in compared for example, to investments opinion as no less ‘corrupt’ if it the case of sanctions and embargo- from, say, the UK, EU or Canada.’ happens abroad than in the United related practice, the tension ‘There’s a convergence in all these States or Europe. underpinning CFIUS is between matters,’ says Dechert’s Jeremy And it can be a bellwether for other national security concerns, and Zucker, co-chair of the firm’s forms of malfeasance – all of which Ken Schulze Ken

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may fall within the purview of the security or foreign policy concerns and among these regimes. Corruption Washington lawyer. would be a mistake, cautions Fried funds other international crimes. Primarily an international trade Frank’s Mario Mancuso. ‘Each of these Money laundering facilitates the lawyer, Arent Fox partner Kay Georgi is a discrete regulatory regime, but they movement of illicitly obtained funding, whether sourced from corruption or other criminal activity. To conduct ‘9/11 highlighted the need for coordinated business, terrorists and other criminals enforcement, because it laid bare the require funding, means of connections between and among these communication, and access to items regimes...Companies recognise that a risk subject to export controls, whether in one area can breed risk in another.’ they be weapons controlled under the ITAR, or dual-use items controlled Kathryn Cameron atkinson, under the EAR. Economic sanctions Miller & Chevalier target specific activities of concern, and seek to block criminals’ access to these items and pathways. Companies also sits on the firm’s cross-practice area move together, rather like figure skaters recognise that a risk in one area can FCPA group. ‘There’s a lot of overlap on an ice-rink. Ultimately, they are breed risk in another. Thus, lawyers with sanctions and export controls here. designed to advance, in different need to be able to help companies What’s the biggest FCPA issue? Third commercial contexts, the same national identify and manage these risks. To do parties. And experience suggests that if security or foreign policy objectives.’ so efficiently, it’s best to consider them a company is being lax about who it’s Kathryn Cameron Atkinson of together rather than piecemeal.’ doing business with in one area, e.g. Miller & Chevalier believes the changes It is this kind of deeper under the terms of the FCPA, it’s can be easily explained: ‘There are understanding – and also of how policy possibly lax in another – like sanctions.’ several reasons for the trend, but the translates into regulation (albeit To fail to see each of these legal effect of 9/11 is probably most sometimes bluntly) – that empowers a regimes (i.e., sanctions, export controls, important. 9/11 highlighted the need DC law firm to deliver strong advice CFIUS, anti-money laundering, etc) as for coordinated enforcement, because pertaining not only to sanctions and related to a common core of national it laid bare the connections between export controls, but beyond. MINIMIZING RISK IN EXPORT COMPLIANCE Our attorneys provide guidance to help your business avoid disruptions. From regulatory complexities in shipping or transferring goods and services to engaging in global M&A activity or outsourcing patent applications, companies operating on a global scale face challenges with export control and sanctions compliance. We help clients comply with the complex and rapidly changing U.S. export regulations and sanctions to minimize their risk and keep their business moving forward.

Grayson Yeargin ([email protected], 202-585-8273) Alexandra Lopez-Casero ([email protected], 202-585-8372) Lindsey Nelson ([email protected], 202-585-8384)

401 Ninth Street NW, Suite 900, Washington, DC | 202-585-8000 nixonpeabody.com/eces | @nixonpeabodyllp

6 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC bikeriderlondon ExpoRt CoNtRol REFoRM: thE paiN bEFoRE thE GaiN

The Export Control Reform initiative is the biggest shake-up in trade controls in years. It aims to simplify export controls and in so doing improve export opportunities for U.S. businesses as well as facilitating export to America’s allies. Five years on from its conception, WorldECR asks practitioners if their clients are benefiting from the new regime.

he United States’ export control Regulations (‘EAR’) under the remit of longer merit controls under the USML, regime is a bedrock of its national the Bureau of Industry and Security such as certain parts and components, T security strategy, governing, as it (‘BIS’) within the Department of to the CCL, to allow for more flexible does, how the nation’s strategic and Commerce. Generally speaking, ITAR licensing authorisations to allies and military products are sold across the applies to military (‘USML’) goods, and partners while increasing the number world. Doing so has always been a the EAR governs dual-use (‘CCL’) of enforcement officials available to balancing act, with the aim, as per all products, with quite different rules per - safeguard against illicit attempts to export control regimes, of striking the tain ing to their export and re-export. procure sensitive defense technologies.’ right note between the country’s But the status quo is being shaken The underlying policy drivers are obligations to foreign partners and up by the Export Control Reform that once completed ECR should allies, concerns about human rights (‘ECR’) initiative, a radical rethink of increase interoperability with NATO abroad, international commitments to how ‘the system’ should function. ‘It’s and other close allies while reducing the anti-proliferation regimes such as the akin,’ said one lawyer, ‘to asking all the current incentives for companies in Wassenaar Arrangement, domestic nation’s aerospace and defence ‘friendly’ (i.e., non-embargoed competitiveness, and regional and contractors to go through their toy countries) to design out or avoid the use international security. boxes and sort them out all over again.’ of U.S. origin content previously/ The basic principles have always The catchy slogan used to describe currently controlled under ITAR. As at been clear enough: goods fall under the the philosophy underlying the Export time of writing, Final Rules have been jurisdiction of the International Traffic Control Reform initiative is, of course, published redefining how around a in Arms Regulations (‘ITAR’) ‘a higher fence around a smaller yard’ – dozen categories of items should be administered by the Directorate of or, as the U.S. State Department treated. Not all these changes impact Defense Trade Controls (‘DDTC’) described it (less pithily, but more on every manufacturer or exporter (by within the Department of State, or that explanatorily): ‘Export Control Reform some estimates, defence trade is only of the Export Administration will move less sensitive items that no around 10% of the total of U.S. trade)

7 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

but for those that do the process of export control compliance posture, some time before the new controls are reform is proving significant. regardless of the reform programme. ‘It integrated with existing product lines ‘This is the biggest revision to the isn’t uncommon,’ says Mancuso, ‘to and processes. In the meantime, export control regime that I’ve seen in find companies with really antiquated businesses are asking all the same over 30 years of practice,’ says Ben classification systems that haven’t questions about licence requirements, Flowe of Berliner, Corcoran & Rowe. ‘It taken into account how their products exporting dual-use goods – but the is extremely complicated because what have been upgraded or modified over answers are changing as the regulations you have is two sets of rule revisions, the years. You’d be surprised how many are revised and as product jurisdictions ITAR and the EAR, that are happening simply don’t classify their products at and classifications shift.’ Barbara D. Linney of Miller & Chevalier points out that the struggle to ‘For people used to dealing with the ITAR, come to terms with the new regime is their first instinct is that a product not felt only at home. ‘These folks are requires a licence. But now they are facing a very steep learning curve. This responsible for deciding whether, in fact, is particularly true for non-U.S. clients a licence is required – and there’s a strict who deal in formerly ITAR-controlled goods that now are subject to the EAR. liability if they get it wrong.’ For these companies, the challenge of ben Flowe, berliner, Corcoran & Rowe learning a new export control regime is exacerbated by the need to obtain the new classifications from their U.S. in parallel. It’s a huge amount of work all, or have their sales teams self- suppliers. U.S. suppliers with an for companies to have to reclassify all classify without expert guidance. You’d extensive product line to reclassify are their products.’ seldom find that with large cap public doing the best they can to get through In essence, says Flowe, the process companies, but it is often true of large, the process, but since they must of requires a major shift of responsibility private companies, even those with necessity prioritise the order in which from government licensing officers to turnovers running into hundreds of their products are to be reclassified, not company export administrators: ‘For millions of dollars.’ all of their customers will find the people used to dealing with the ITAR, This might reflect the fact that until products they buy at the top of the list.’ their first instinct is that a product recently the U.S. itself has provided a requires a licence. But now they are more than lucrative market for U.S. tricky transition responsible for deciding whether, in products, and that for obvious reasons Bill McGlone of Latham & Watkins says fact, a licence is required – and there’s companies which are traditionally dom - that ECR is proving to be ‘an extremely a strict liability if they get it wrong.’ estic ally focused have paid less attent ion complex transition that raises some Flowe says that the wrong response to their export-related oblig ations. complicated issues – there is plenty of to the ECR programme is to think ‘This These are now coming up to speed with room for confusion.’ merely removes a whole lot of licensing the legal and technical complexities of, As McGlone points out, one of the requirements, so we can shed some of for example, the EAR, as they look for subtleties (or indeed ironies) of the our compliance people. If anything new buyers for their products. reform process is that the two there’s a need for more, not less.’ This is a trend noticed by Covington longstanding export control lists & Burling’s Kim Strosnider who says (USML, subject to ITAR, and CCL, big challenges for all sizes that U.S. defence contractors ‘are subject to the EAR) have essentially The challenge of compliance with U.S. seeking out new international markets morphed into three lists: those two, and export controls has never been and opportunities as the U.S. defence the new 600 series within the CCL, straightforward. One issue that arises, budget shrinks. That of course which includes defence items previously says Richard Matheny of Goodwin Procter, is that the potential for unwitt - ing breaches of export controls is so broad – in other words, it is very easy ‘This is an ongoing process, so it’s going for companies, especially smaller busi- to take some time before the new ness es lacking the resources to commit controls are integrated with existing to dedicated compliance person nel to product lines and processes.’ slip up against a back drop of ‘dynamic’ Kim strosnider, Covington & burling changes in the law. ‘We’re still finding [encryption control] violations every day,’ says Matheny. ‘In part, that’s because companies find it counter- increases the need for understanding on the USML and to which a whole new intuitive, for example, that technologies the export control regimes, not just for set of parameters applies. At least at this that are openly available should be the big players but medium-sized stage, this is causing some export ers to controlled for export purposes.’ businesses in the sector too.’ question whether the policy objective of Fried Frank partner Mario Mancuso The reform process will in time simplification is being achieved. says that it is surprising how many provide greater clarity and efficiencies Further, as the administration has companies are either unaware about for businesses, she says, but not before been keen to emphasise, this doesn’t their export control compliance companies get to grips with it: ‘This is represent a complete ‘decontrol’. Many obligations or overconfident about their an ongoing process, so it’s going to take items that have moved from the USML

8 WorldECR www.worldecr.com LLWW.com. A Full-Service Powerhouse. YYourour TradeTrade Controls and SanctionsSanctions Solutions. /DWKDP :DWNLQVDJOREDOODZ¿UPZLWKPRUHWKDQDWWRUQH\VLQRI¿FHVFRPELQHV::D: PDKWD/ DWNNLL   ¿ZDOODEROJDVQ UUPP Z RPKWLZ UUHH   UUQURWWDQDKW Q  RQLV\H II¿¿ LEPRFVHF VHQL  DZHDOWKRIH[SHULHQFHLQDOODVSHFWVRI86DQGQRQ86WUDGHFRQWUROVDQGVDQFWLRQVODZVHIRKWODHZD HS[H UULL DQLHFQH OOOO RVWFHSVD 68QRQGQD68IR WUUDD FHG WQRF UURR FQDVGQDVO WWLL ZDOVQR VZ WRVHUYHFOLHQWVDFURVVDGLYHUVHVSHFWUXPRILQGXVWULHVHVRW UY QHLOFH FDVWQ UURR DVV GGLLYHUUVV FHSVH WF UUXX WVXGQLIRP UULL VH

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Les P. Carnegie Charles Claypoole Kevin P. DiBartolo William M. McGlone [email protected] [email protected] [email protected] [email protected] +1.202.637.1096 +44.20.7710.1178 +1.202.637.2290 +1.202.637.2202

Latham & Watkinsa operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in the United Kingdom, France, Italy and Singapore and as affiliated partnerships conducting the practice in Hong Kong and Japan. The Law Office of Salman M. Al-Sudairi is Latham & W aatkins associated office in the Kingdom of Saudi Arabia.bia. In Qatar r, Latham & WWatkinsatkins LLP is licensed by the Qatar Financial Centre Authority. © Copyright 2014 Latham & Watkins. All Rights Reserved. Special focus: Washington, DC Special focus: Washington, DC

to the CCL remain controlled under the difficult concept for many exporters to and researchers from all over the world 600 series list and are generally subject under stand and operationalise, working and collaborating on research to a licensing requirement for all foreign notwithstanding BIS's outstanding projects. But it’s easy for them to cross destinations and are ineligible for ship - efforts to educate industry.’ the line between what’s controlled by ment to ITAR embargoed countries. Steve Pelak of Holland & Hart has ITAR, and what’s controlled by the ‘Correct classification, or categoris - also witnessed confusion over the Department of Commerce. Often, when ation, of commodities, software, and changes. ‘Companies that typically dealt clients have fallen foul it’s because of a technology is the cornerstone of only in ITAR-related goods, e.g., lack of awareness. Half the time the compliance with the U.S. export control defence contractors,’ says Pelak, ‘seem trick lies in knowing to ask the rules, both before and after ECR,’ says to be having the most difficulty question: “Is this controlled material?’” Latham & Watkins’ Les Carnegie. adapting to the export control reform Counter-intuitive they may be, but ‘Doing it properly means drawing on a initiative’s changes. These companies at the heart of the export control number of skill sets – there’s a need for are not as familiar with the EAR, which regulation is (and though the both engineering/technical and regulatory expertise.’ Currently, a hot topic amongst ‘Companies that typically dealt only in exporters of 600 series products is the ITAR-related goods, e.g., defence use of what Sidley Austin’s Rob contractors, seem to be having the most Torresen calls the ‘tricky’ License difficulty adapting to the Export Control Exception Strategic Trade Author - Reform initiative’s changes.’ isation (‘STA’), the effect of which is to remove the need for specific licences for steve pelak, holland & hart exports, re-exports, and in-country transfers (including ‘deemed exports’ and ‘deemed re-exports’) of some 600 generally is more complicated than the transposition into law is sometimes series products to some destinations ITAR. A USML item almost always blunt and imperfect) the laudable and nationals of eligible destinations requires a State Department export objective of keeping dangerous where it has been det ermined that licence. But once that same item moves technologies out of the hands of those there’s a low risk of diversion. from the USML to the CCL, the item who might use them for nefarious But it does nonetheless contain its might fall under an EAR licence purposes – either against the interests own compliance requirements, some of exception or might require a licence of the United States and its allies, or, for which place considerable burdens on from the Commerce Department. example, for the oppression of their the company to whom a product has Under the EAR, the determination can own peoples or neighbours. been exported: ‘Although the License depend on the country and/or end-user The challenge for U.S. lawmakers is Exception STA is intended to make life to which the item is going, the end use to ensure that the regime is fit, not for easier, it is actually so complicated that of the item, the value of the item, or a one, but for several purposes. But, say in many instances companies are combination of these factors. Non-U.S. lawyers, the authorities are to be opting, or their customers are manufacturers are often confused credited with extensive outreach, requesting, that the exporter actually because their U.S. suppliers do not fully including BIS’s weekly teleconferences, obtain the licence and not use STA,’ understand these changes and are seminars provided by the DDTC, and says Torresen. having difficulty explaining them.’ live events. Each stage of change has Jacobson Burton partner Michael Corey Norton of Trade Pacific PLLC been accompanied by consultation with Burton says that one of the problems is points to another challenge: how to stay indust ry, giving companies the that ‘It is as if the old regime had been abreast of the staggered implement - opportunity to put to government how more “either/or” – generally speaking, ation of reform. According to Norton, the rule changes would impact upon you either needed a licence under the ‘The fact that some USML categories their commercial interests and, say ITAR, or the EAR applied and you were have been reformed, such as Category lawyers, the government has been subject to those somewhat more VIII (aircraft and related articles), but respon sive to that input. Reform takes complicated but flexible rules. Many others are still pending revision, means time, and even its own architects don’t companies had become comfortable that many businesses find themselves yet know all the answers to the operating in one of the two regimes. But in a state of limbo, pending the questions constituents want to pose. the new system is more ambiguous, at completion of the programme.’ There are no short-cuts to export least during this transitional period, as Not all those seeking export control control compliance, but there are portions of the USML are gradually advice are defence players. Alongside a pointers. As Michael Burton notes: being transferred to the CCL. Many client portfolio of major players in the ‘Within export controls and economic companies simply don’t have systems in hi-tech sector, Nixon Peabody partner sanctions compliance, the key questions place to cope with these changes.’ Grayson Yeargin routinely advises a are these: “What is the product? Where All of which, Burton points out, is number of universities and research of is the product being exported and less straightforward in practice than institutions: ‘It would be hard to ultimately destined? Who are the theory: ‘Ultimately, License Exception pigeon-hole the kind of practice we recipients of the product and parties to Strategic Trade Authorisation is not have – but one of the issues that keeps the transaction? For what purpose will simple to apply, just as the new coming up is that of deemed exports it be used? And where is the money definition of “Specially Designed”, where it’s really easy to get caught up in coming from? If you can’t answer these introduced last year and now used in the technicalities. Universities are very questions, or worse don't ask, you both the USML and the CCL, is a cosmopolitan settings – many students simply can’t comply.’

10 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC vipflash / Shutterstock.com saNCtioNs laWYERs: at thE NExus oF FoREiGN poliCY aNd thE laW

Economic sanctions have played a starring role in the execution of U.S. foreign policy throughout history. WorldECR examines the politicians’ tool of choice and the impact it can have on the law.

.S. embargo/sanctions law Japan; Harry Truman’s Battle Act of Thus the making and unmaking of leaves an indelible trail through 1951 banning U.S. help to European sanctions policy has form in DC. The U foreign policy for which countries doing business with the terminology is familiar and the historians present and future will be Soviet Union; the 1956 oil embargo arguments – about ethics, effectiveness forever indebted. In 1807, Thomas against Britain and France during the and impact on domestic interests – are Jefferson imposed an embargo on Suez crisis; sanctions against Vietnam, well rehearsed and incarnated through trade with Britain in an attempt to gain Cuba, South Africa, Sudan, Iraq and, each generation’s national security independence while averting war. Half of course, Iran. concerns. As one lawyer joked, ‘Trade a century later, America in effect Sanctions are the tool by which the practitioners can be carbon-dated by embargoed itself when the forces of the United States government exercises reference to how far back their Union blockaded Confederate ports foreign policy short of military action. embargo experience extends: The Oil- during the Civil War. It is of course, in Washington, DC that for-Food program? 1963 Cuba More contemporary statutes reveal these laws and schemes are regulations? Jackson-Vanik Amend - the Export Control Act of 1940 limiting formulated, debated, amended, ment? The Anaconda Plan?’ (The latter the sale of war-critical products to promulgated and announced. refers to the 1861 blockade upon the

11 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

Southern states – a ‘giant snake’ Iran-related legislation still holds sway sanctions announced through three choking off exports of cotton and other over the much of the day-to-day work executive orders in March 2014, client commodities.) of lawyers, and this despite the fact that interest in understanding sanctions’ Since Barack Obama took U.S. trade with Iran is at an all-time impacts is incredibly high. presidential office, the White House low. ‘That really reflects the extra- One of the oft-mentioned has very actively invoked sanctions to territorial element of the sanctions. corollaries of sanctions legislation has respond to a slew of evolving Many U.S. businesses long ago wrote been that many institutions, particularly in the financial sector, have become risk averse to the extent that legitimate activity with sanctioned ‘There’s definitely a sense of more robust countries becomes very difficult. For enforcement by the agencies involved in instance, Carnegie described that a this area, and of stronger assertion of client could not persuade a bank that jurisdiction generally.’ contemplated activities in Burma were lawful because of the targeted nature of Jeremy Zucker, dechert the Burma sanctions or that sales to Iran of most U.S.-regulated medicines no longer require an OFAC specific licence: ‘The sanctions have such a international challenges. Iran has off doing Iran business. But non-U.S. chilling effect that companies are dominated the international pages up entities, especially financial walking away from deals that are until and beyond the negotiation of the institutions, are feeling potentially very perfectly lawful and some banks aren’t Joint Plan of Action (‘JPOA’), the first exposed,’ says Zucker. taking any chances with sales of six months of the implementation of The reason for that, he says, lies in medicines to Iran – the juice just isn’t which is soon to expire. But the Arab the rapid expansion of the sanctions worth the squeeze.’ Spring, civil war in Syria and conflict in and their extra-territorial impact. That As at time of writing, the U.S. and South Sudan have also generated not only draws in non-U.S. clients its Security Council partners (plus legislative responses – as has, of seeking advice on their potential Germany) are quietly negotiating with course, the current crisis in Ukraine. exposures, but also increases the Iran an agreement which would, if At the same time as developing its exposure of U.S. companies to ‘suspect’ successful, relax sanctions in return for own policies, the United States has business partners. assurances and safeguards relating to worked hard to galvanise allies to take ‘The consequences for non-U.S. Iran’s nuclear programme. Under the measures that are broadly aligned, with entities of being hit by the extra- terms of the JPOA, Iran is already the corresponding effect that 21st territorial effects of U.S. sanctions afforded some limited sanctions relief, Century businesses now face an include loss of access to U.S. markets creating some opportunities for EU unprecedented volume of complex and finance,’ points out Zucker. That businesses but few for their U.S. legislation and compliance regimes. each of those would be accompanied by counterparts. In February, U.S. vice- And while it was always the case that the kind of reputational fall-out president Joe Biden criticised a certain cliques of business knew that the attendant on recent big settlements delegation of French businesspeople nature and location of their activities goes without saying. visiting Tehran for sending the wrong were likely to be impacted by sanctions, Latham & Watkins’ Les Carnegie signals. Nonetheless, Iran is a big now they make a bigger splash describes the sanctions landscape as market. Covington & Burling partner throughout the ecosystem of business – being ‘very active at the moment. The Kim Strosnider says that the first steps banking, insurance, private equity, challenge is that the rules are complex, toward a relaxation of Iran sanctions – service providers, and ICT companies ‘There’s definitely a sense of more robust enforcement by the agencies ‘The sanctions have such a chilling effect involved in this area, and of stronger that companies are walking away from assertion of jurisdiction generally,’ says deals that are perfectly lawful and some Jeremy Zucker, co-chair of the banks aren’t taking any chances with International Trade and Government sales of medicines to Iran – the juice just Regulation practice at the DC office of isn’t worth the squeeze.’ Dechert. Zucker says that it was the ramping les Carnegie, latham & Watkins up of the sanctions against Iran in particular (with the passing of legislation including CISADA far-reaching, and in some cases as called for by the JPOA – has (Comprehensive Iran Sanctions, counterintuitive – so clients are always garnered some interest already. Accountability, and Divestment Act of looking for extra clarity. And there’s ‘No-one is jumping the gun,’ says 2010) and ITRSHRA (Iran Threat high sensitivity, especially amongst the Strosnider. ‘The U.S. government has Reduction and Syria Human Rights Act banks, about the possibility of issued many cautions on taking of 2012) that has heightened becoming subject to an enforcement premature steps. Nonetheless, people sensitivities very significantly. action or engaging in activities that are looking closely, watching the slight With the JPOA still under present reputational risks.’ In easing.’ Covington is, she says, also negotiation between Iran and P5+1, particular, with the new Russia-related keeping a weather-eye on the changing

12 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

relationship because, as she points out, the art of giving accurate sanctions- related advice requires political aware ness and astuteness as much as legal accuracy. If one diplomatic door appears to be, however tentatively, looking less resolutely shut than it once did, another is drawing closed, with Russia/U.S. relations at a post-Cold War all-time low in the wake of the violence inflicted against demonstrat - ors in Kiev during the dying embers of the Yanukovych regime, and with the abrupt annexation of the Crimean peninsula by Russia. ‘[The Ukraine- related] sanctions are very much de jour right now,’ says Arent Fox partner Kay Georgi. Though narrowly targeted, Orhan Cam designating a very restricted number of denied) allegation enough to create an the CEO is a designated individual? individuals and few entities, the handful unacceptable risk of violation? What happens where a designated of executive orders that have constituted Published guidance – OFAC’s so-called person divests of a business? Can I buy the U.S. response to those events have, “50% rule” and HM Treasury’s those assets?”’ in concert with actions taken by the deference to section 1162 of the Whether the designations of European Union, Canada and Australia, Companies Act 2006, for example – Russian and Ukrainian individuals and precipitated a seemingly disproportion - does little more than establish the entities put the brakes on business ate volume of client enquiries. applicable thresholds of ownership. Far between the Cold War’s erstwhile Georgi suggests that the reason for more challenging is assembling the sparring partners has yet to be seen. this is that while her clients might not facts necessary to determine whether Thompson Coburn partner Robert be involved with the SDNs directly, the threshold has been met in a given Shapiro says that ‘There’s an obvious ‘Under OFAC rules U.S. persons are case, and while HMT invites difference between the Russia-related prohibited from doing business with consultation in cases of doubt, OFAC is sanctions and the Iran embargo – entities that are 50% (or more) owned as reluctant as ever to share which is that Russia is a major trading by designated persons. In tandem with intelligence. This leaves companies partner with the United States. And in the lack of transparency typically with limited sources of verifiable the broader ambit of trade, they play attendant on Russian corporate information regarding the ownership on so many dimensions.’ As at time of writing, the mood around the situation in Ukraine is ‘There’s an obvious difference between ominous, and as NATO countries talk about bolstering the presence of troops the Russia-related sanctions and the in Eastern Europe, and Moscow makes Iran embargo – which is that Russia is a show of force close to the Ukraine a major trading partner with the border, something greater than the self- United States.’ determination of a Russian-speaking Robert shapiro, thompson Coburn population appears to be at stake. Russia is neither immune from the impact of sanctions, but nor does it have the energy card to play with ownership structures, it really makes of private entities with whom they may respect to relations with the United sense to look closely at your business wish to deal.’ States. Already amongst those operations.’ Berliner, Corcoran & Rowe partner designated by the State Department ‘Perhaps the single most frustrating Ben Flowe gives a flavour of the sense are included Kremlin insider Igor compliance challenge that clients are of urgency created by the Sechin, chairman of Rosneft, the encountering in the sanctions arena,’ Ukraine/Russia sanctions: ‘It got pretty world’s largest publicly-traded says Barbara D. Linney of Miller & confusing when we saw three executive petroleum company. The designation Chevalier, ‘is the lack of clear guidance orders and one law passed in the space does preclude U.S. companies from on the standard of care expected of of a few weeks – there’s guidance on doing business with Rosneft, but it will companies when attempting to the OFAC website, but that’s not the send tremors, says Shapiro, who adds determine whether a party is owned or whole story. It doesn’t answer all the that it is within this industry that the controlled by a blocked person or SDN questions. The sanctions looked impact of sanctions may be felt. (under the U.S. rules) or a designated limited but they still affect all kinds of ‘From a geopolitical perspective, person under asset freezing transactions. All of a sudden our clients this means that the United States is programmes of other countries. Is a were asking all sorts of questions: “Can going to have to focus on Europe’s rumour or an unsubstantiated (or even I sell my goods to Russian Railways if supplies of energy. Surely there’s going

13 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

to be greater pressure to increase criticised as flawed by observers, and Mancuso points out: ‘European exports of U.S. crude and natural gas. decried as ‘farcical’ and lacking in legal countries are more economically These are tough issues that are going to basis by the authorities in Kiev. The exposed than U.S. companies [to a have to be faced,’ says Shapiro, adding world is now watching the Kremlin’s slowdown in commercial relations with that, looked at through an energy security prism, the Russia sanctions ‘may also have some influence on the dynamics of the Iranian sanctions’. ‘It’s certainly true that the real world Fried Frank partner Mario Mancuso reach of the sanctions is greater than brings his policy experience as a former their actual legal reach.’ member of the President’s national security and economic leadership Mario Mancuso, Fried Frank teams to bear on his client engagements. In recent days, he has been called upon extensively to provide practical counsel – not merely legal response, which could in turn bring Russia]. On the other hand, Europe has advice – in relation to the new Russia more far-reaching, sector-based, a greater security interest in preventing sanctions. ‘It’s certainly true that the sanctions from Washington. Eastern Europe from becoming a real world reach of the sanctions is As ever in the world of sanctions, contested, strategic frontier between greater than their actual legal reach,’ he who makes the next move and how is the West and Russia’ says. That can be partly attributed to contingent on a bigger picture. In the the difficulties outlined above but also, case of Iran, the United States has No certainty but change says Mancuso, to the probable succeeded in convincing the EU that it Counselling on these kinds of political ‘incremental trajectory’ of further and should align its policy, in effect, with trajectories, uncertainties and nuances more restrictive measures. Washington, a strategy that appears to is all part of the remit for DC trade As we go to press, pro-Russian have succeeded in advancing the security lawyers. Indeed, the only rebels have held referendums in current diplomatic efforts. certainty is that while there are Eastern Ukraine, the result of which Vis a vis Russia, it’s yet to be proven constants, sanctions practice, following purports to show overwhelming that the same choreographed response as it does the contours of both foreign support for ‘self-rule’ or absorption can be sustained. There are, of course- affairs and enforcement trends, is into Russia. These have been widely both plus and minus factors, as Mario seldom repetitive.

Jacobson Burton PLLC INTERNATIONAL TRADE LAW

Washington,​DC-based​​​Jacobson​Burton​PLLC​provides​high- quality​legal​services​to​a​wide​range​of​U.S.​and​multinational companies​involved​in​cross-border​transactions. ​The​scope​of​our​international​trade​legal​services​includes: ​​l Export​controls,​ITAR​and​antiboycott​compliance l Economic​sanctions​and​embargoes​ l U.S.​Foreign​Corrupt​Practices​Act​and​anti-bribery compliance l U.S.​Customs​and​import​matters l Antidumping​and​countervailing​duty​proceedings​​ l International​aviation​and​enforcement​ l International​trade​policy​matters

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14 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

Broadly speaking, practice tends to undertake a voluntary disclosure (for has received blocked property fall into one of two categories. The OFAC, in the case of potential belonging to an SDN, there’s no choice. ‘preventive’ work involved in advising sanctions violations, or the You have to disclose.’ on ongoing compliance measures, and departments of Commerce or State if Just as world events are subject to secondly, the more aggressive EAR- or ITAR-related). Jacobson their own, particular rhythms, so also investigatory work and advocacy Burton’s Michael Burton outlines some are enforcement trends, says Crowell & demanded when a company strays off of the horns of the dilemma: Moring partner Cari Stinebower: course. ‘What’s the best thing to do if you ‘Companies tend to react to what they perceive the agencies to have been focusing in on in the previous year.’ ‘[There is a palpable sense of] greater What’s interesting, she adds, is that commitment by criminal prosecutors they don’t only base their to come after those who violate export understanding on completed control regulations... the U.S. investigations, which can take up to Department of Justice has secured three years to conclude. ‘[Compliance significant jail sentences in many of professionals within industry] “hear these cases.’ the chatter” ie. get wind of the direction of interest by the agencies before an amit Mehta, Zuckerman spaeder investigation is completed – so they’re responding to the trend even before the Within some firms’ teams the two discover a violation? It depends on the outcome of the investigation has been elements are parts of the same circumstances, on the harm done, on published. This information sharing spectrum, with the emphasis shifting to whether a mistake was made through and trend spotting is an essential respond to demand. Latham & ignorance or negligence versus more component to securing the financial Watkins’ les Carnegie says that firms egregious conduct. We’re seeing an sector against new money laundering have responded to an increase in increased understanding or clemency and sanctions busting trends.’ enforcement activity and thus ‘There’s on the part of the three main agencies Stinebower says that heightened more demand for investigative skills enforcing export controls and sanctions compliance, in conjunction than there was a few years ago.’ As a economic sanctions laws – if the with an increase in corporate activity, result, he says, he and his team have exporter has been responsible overall, means that she and team colleagues been taken up with a slew of the violation did not involve knowing are working closely with M&A lawyers: investigations-related work, but also or willful conduct, and a voluntary ‘For example, we’re currently working see many more clients placing a disclosure has been made. Having a for a client that’s making a few premium on pre-emptive compliance strong compliance programme is a acquisitions a month and we find that strategies. critical part of that.’ the due diligence is really focused on Amit Mehta of Zuckerman Spaeder Is disclosure always the best way anti-money laundering, FCPA, LLP sees things very much from the forward where a client uncovers ‘red customs/imports, sanctions, and sharp end. Prior to joining his current flags’? Burton says, ‘A company that export controls.’ firm, Mehta (whose clients have undertakes a voluntary disclosure is Mostly, she says, the general trend included Dominique Strauss-Kahn, less likely to face a penalty, and any she is seeing is acquirers are U.S. former President of the World Bank, penalty that might be imposed is companies buying U.S. companies with who was cleared of criminal allegations significantly mitigated. That being said, overseas sales facilities or subsidiaries. of sexual assault in 2011) worked at the whether, when, and how to disclose As a result, often the team is having to Public Defender Service for the District turns on the facts of a given case. We work ‘fast and furious’ with the process of Columbia. He says there is a always lay out the pros and cons of of management interviews and data palpable sense of ‘greater commitment by criminal prosecutors to come after those who violate export control regulations, and it’s not just financial ‘Companies tend to react to what they penalties they are seeking – the U.S. Department of Justice has secured perceive the agencies to have been significant jail sentences in many of focusing in on in the previous year.’ these cases.’ Cari stinebower, Crowell & Moring Mehta also observes that one of the ironies of the export control world is that, typically, despite or because of the fact that larger companies are taking compliance very seriously, ‘with some making a disclosure, including the room access so they are paced to tight high-profile exceptions, the big costs both in legal fees and deal deadlines: ‘We haven’t seen this companies are not getting caught up in implementing remedial measures, but volume of activity until recently. But these prosecutions. It’s the small it is ultimately the client's decision. On there was an uptick that began around companies that tend to take the bigger the other hand, in certain situations – 2006 when we saw some hard-hitting risks and that get caught.’ such as a breach of the ITAR involving successor liability issues coming up. One sometimes vexed question is a s.126.1 country (arms-embargoed Now it’s more common to deal with whether/when clients should countries), or where a company finds it these issues in the pre-closing due

15 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

diligence – the banks are expecting sanctions and anti corruption – some of the banks can be very skittish this.’ compliance programme to satisfy the about underwriting because they’ve What is also apparent is that the requirements of the foreign bank that seen how hard financial institutions nexus to foreign trade need only be financed our client’s acquisition of have been hit.’ slim before sanctions-related due assets from a foreign company.’ Matheny adds that private equity diligence becomes an issue – indeed, That sanctions-related issues can firms financing technology companies Corey Norton of Trade Pacific PLLC arise in circumstances that are, if not are also extremely interested in says that clients are sometimes surprising, at least counter-intuitive, understanding the potential liabilities of companies within their portfolios ‘You’re actually seeing sanctions-oriented and targets. contract clauses in purely domestic, U.S. ‘A sudden change in the law can create a tremendous amount of work,’ activity, such as real estate contracts that says Matheny. ‘The October 2012 contain provisions to ensure that one or Executive Order [Authorizing the other party has no connection with Implementation of Certain Sanctions anybody on an SDN list.’ Set Forth in the Iran Threat Reduction Corey Norton, trade pacific pllC and Human Rights Act] which was intended to close off loopholes relating to the activities of foreign subsidiaries surprised to see sanctions-related reflects the extent to which the unleashed a degree of chaos!’ compliance checks emerging. legislation has permeated through It is the kinetic nature – and the ‘This stuff isn’t always intuitive,’ says multiple layers of the business multi-dimensionality – of the sanctions Norton. ‘What’s interesting to my mind ‘ecosystem’, but also the fact that in an and trade security arena that attracts is that sanctions issues are coming up age where technology eschews practitioners. Sanctions regimes can in contexts which have absolutely no boundaries the distinction between bed in with a kind of semi-permanent obvious foreign component or ‘domestic’ and ‘foreign’ is easily chilling effect on trade with a given dimension whatsoever. You’re actually blurred. Web-based applications for country pending a tectonic change in seeing sanctions-oriented contract example can by default be accessed by relations with the United States. clauses in purely domestic, U.S. activity, users anywhere in the world, regardless Increasingly they are more targeted such as real estate contracts that of whom the intended users might be – and exhibit more dynamic, but often no contain provisions to ensure that one or as Goodwin Procter partner Richard less or indeed more, confusing other party has no connection with Matheny, whose clients include characteristics as policy makers strive anybody on an SDN list.’ (among others) a portfolio of early and to avoid the negative impacts that so There are other arenas, such as employment, where businesses sometimes need reminding of potential ‘We do a lot of work for the underwriters exposures: ‘If you’re buying a company in Latin America, have you checked to in IPOs – some of the banks can be very see, for example, whether that business skittish about underwriting because hires Cuban nationals – and is that a they’ve seen how hard financial problem?’ Norton asks. institutions have been hit.’ ‘Our team of sanctions/export Rich Matheny, Goodwin procter controls lawyers is increasingly working with lawyers in other practice areas,’ says Steve Pelak of Holland & Hart, ‘partly due to a growing growth stage technology companies often attended the blanket embargoes recognition by both our colleagues and around Boston and Silicon Valley: of the past. our clients that export controls/trade ‘Often we’re representing these A good practitioner in this area takes sanctions issues permeate these companies as acquisition targets, and on board these nuances – and also transactions. We routinely help they are using or producing controlled understands that key to giving sound business attorneys with drafting software, services or hardware – due advice is having a grasp of the policy contracts for services that require diligence concerns arise, as they do rationale driving the legislation or export control, trade sanctions or anti where technology can be accessed by regulation. As Fried Frank’s Mario corruption provisions. Our intellectual SDNs or from designated countries. Mancuso puts it: ‘Regulation is an property colleagues increasingly seek Often I’m involved in interpretative instrument, it is the vessel of policy. assistance from us with licensing for disputes as to whether licences are Regulation is the bottle; policy is the transactions in sanctioned countries to required or are eligible for a first wine. That is why technical expertise is protect clients’ IP rights. And, in the amendment or social media exception.’ necessary but not sufficient to providing M&A arena, successor liability Many of Matheny’s clients, he says, clients with judicious, actionable advice. concerns have helped to make trade would not naturally conceive of their Understanding how the U.S. govern - sanctions issues a more common products as presenting a potential threat ment is reading and assessing a component of transactional due of sanctions violations; sometimes the particular scenario is what enables you diligence. For example, we are topic isn’t on the agenda until there’s a to help your clients comply with the law currently helping a U.S.-based mining scaling up of their ambitions: ‘We do a and look around the corner. That is company to implement a trade lot of work for the underwriters in IPOs strategically valuable advice’

16 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC EmiliaUngur MEEt thE laWYERs The ideal legal advisor combines first-rate technical expertise with experience of implementing the law in practice. WorldECR profiles some of DC’s finest export controls/sanctions practices.

There’s a real spectrum of firms in Thompson Coburn LLP fields more advise clients on export controls and Washington, DC offering export than 350 lawyers practising in financial sanctions, as well as on anti control and sanctions advice. Most of Chicago, St. Louis, Los Angeles, corruption, CFIUS, conflict minerals the ‘big name’ international practices Washington, DC and Southern Illinois. and customs laws. Industry sector have a presence, their trade security Its D.C. office, active since 1982, is expertise is wide, including finance and teams operating alongside finance responsible for liaising with federal reinsurance, electronics, miscellaneous and corporate, and possessing all the agencies and the U.S. Congress on engineered components, satellite accoutrements of the global brand. regulatory matters in the fields of technology, chemical, encryption, and But this is also an area in which transportation; utilities; international medical devices. smaller, niche outfits, either trade, finance, customs and export Among its past experiences, the combining sanctions/export control control; government contracts; firm recounts: experience with other specialised intellectual property; telecom - areas including government munications; corporate and securities; l Advising a satellite technology relations, technology, customs or postal and publishing; and litigation, company regarding export controls tax, or as stand-alone trade including appellate matters. after completing a directed practices, can shine. The International Trade practice, disclosure regarding the failure to structurally part of the Federal adhere to licence conditions. In this Practice group, comprises four case, the executives of the company partners and two associates, who were required to meet with the

17 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

Department of State to assure 1975. Practice areas include their commitment to appellate, bankruptcy, business compliance. Notwithstanding DC export controls and counselling, civil litigation, class the severity of the violations, actions, food and drug, the matter was settled sanctions law firms government ethics and election without penalty; law, insurance, legal profession l Advising an engineering Arent Fox and ethics, Native American law, company regarding violations plaintiff's litigation, real estate, associated with the Berliner, Corcoran & Rowe, LLP securities litigation, tax litigation, exportation of valves and, as mentioned above, white- controlled under 2B350 and Covington & Burling LLP collar criminal defence and the disclosure of the same; Crowell & Moring government investigations. l Advising an engineering Export control and sanctions- company about the export Dechert LLP related work is conducted by controls applicable to flight Fried, Frank, Harris, Shriver & lawyers in the white-collar control components assoc - practice: Amit Mehta and Aitan iated with military aircraft; Jacobson LLP Goelman in DC, along with Sandy l Advising a medical device Goodwin Procter LLP Weinberg and Marcos Hasbun in manufacturer on adherence Tampa, are all experienced in to TSRA licence requirements Holland & Hart LLP dealing with issues of export regarding the sale of medical Jacobson Burton PLLC controls and sanctions. The same devices to Iran; department is also responsible l Advising a large chemical Latham & Watkins for covering the full range of company which failed to Miller & Chevalier white-collar and civil recognise the export control enforcement defence work, and sanctions implications of Nixon Peabody including, of particular interest to its re-domiciliation to the international clients, Foreign United States, until Sidley Austin LLP Corrupt Practices Act and cartel questioned by the Securities Thompson Coburn LLP enforcement. Since the practice and Exchange Commission. primarily handles criminal and After a thorough review of all Trade Pacific PLLC civil enforcement matters, it does transactions, the case was Zuckerman Spaeder LLP not have a particular industry closed without penalty. focus. This list does not purport to be exhaustive In recent times, the firm has: The International Trade group at Crowell & Moring, headed up by l Represented U.S. citizen partner Jeff Snyder, fields three touch-points to sanctioned parties, Yaming Hanson on charges of partners, including export controls and the establishment of formal global criminal violation of export control sanctions contact Cari Stinebower, plus sanctions recusal policies, and regulations – the matter was six associates, whose combined sanctions exclusions clauses in resolved with the dismissal of the expertise covers anti corruption/anti- contracts; export control charges; bribery; CFIUS; anti-money l Participated in export controls, anti l Defended Robert Quinn, criminally launderi ng; anti-dumping/ counter - corruption/anti-dumping, imports charged with violating the Iran vail ing duties and customs. It has and sanctions due diligence where a sanctions regulations – the matter particular experience advising financial private equity fund was acquiring a was resolved with the dismissal of institutions (banks, (re)insurance, U.S. tech company with global sales; the sanctions breach charges; broker-dealers, private equity), l Counselled a well-known consulting l Defended U.S. company Myus.com government contractors, publishing firm in connection with compliance in a criminal investigation of companies, trade associations, with OFAC's regulations as they violations of export control manufacturers, retailers, shipping relate to travel transactions; regulations; companies, exporters and technology l Assisted a commodities contract l Defended a U.S. citizen charged companies. broker-dealer with compliance with with violation of the Sudan Amongst recent client instructions U.S. sanctions regulations; sanctions regulations; the team has: l Provided compliance counseling to l Defended a South African aviation a global health insurance and health company in administrative l Provided OFAC compliance services company on OFAC and proceedings before the U.S. guidance to a multinational FCPA issues. Department of Commerce. corporation with expansive dealings in Russia with respect to Zuckerman Spaeder LLP is a specialist Arent Fox’s International Trade maintaining compliance with U.S. litigation firm, home to a nationally Practice, headed by partner Kay and EU sanctions while continuing recognised white-collar criminal Georgi, is an integral part of the firm’s business in the region. Guidance defence and investigations practice. It Washington, DC office, which was first included identifying potential was founded in Washington, DC in opened in 1942 and still serves as its

18 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

Les Carnegie, William McGlone, Rich Matheny, Kay Georgi, Latham & Watkins Latham & Watkins Goodwin Procter Arent Fox

main headquarters. Today, a team of l Investigating violations of a global l Assisting a leading non-U.S. energy four partners and five associates offers diversified manufacturer related to company in a major internal review counsel to clients on a broad swathe of unintended trade with U.S. of sanctions compliance triggered trade-related issues. embargoed countries. by enforcement inquiries from the The practice is experienced in U.S. government about financial working with the sectors of defence, Covington & Burling, head quartered in transactions involving certain U.S.- security, oil & gas, energy equipment Washington, DC since 1919, also has sanctioned markets. The firm is also and services (including exploration), offices in Beijing, Brussels, London, advising on the EU sanctions sensors, lasers, navigation (e.g. GPS, New York, San Francisco, Seoul, dimensions of these transactions, IMUs, INS), encryption, information Shanghai, Silicon Valley and San and the matter has involved security, computers, processors, Diego. Alongside advising on issues engagement with the U.S. memory, aircraft/aviation, crime related to export controls and departments of State and Treasury; control, nuclear, machinery and sanctions, the International Trade l Advising a subsidiary of a Fortune equipment of all sorts, health care/ Practice Group, which is home to eight 50 aerospace company regarding medical devices and financial and partners and 20 associates, regularly many facets of its compliance with insurance services. Clients of the team acts in a variety of other areas of U.S. export control laws and have included 3M, Dover, practice such as anti corruption, anti- regulations, particularly the defence Leidos/SAIC, G4S and Topcon. money laundering, CFIUS, customs, trade control regulations of the Recently, the firm has dealt with cybersecurity, govern ment contracts, ITAR. Covington has led around a matters including: international investment disputes, dozen internal investigation matters inter national public policy, privacy and for this client and developed export l Advising a manufacturer and data security and trade policy and compliance plans for several of the exporter of amplifiers in proceedings. company’s high-profile inter - simultaneous voluntary and In particular, the team is sought out national projects; directed disclosures with the for representation by clients in the oil l Advising a major non-U.S. financial departments of Commerce and and gas, software and high-technology, institution in connection with its State and related criminal pharma ceutical and biotechnology, processing through U.S. financial proceedings; aerospace and defence sectors, institutions of U.S. dollar l Assisting a well-known manu - including ExxonMobil, Bristol-Myers transactions on behalf of U.S.- facturer of crime-control devices to Squibb and Hewlett-Packard, as well as sanctioned clients. Other major obtain favourable classification financial institutions. non-U.S. banks have already determinations eliminating all Recent matters have included: resolved similar claims by U.S. potential violations related to the federal and state enforcement exports of technology; l Advising major international authorities and have paid penalties l Conducting pre- and post- companies and financial in the hundreds of millions of acquisition due diligence for a institutions – including an dollars; company making multiple international oil and gas company, l Advising an international logistics acquisitions, including investigat - a multinational financial services company in connection with ions and voluntary disclosures to holding company, a multinational shipments to Syria of U.S.-origin the departments of State, conglomerate corporation, an computer equipment that the U.S. Commerce, and Treasury (OFAC); American bank and securities firm, government alleges has been used l Advising a Europe-headquartered two leading pharmaceutical by the al-Assad regime to interfere geophysical services company on companies, and manufacturing with Internet access and repress the defence and dual-use export companies, among others – on U.S. Syrian people. controls and economic sanctions and EU sanctions relating to the issues; and unrest in Ukraine; Key members of the DC team

19 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

Rob Torresen, Steve Pelak, Robert Shapiro, Cari Stinebower, Sidley Austin Holland and Hart Thompson Coburn Crowell & Moring

include Kim Strosnider, Peter commodity jurisdiction and corruption (FCPA, UK Bribery Act), Flanagan, Peter Lichtenbaum and classification review of its entire anti-money laundering (USA Patriot Corrinne Goldstein. product and technology portfolio; Act), customs procedures and supply l Advising a leading global satellite chain management, economic Fried, Frank, Harris, Shriver & Jacobson company in connection with a sanctions and trade embargoes, EU LLP opened its Washington, DC office sensitive ITAR investigation by the regulation and government affairs, EU in 1949. The sanctions and export U.S. government; internal market policy, Foreign controls practice is based within the l Advising a major multinational Intelligence Surveillance Act (FISA), firm’s International Trade & energy company on compliance infringement of European regulation, Investment group. It is led by the Hon. with U.S. economic sanctions export controls, national security Mario Mancuso, a former member of regimes regarding a number of oil- reviews of foreign direct investment the President’s national security and producing countries, including the (CFIUS), negotiation of EU free trade economic leadership teams, and impact of both direct and extra- agreements and EU preference comprises two partners, one of counsel territorial U.S. sanctions on the schemes, policy development within and six associates. company’s business activities; the European Union, trade defence The team advises on the full range l Advising a Top 5 European measures, trade legislation and policy, of U.S. and EU legal requirements aerospace, defence and security and working effectively in the affecting international trade and company in connection with CFIUS European Union. investment, including: economic advice with respect to its potential Recent instructions for the team sanctions, defence, trade and dual-use acquisition of a U.S. company. include: export controls, anti corruption and anti-boycott, CFIUS and cross-border Well known for its corporate and l Conducting an internal investigat - investment clearance, as well as anti- securities practices, complex litigation, ion into activities of a publicly money laundering. Clients include real estate, financial services and asset- traded high-technology client’s companies in the aerospace and management expertise, Dechert LLP Chinese subsidiary regarding defence, energy, manufacturing, high- also offers counsel on export controls potential sales in violation of the technology, software and industrial and sanctions compliance as part of its Export Administration Regulations; sectors, and financial institutions and International Trade and Government l Conducting an internal investigat - investment funds, among others. Regulation department, headed up in ion into the activities of a Middle In addition to DC, the firm has Washington, DC by Jeremy Zucker. Eastern airline regarding violations offices in New York, Frankfurt, The team brings together ten of U.S. export controls and London, Paris, Hong Kong and individuals: two partners, five economic sanctions applicable to Shanghai. associates, one senior director, one Iran, and negotiating a settlement Recent illustrative instructions director and one trade and regulatory with U.S. enforcement authorities; include: advisor. l Defending multiple officials of a Clients are from a wide range of major European financial l Advising a large non-U.S. (global) industry sectors, including technology, institution in connection with an telecommunications infrastructure banking and financial services, investigation by the U.S. depart - company on the preparation of logistics, defence, telecommunications, ments of Justice and Treasury and licence applications to OFAC and financial information, software, the District Attorney of New York the European host country export energy, manufacturing, private equity regarding potential violations of control authority in relation to and data protection and privacy. U.S. economic sanctions laws; certain particularly sensitive While focusing on international l Conducting an internal investigat - economic sanctions programmes; trade, specialist lawyers at Derchert ion into violations of U.S. and l Advising a leading U.S. oilfield have also advised clients on other areas Brazilian anti-bribery laws by equipment and service company of practice such as: anti-boycott Brazilian distributors of a publicly- through a U.S. export control compliance, anti-bribery/anti traded medical device company;

20 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

Jeremy Zucker, Mario Mancuso, Amit Mehta, Michael Burton, Dechert Fried Frank Zuckerman Spaeder Jacobson Burton

l Representing a sovereign wealth defence company in multiple services energy insurance/reinsura nce, fund before CFIUS in connection internal investigations, voluntary investment funds, pharmaceuticals/ with its investment in a U.S. disclosures and corrective life sciences, manufacturing, and software company. actions/compliance enhancements technology industry sectors. in connection with pre- and post- In the recent past, the International Latham & Watkins LLP was established settlement of export controls Trade team has: in 1934 in Los Angeles, California, but criminal/administrative settlements the firm’s largest office is today in New of U.S. government enforcement l Represented a Fortune 100 York City. The Washington, DC office actions; manufacturer in concurrent was opened in 1978; today it counts l Advising a well-known aircraft investigations by five federal 280-plus lawyers. original equipment manufacturer in agencies relating to compliance The firm’s Export Controls, the development and implement - with dual-use export controls and Economic Sanctions & Customs team is ation of automated logic trees for economic sanctions laws; composed of 16 partners, three counsel export jurisdiction and class ification l Conducted export control and and 17 associates, practising in the of aircraft parts and components; sanctions compliance due diligence fields of anti-boycott laws, anti- l Representing CARE USA regarding in large M&A transactions; terrorism controls, anti-money its compliance with U.S. sanctions l Advised a U.S. defence contractor in laundering regimes, customs and against Syria, Cuba, Sudan and connection with ITAR jurisdiction import regulations, export control Somalia. Matters have involved and licensing issues; laws, foreign investment in the U.S., securing licensing from the U.S. l Presented export control and FCPA, UK Bribery Act, and trade and Treasury Department’s Office of sanctions training programmes to economic sanctions. Key contacts Foreign Assets Control as well as the 40 domestic and foreign include William McGlone, Les U.S. Commerce Department’s subsidiaries of a large U.S. Carnegie and Kevin DiBartolo. Bureau of Industry and Security to diversified industrial company; Latham’s export controls team has carry out humanitarian activities in l Conducted an internal investigation been very involved with clients in the countries subject to U.S. sanctions. of economic sanctions compliance aerospace and defence, energy and prepared voluntary disclosures (particularly oil & gas), satellite/ Sidley Austin’s Washington, D.C. office for a large pharmaceutical company. communications, and semiconductors opened its doors in 1963 with just three sectors, representing clients such as lawyers. Since then, it has has grown to Trade Pacific PLLC is a DC-based Genzyme, Honeywell International, be one of the city’s largest, home to international trade law firm, formed in Schlumberger Limited, Stratasys, and more than 300 lawyers and policy 2004, that provides legal services to a United Technologies Corporation. professionals who provide regulatory, wide array of clients who wish to Recent instructions have included: policy and litigation services to navigate U.S. trade laws. Its export domestic and international clients. controls and economic sanctions l Representing a Fortune 50 Its International Trade department, practice is run by three partners within multinational in the energy sector in headed up Andrew W. Shoyer, sees six the firm, an affiliated partner in multiple grand jury investigations, other partners and 10 associates Vietnam, and a government advisor in SEC investigations and related advising on issues of antidumping, Washington, DC partner Corey Norton, administrative investigations and countervailing duties and trade who recently joined the firm from enforcement actions, and internal remedies, CFIUS, customs, export Keller and Heckman, is the firm’s compliance reviews focusing on controls and economic sanctions, export controls and sanctions contact. potential violations of U.S. international intellectual property, Also active in the areas of anti sanctions against Iran, Sudan, Cuba market access and regulatory barriers, corruption, antiboycott, trade remedies and Syria; trade policy and negotiations and WTO (antidumpuing, counterv ailing duties l Representing various business units disputes, particularly in the and safeguards), customs and FDA of a Fortune 50 aerospace and agribusiness, chemicals, financial food safety for imports, particularly

21 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

Larry E. Christensen, Barbara M. Linney, Kathryn Cameron Atkinson, Grayson Yeargin, Miller & Chevalier Miller & Chevalier Miller & Chevalier Nixon Peabody

seafood, Trade Pacific has worked sanctions work, the firm handles anti- export control and sanctions practice closely with contractors from the boycott compliance; FCPA and anti which boasts four partners and three industrial processing (oil and gas, corruption compliance; U.S. customs counsel/associates practising full time chemicals etc.), energy, biotech, and import regulatory matters; – and others when occasion demands. electronics, automotive, chemicals and antidumping and countervailing duty Key contacts are Ben Flowe, Wayne other sensitive materials and defence proceedings; international aviation and Rusch, John Ordway and Dan Fisher- industries. U.S. Department of Transportation Owens. The team is active for clients on Recently, the firm has: enforcement proceedings; and EAR, ITAR and sanctions matters; international trade policy matters foreign trade regulations; nuclear l Defended a global automotive (including GSP and free trade export controls; anti-boycott, anti company in an enforcement action agreements). corruption/bribery; CFIUS; extra dition; involving exports of production The partners advise clients across a software licensing; international tax equipment, revising and imple - wide spectrum of sectors, including oil disputes; cross-border business menti ng compliance procedures in and gas, chemical, automotive, elec - transactions; customs; and represents connection with the same; tronics, defence, medical, agricultural, foreign governments and advises on l Obtained commodity jurisdiction software, aviation, engineering, government procurement-related work. determinations for a defence financial services, e-commerce, and Clients are from a broad range of contractor manufacturing a range of insurance. specialised industries including, but weapons systems, military vehicles Recent instructions include: not limited to: advanced materials, and related components and aerospace, automotive, ceramics, collective protection equipment, l Advising a Fortune 10 company on chemical and biological agents and advising on licence requirements export controls and economic processing equipment, computers and and available exceptions; sanctions compliance and licensing; software, defence, electronic test l Conducted an international trade l Advising a multinational law firm in equipment, encryption, financial and due diligence for a global Fortune conjunction with OFAC voluntary insurance, geographic information 50 company acquiring and selling disclosure, resulting in a warning systems, geophysical instruments, companies; letter; industrial lasers, infrared devices, l Advised U.S. and non-U.S. l Obtaining numerous OFAC and BIS irrigation equipment, international companies on the legality of dealing licences authorising the export and shipping and logistics, machine tools, with embargoed countries and how payment for sales of agricultural medical devices, microelectronics, to prepare for and react to new commodities and medical devices to networking/ cloud computing, nuclear sanctions arising in places such as embargoed countries; and oilfield tools. Ukraine and Libya; l Preparing technical assistance Indicative instructions include: l Conducted anti corruption investi - agreements (TAA) for a U.S. gat ions in Asia for a number of subsidiary of a European defence l Working to improve the remote global companies. contractor to manufacture next sensing satellite licensing function generation ITAR-controlled optical for an allied government; Jacobson Burton PLLC is one of the equipment; l Obtaining export authorisation for newer practices in DC – formed in l Preparing voluntary disclosures to a leading U.S. think tank to advise a January of this year and bringing BIS, OFAC and DDTC in connection close U.S. ally on a shipbuilding together the experience of Michael with e-commerce transactions programme for a new class of Burton (formerly of Arent Fox and involving embargoed countries warship; Joiner Burton) with Douglas Jacobson, resulting in warning letters from all l Advising U.S. and non-U.S. who had previously been sole name agencies. companies on compliance with new partner of his own firm. Russia/Ukraine sanctions and on A specialist trade law practice, in Berliner, Corcoran & Rowe, which their application to a variety of fact addition to export control and opened in DC in 1990, is home to an patterns;

22 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

Ben Flowe, Corey Norton, Kim Strosnider, Mark Plotkin, Berliner, Corcoran & Rowe Trade Pacific Covington & Burling Covington & Burling

l Working with OFAC and BIS to l Representing a Fortune 100 determining the commodity clarify the application of controls to publicly-traded U.S. technology jurisdiction of aircraft avionics and cloud computing and other forms of firm with respect to compliance other products and components. e-commerce, internet and other with Syria sanctions and resolution The firm drafted self-jurisdiction high-tech communications and of those matters with the U.S. analyses and provided products; Treasury Department; comprehensive consulting on all l Advising on whether, when, and l Providing advice and counsel on export control and embargo how to voluntarily disclose clear export control issues to U.S. programmes. The firm also has violations and gray area national laboratories; advised a client on a U.K. end-use applications of EAR, ITAR, and l Defending a U.S. defence systems ‘informed’ notice regarding sanctions; manufacturer in parallel criminal weapons of mass destruction l Training clients on applying Export and administrative proceedings activity of a distributor. Control Reform regulatory revisions under the ITAR; l Defending several government- to products and compliance l Representing a publicly-traded initiated export controls programmes. global e-commerce service company investigations and allegations with regard to U.S. sanctions and stemming from voluntary Holland & Hart LLP, which opened its anti corruption compliance as to all disclosures that involved multiple DC office in 2001, has an Export international operations. alleged unauthorised exports. The Control/Trade Sanctions Defense and investigations were settled with Compliance Group (lead by partners Miller & Chevalier opened its offices in warning letters based upon Steven Pelak and Triplett Mackintosh) DC in 1920. The export control and substantial and comprehensive that includes three partners, four of sanctions group practises out of the improvements in the clients' counsel and an associate. Between firm’s International Department, led by compliance plans, processes and them, team members undertake Kathryn Cameron Atkinson – though procedures, automation, and alongside export control and sanctions key export control/sanctions contacts training strategies. law: customs law/import control, are Barbara Linney and Larry l Representing a non-U.S. company government investigations and white- Christensen. Related areas of work and its president in defence of U.S. collar defence, aerospace, international undertaken by the firm include: Department of Justice criminal trade, FCPA and anti corruption laws, Foreign Investment Review (CFIUS), charges and threats of extradition. and CFIUS work. defence security, merger and Results achieved by the firm Clients come from numerous acquisition due diligence, Foreign included a plea agreement with sectors, including defence manu - Corrupt Practices Act (FCPA) and recommendation for no jail time, a facturers and service providers, international anti corruption, anti- relatively small criminal fine, and aerospace, mining, munitions and money laundering, customs and import no administrative fines by OFAC or firearms, high-technology and software. trade, global compliance and risk the U.S. Bureau of Industry and Recent instructions and ongoing management, internal investigations, Security. All administrative matters matters for the firm include: international trade remedies, have been completed, and the investment disputes and international criminal case is resolved. l Representing a non-U.S. manu- arbitration, and trade policy and l Advising a major engineering firm facturing concern (over $60 billion market access. on how to enter an ITAR-controlled in annual sales) with regard to Illustrative recent instructions for field while preparing a voluntary global compliance with U.S. the team include: disclosure to DDTC for the sanctions as to Iran and other unauthorised release of ITAR- markets. The matter involves close l Assisting multiple manufacturers in controlled technical data to foreign work concerning secondary Iranian the preparation of commodity persons. sanctions and restrictions on certain jurisdiction requests, and the industries; development of procedures for At Nixon Peabody, export controls and

23 WorldECR www.worldecr.com Special focus: Washington, DC Special focus: Washington, DC

sanctions-related work is primarily handled by partners Grayson Yeargin and Peter Durant, working alongside counsel Alexandra Lopez-Casero. Typical clients for the firm are government contractors, defence and security companies, military suppliers, software developers, information technology providers, outsourcing companies, medical device companies, health care organisations, universities, research organisations, software-as-a- service providers, tech companies, banks, financial institutions, small business innovation research participants and law enforcement suppliers. Instructions include undertaking internal investigations, preparing voluntary disclosures and defending against civil and criminal enforcement actions, as well as conducting due diligence and assisting in negotiating language for clients engaged in global M&A activity to avoid violations of U.S. export controls and sanctions. Hdc Photo Other areas of practice for Yeargin, under the Foreign Agents Richard Matheny III is the head of Durant and Lopez-Casero include Registration Act. the practice; litigation partner Gus advising on government investigations Coldebella is another key contact. of government contractors and In addition to its strong domestic Recent experience includes: contractor compliance, including False footprint (offices in a dozen U.S. cities, Claims Act (FCA) compliance, Foreign including DC), the firm has a London l Defending a California resident and Corrupt Practises Act (FCPA) and office and offices in Hong Kong and his company in a federal criminal Foreign Agents Registration Act Shanghai. prosecution involving the export of (FARA) related work, and advising laptop computers to Iran through companies on the legal and regulatory Founded in 1912 and with its corporate Dubai, U.A.E. (United States v. compliance requirements that arise in headquarters in Boston, Goodwin Online Micro, D.D.C.); the national security and defence Procter has offices in six U.S. cities, and l Investigation and disclosure to industries. also in London and Hong Kong. OFAC of a U.S.-owned foreign Recent instruct ions include: Sanctions/export control-related subsidiary’s transactions with work is undertaken by the firm’s airlines owned by the Cuban l Successfully negotiating a National Security and Foreign Trade government and listed as specially favourable plea agreement for a Regulation Practice which assists, designated nationals; client who was indicted by the amongst others, clients involved in l Representing before the SEC Office United States government for cross-border transactions, such as the of Global Security Risk a major exporting sensitive dual-use items; export and re-export of sensitive goods travel website company in an l Co-ordinating the internal and technologies; investments and investigation of travel-related investigation of a public company other dealings having national security services pertaining to Iran, Sudan that discovered that some of its implications; and relationships with and Syria; and of a test-preparation products were transshipped to an persons and entities that may be company in an investigation of a embargoed country – the matter governed by U.S. economic sanctions, franchisee located in Syria; involved an investigation into issues anti-money laundering and anti l Advising on deemed exports handled by the Office of Foreign corruption laws. relating to the disclosure of EAR- Assets Control, U.S. Department of The firm represents businesses in a controlled ultraviolet LED Treasury; range of sectors including technology, technology to Chinese nationals and l Assisting in the coordination of an clean technology, financial services, the disclosure of ITAR-controlled internal investigation of a large, transportation, real estate, energy, and optoelectronics technology to Israeli public company concerning defence manufacturing, among others. nationals; and potential Foreign Corrupt Practices It sees six regulatory regimes as being l Advising on ITAR ramifications of Act issues; at the heart of that practice: OFAC carrying armed security personnel l Providing advice to companies and regulations, the EAR, ITAR, CFIUS, to defend against piracy in the Gulf lobbying firms concerning laws U.S. Patriot Act and anti-money of Aden (where the client was an governing lobbying and registration laundering laws and the FCPA. ocean common carrier).

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Arent Fox

Transacting international business while complying with the 1717 K Street, NW complex web of U.S. and international trade controls grows more Washington, DC 20036 difficult every day. Technology advances at an exponential rate, the USA structure of international business transactions is ever more Export controls contact: complex, and international politics as well as the rules governing Kay Georgi export trade and economic sanctions change on a near daily basis. Tel. +1 202 857 6293 At the same time, the compliance expectations of both governments [email protected] and investors have reached new highs.

At Arent Fox, we assist our clients in anticipating and exceeding Offices those expectations while maximising the return to the business. We Washington, DC offer a full-service practice advising clients on U.S. and New York, NY international trade controls requirements with an emphasis on Los Angeles, CA compliance, counseling, controversy management and disclosures, San Francisco, CA and government investigations. • With over 50 years’ combined experience, our team has breadth www.arentfox.com and depth of knowledge in multiple industry sectors; • We advise clients daily on export controls, defence trade controls, economic sanctions, and antiboycott compliance issues; • We provide comprehensive services including counseling, classification, licensing, opinion writing, and auditing the most sophisticated worldwide systems; and • We are advocates with a proven track record defending our clients and achieving resolutions of civil and criminal investigations and enforcement actions. Arent Fox counsels clients on U.S. and international export control and economic sanctions laws, including the Department of Commerce Export Administration Regulations (EAR); the Department of State International Traffic in Arms Regulations (ITAR); the Department of Treasury Office of Foreign Assets Control (OFAC) and Department of State assets controls and economic sanctions regulations; Nuclear Regulatory Commission (NRC) and Department of Energy (DOE) regulations on the export of nuclear equipment and material (NRC) and technology (DOE); the Food and Drug Administration and Drug Enforcement Agency (DEA) regulations; and other countries’ export regulations. In addition, Arent Fox advises on a wide range of cross-border matters, including customs/import compliance, global trade policy, international trade litigation, and international anti-corruption and the Foreign Corrupt Practices Act (FCPA).

25 WorldECR www.worldecr.com Washington, DC contacts Washington, DC contacts

Berliner, Corcoran & Rowe, LLP

Berliner, Corcoran & Rowe, L.L.P. (‘BCR’) is a boutique 1101 Seventeenth Street, N.W. international law firm with specialties in export controls and Suite 1100, economic sanctions, international law, litigation, corporate, Washington, D.C. 20036 government contracts, and intellectual property. With offices in Tel. +1 202 293 5555 Washington and San Francisco, BCR serves clients worldwide, Export control and sanctions including foreign governments, multinationals, small to medium contacts: businesses, and individuals. BCR is respected for its expertise, Ben H. Flowe, Jr. creativity, and efficient service. [email protected] Seven BCR attorneys, with experience ranging from eight to over 30 Wayne Rusch years, practise full-time in this field. BCR attorneys are respected by [email protected] regulators and enforcement officials for their substantive John A. Ordway knowledge and integrity. The firm’s advocacy and expert advice has [email protected] included testifying before the U.S. Congress and in arbitration/litigation, and advising the U.S. Executive Branch on export control regulations, legislation, and policy. 321 Warren Drive BCR advises and represents clients on all aspects of export controls, San Francisco, CA 94131 Tel. +1 415 839 9201 embargoes and sanctions, and antiboycott laws, including those relating to the Export Administration Regulations administered by Export control and sanctions the Commerce Department's Bureau of Industry and Security; the contact: International Traffic in Arms Regulations administered by the State Dan Fisher-Owens Department’s Directorate of Defense Trade Controls; sanctions [email protected] programmes administered by the Treasury Department’s Office of Foreign Assets Control, the U.N., and others; nuclear trade controls administered by the Department of Energy and the Nuclear www.bcr-dc.com Regulatory Commission; foreign trade regulations administered by the Census Bureau governing export documentation; U.S. Munitions Import List controls administered by the Bureau of Alcohol, Tobacco, Firearms and Explosives of the Department of Justice; antiboycott regulations administered by BIS and the Treasury Department; and multilateral export control regimes. BCR attorneys have extensive experience with a variety of products and industries, including: advanced materials, aerospace, automotive, ceramics, chemical and biological agents and processing equipment, computers and software, defence, encryption, financial and insurance, focal plane arrays, geographic information systems, geophysical instruments, lasers, infrared devices, irrigation equipment, international logistics, machine tools, medical devices, microelectronics, networking/cloud computing, nuclear, oilfield tools, pharmaceuticals, satellites/spacecraft, security and surveillance, surreptitious listening devices, semiconductors and related production and inspection equipment, telecommunications, test and measurement equipment, trade associations, underwater remote operated vehicles, and unmanned aerial vehicles.

26 WorldECR www.worldecr.com Washington, DC contacts Washington, DC contacts

Covington & Burling LLP

In an increasingly regulated world, we have an exceptional ability to 1201 Pennsylvania Ave. NW help clients navigate their most complex business problems, deals Washington, DC 20004 and disputes. Covington has a preeminent international trade USA controls practice and deep expertise handling advisory and International trade controls enforcement matters involving U.S. and international export contact: controls, sanctions and antiboycott requirements. Covington Kim Strosnider likewise has a leading practice in handling reviews of cross-border [email protected] investments, transactions and ventures conducted by the Committee on Foreign Investment in the United States (CFIUS). Foreign investment contacts: In the international trade controls field, we advise clients across a David Fagan [email protected] wide range of industrial sectors on changes in the scope of trade control programmes; obtaining licences, export classification Mark Plotkin rulings, and other authorisations; advocating for changes in [email protected] regulatory programmes and legislation; and defending clients in administrative and criminal enforcement cases. We assist clients in the development and implementation of internal compliance www.cov.com programmes (including training programmes) and the conduct of internal investigations. Covington has handled many of the most complex CFIUS reviews, presenting myriad issues ranging from cutting-edge technology transfers to defence and homeland security contracting and novel compliance matters. Our experience spans virtually every sector subject to CFIUS review, including aerospace, defence, software, information and advanced technologies, telecommunications, energy, finance, ports, chemicals, and pharmaceuticals/bio- technology, and has included some of the largest Chinese, Middle Eastern, Russian and European acquisitions ever made in the U.S. We have deep policy expertise, counting among our ranks some of the nation’s most highly respected former senior trade and national security officials with the Departments of Commerce, Defense, State, and Treasury, as well as a former Secretary of the Department of Homeland Security. We provide clients with guidance in the following related fields:

n Anticorruption Practice n International Investment n Customs Disputes n Cybersecurity n International Public Policy n Foreign Investment n Privacy and Data Security n Government Contracts n Trade Policy and Proceedings

Our lawyers are recognised as leaders in the field of international trade and our group is rated among the best in the field by Chambers, Legal 500, and Best Lawyers.

27 WorldECR www.worldecr.com Washington, DC contacts Washington, DC contacts

Dechert LLP

Dechert is a global specialist law firm focused on sectors with the 1900 K Street, NW greatest complexities, legal intricacies and highest regulatory Washington, DC 20006 demands. We advise on a comprehensive range of international USA trade matters arising before national governments, regional bodies Tel. +1 202 261 3300 Fax +1 202 261 3333 and multinational entities. Export controls contact: Economic sanctions and trade embargoes Jeremy B. Zucker Compliance with economic sanctions and trade embargoes requires Tel. +1 202 261 3322 awareness of more than published guidance. Clients turn to us for [email protected] advice regarding the future development, scope, interpretation, application and jurisdictional nuances of the rules as well as the discretion exercised by enforcement authorities on both sides of the 160 Queen Victoria Street Atlantic in this regard. London EC4V 4QQ United Kingdom Export controls Tel. +44 20 7184 7000 We counsel clients regarding the requirements applicable to ‘dual- Fax +44 20 7184 7001 use’ items, defence-related items, and so-called ‘end-use’ or ‘catch-all’ controls. Our keen commercial judgement allows us to Export controls contact: Miriam Gonzalez assist in the development of operational ‘day-to-day’ internal Tel. +44 20 7184 7892 procedures that are tailored to a company’s structure, resources and [email protected] exposure to export-related risks and least burdensome on business objectives. Foreign Corrupt practices act dechert.com/international_trade Clients rely on our deep expertise to counsel in all phases of their compliance and risk mitigation programmes. We advise on anti- corruption implications in connection with mergers, acquisitions, strategic alliances and joint ventures involving international businesses and sales operations. Committee on Foreign investment in the united states (CFius) We advise non-U.S. and U.S. clients (‘buyers’ and ‘sellers’, as well as third parties) regarding the CFIUS review process, helping clients determine whether to bring a transaction before the committee, to assemble the required information and materials for a voluntary filing, and then to negotiate national security agreements with CFIUS in a manner that minimises both delay and the imposition of conditions that might threaten the transaction. Our uniquely qualified global team includes former regulators, compliance officers and enforcement agents, along with experienced practitioners. With multilingual teams in offices across the United States, Europe, Asia and the Middle East, we address complex, global trade issues, collaborate with internal legal and compliance teams, offer strategic advice on engagement with international regulators and enforcement agencies, and provide practical, commercial, relentlessly client-focused solutions.

28 WorldECR www.worldecr.com Washington, DC contacts Washington, DC contacts

Fried, Frank, Harris, Shriver & Jacobson LLP

Fried, Frank, Harris, Shriver & Jacobson LLP is a leading 801 17th Street, NW international law firm. We counsel many of the world’s leading Washington, DC 20006 companies, financial institutions and investment firms, and are USA recognised for deploying well-configured, cross-border teams that Tel. +1 202 639 7000 Fax +1 202 639 7003 provide the expertise, experience and responsive service that clients require to meet their critical business objectives. Export controls and sanctions contact: Fried Frank’s International Trade and Investment Practice The Hon. Mario Mancuso regularly counsels a broad range of global clients on U.S. and EU Tel. +1 202 639 7055 legal requirements affecting international trade and investment, [email protected] including matters involving economic sanctions administered by the Office of Foreign Assets Control (OFAC) and the EU, the Export Administration Regulations (EAR), the International Traffic in Offices Arms Regulations (ITAR), the EU Dual-Use Regulation, the Foreign New York Corrupt Practices Act (FCPA), the UK Bribery Act, U.S. anti-boycott Washington, DC requirements, the Committee on Foreign Investment in the United London States (CFIUS), and anti-money laundering laws and regulations. Paris Frankfurt Our practice has deep, diverse and longstanding experience Hong Kong addressing these requirements in formal engagements around the Shanghai world across a number of matter contexts, including:

l counseling clients on the implications of legal and regulatory www.friedfrank.com changes on their business; l representing clients in civil and criminal enforcement investigations by OFAC and the Bureau of Industry and Security (BIS); l conducting multi-jurisdictional internal investigations in connection with possible violations of these legal requirements; l designing and developing integrated, risk-based compliance and related training programmes; and l conducting targeted due diligence in corporate transactions. We opened our Washington, DC office in 1949. Today, our practice is unique among its kind: it draws upon the Firm’s long tradition of senior U.S. government and diplomatic service to deliver timely, actionable advice to its clients that combines policy acuity, deep legal expertise and business judgement.

29 WorldECR www.worldecr.com Washington, DC contacts Washington, DC contacts

Goodwin Procter LLP

Goodwin Procter’s international trade practice is distinguished by 901 New York Avenue, NW its dedicated focus on the demands of middle-market technology Washington, DC 20001 companies as they confront dynamic laws regulating their export of USA goods and services and their attraction of investment from the Export controls contact: United States and abroad. Richard L. Matheny III Our clients in the technology sector are expanding their global Tel. +1 202 346 4130 footprint through the offering of software, hardware, Software-as- [email protected] a-Service, and other products and services. At the same time, they are arranging to attract private investment or to prepare for a sale of the company, an initial public offering, or other forms of Offices transactions in which trade compliance is vital to success. This Boston Hong Kong critical intersection of expanding trade while attracting investment London from the United States and elsewhere is where Goodwin really Los Angeles excels. New York In 2013, we worked with over 150 separate companies – San Francisco representing a diverse range of technologies, services, and markets Silicon Valley – in managing their exportation of controlled goods and services Washington, DC from the United States; provision of defence articles and services; transactions involving sanctioned countries, persons, and entities; www.goodwinprocter.com and cross-border investments and transactions that impact U.S. national security and foreign policy. Goodwin has confronted a litany of trade issues for our technology clients: from the esoteric corners of the Export Administration Regulations encryption controls to the perils of cloud computing; from the shifting boundaries of the International Traffic in Arms Regulations to the exploitation of social media and other licences in the U.S. sanctions programmes administered by the Office of Foreign Assets Control; from the national security concerns of the Committee on Foreign Investment in the United States and its constituent agencies to emerging technologies for which the regulations and their enforcing agencies are slow to adapt. Because we understand the regulatory pitfalls for investors and others who place their money, trust and reputation in the hands of companies in growth mode, we are especially adept in striking a comfortable balance through tested advice and counseling that avoids over-regulation while allaying investor concerns by reducing actual risk.

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Holland & Hart LLP

From small privately held start-ups to publicly traded Fortune 50 975 F Street NW, Suite 900 companies, the export control, compliance, and trade sanctions Washington, D.C. 20004 attorneys at Holland & Hart have considerable experience in this USA complex area of law, including: Contact: Steven W. Pelak l Export Controls Tel. +1 202 654 6929 [email protected] l trade sanctions l Customs law/import Controls www.hollandhart.com l Foreign Corrupt practices act l homeland security l National security Restrictions on investment

Compliance and training From body armour and computer chips to helicopters and space launch vehicles, Holland & Hart has assisted companies in developing and monitoring comprehensive export compliance programmes. We have also counseled senior management on navigating this complex area of law while reducing the impact of compliance on internal business processes. We have provided tailored online training tutorials for large multinational companies and personalised face-to-face training for company executives. Our trainees span the globe, from the United States to Asia, Europe, and the Middle East. We have extensive experience assisting companies in the exporter registration process, preparation and submission of export and brokering licences, and in preparing commodity classification or jurisdiction requests.

investigations and Enforcement In 2007, the Department of Justice began an export enforcement initiative that has led to a tremendous increase in the investigation and prosecution of export control and trade sanction violations. They now have more than 500 federal prosecutors and agents trained on investigating export control violations and more than 20 new regional export enforcement task forces. As a result, companies are subject to more scrutiny than ever before. Violations of these laws carry significant civil and criminal penalties and the associated loss of public goodwill. Therefore, Holland & Hart clients are those companies that recognise the need for robust compliance systems, employee training, proper internal investigations, and discreet resolution of export and trade sanction matters.

31 WorldECR www.worldecr.com

Washington, DC contacts Washington, DC contacts

For more than three decades, t

Miller & Chevalier Our firm lawyers regularly provide g

Miller & Chevalier is consistently ranked and recognised as one of Miller & Chevalier Chartered The firm's strength and the country’s preeminent international practices. For more than 655 Fifteenth Street, NW b three decades, the practice has advised and assisted clients – from Suite 900

start-up companies to Fortune 10 corporations, trade associations Washington, DC 20005-5701 USA and non-profit organisations – on a full range of international law matters. Our lawyers regularly provide guidance on export controls Tel. +1 202 626 5800

and economic sanctions, anti-corruption and anti-money laundering Fax +1 202 626 5801

compliance, foreign investment review, trade policy issues, and national security and international tax matters. The firm’s strength in Export Controls & Sanctions contacts: internal investigations is reflected in the fact that six of its lawyers Larry E. Christensen were recognised in the Who's Who of Investigations Lawyers (2014). A Tel. +1 202 626 1469

Miller & Chevalier’s Export Controls, Economic Sanctions and [email protected]

National Security practice includes leading lawyers who bring their Barbara D. Linney considerable background in government, private practice, and in- Tel. +1 202 626 5806 H house positions to the representation of their clients. They are [email protected] experienced with the regulations of the U.S. Departments of State,

Commerce, Our clients Treasury, value Defense the reduced and Energy, costs ofand experienced the Nuclear advice FCPA & International a Regulatory Agency, and have been heavily involved in recent major Anti-Corruption contact: regulatory and enforcement developments. Our lawyers have great Kathryn Cameron Atkinson depth in regulation, policy, and interagency processes. In the private Tel. +1 202 626 5957 sector, they have advised companies on a wide range of complex [email protected] issues and are regular speakers at major export control seminars.

Having represented clients in Foreign Corrupt Practices We Acthave (FCPA) www.millerchevalier.com b matters for more than 30 years, Miller & Chevalier has one of the leading global anti-corruption practices. Our clients value the reduced costs of experienced advice and efficient problem solving,

our on-the-ground knowledge of the myriad ways corruption risks

arise in different industries and countries, and our team’s ability to

work in over a dozen languages.

Notable matters handled by the firm and its lawyers include: • Deep experience in commodity jurisdiction and classification. We

have been successful in 33 out of 34 recent commodity

jurisdiction requests on behalf of our clients. • Advising clients in the defense, aerospace, maritime, oil and gas, sensor producers, data security, software, pharmaceutical, medical devices, chemical, transportation, and other industries on difficult issues arising from the ever-changing sanctions

environment and the ongoing export control reform initiative.

• Invited to brief congressional staffers and industry associations on Export Control Reform Initiative developments. • Two Independent Compliance Monitorships. • The first FCPA deferred prosecution agreement accepted by the government and the first deferred prosecution agreement that the government agreed to terminate before its term had run. • A number of cases that resulted in declinations, including some that included lengthy government investigations.

32 WorldECR www.worldecr.com Washington, DC contacts Washington, DC contacts

Sidley Austin LLP

Sidley is a leader in helping companies navigate the complex, 1501 K Street, N.W. overlapping and ever-changing export control and sanctions Washington, DC 20005 regimes in force across the globe. Our highly experienced export Tel. +1 202 736 8000 controls and economic sanctions team draws on extensive private Fax +1 202 736 8711 sector and government experience and helps clients understand Export controls contact: and shape export control laws, develop and implement compliance Andrew W. Shoyer programmes, conduct internal investigations and defend against [email protected] civil and criminal enforcement actions. Robert Torresen [email protected] CLASSIFICATION • LICENSING • FINANCIAL TRANSFERS Lisa Crosby COMPLIANCE • ENFORCEMENT PROCEEDINGS [email protected] TROUBLE SHOOTING

**** NEO Building Rue Montoyer 51 B-1000 Brussels ten-time winner Tel. +32 2 504 6400 ‘Global trade & Customs law Firm of the year’ Fax +32 2 504 6499 Who’s Who Legal Awards 2005-2014 Export controls contact: ‘international trade Group of the year.’ Arnoud Willems ‘sidley austin has earned an enviable reputation for [email protected] success in trade matters – and a worldwide stable of Yohan Benizri governments and big-name corporate clients [email protected] who rely on the firm when the stakes couldn’t be higher.’ Law360 2013 9/F, Two Int’l Finance Centre ‘their level of knowledge and service is outstanding.’ Central, Hong Kong Chambers and Partners 2013 Tel. +852 2509 7888 Fax +852 2509 3110 ‘sidley austin llp “simply has incomparable experience” in trade matters.’ Export controls contact: The Legal 500 EMEA 2013 Yuet Ming Tham [email protected]

Sidley Austin LLP is a global law firm committed to providing excellent client service, fostering a culture of cooperation and mutual respect, and creating opportunities for lawyers of all www.sidley.com backgrounds. With more than 1,800 lawyers in 19 offices around the world, talent and teamwork are central to Sidley’s successful results for clients in all types of legal matters, from complex transactions to ‘bet the company’ litigation to cutting-edge regulatory issues.

Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000. Sidley Austin refers to Sidley Austin LLP and affiliated partnerships as explained at www.sidley.com/disclaimer. Prior results do not guarantee a similar outcome.

33 WorldECR www.worldecr.com Washington, DC contacts Washington, DC contacts

Thompson Coburn LLP

Thompson Coburn’s international trade attorneys focus on issues 1909 K Street, NW, Suite 600 concerning the international regulation of trade. Our clients include Washington, D.C. 20006-1167 major companies in the chemical and petroleum industries. While USA some of our trade attorneys have backgrounds in chemistry and Export controls and sanctions other technical areas, we also regularly leverage the technical contacts: expertise of others within the firm for assistance as necessary. Robert Shapiro Tel. +1 202 585 6926 We are well-versed in the various agencies, regulations and laws [email protected] that affect companies involved in international trade, finance and transactions, and customs and export controls. We advise clients on Jim Slear issues related to economic sanctions implemented by the Office of Tel. +1 202 585 6981 [email protected] Foreign Assets Control (OFAC), ‘dual-use’ goods under the Export Administration Regulations (EAR), munitions under the Terry Polino International Traffic in Arms Regulations (ITAR), and transactions Tel. +1 202 585 6907 that involve review by the Committee on Foreign Investment in the [email protected] United States (CFIUS). Sean McGowan Our attorneys regularly represent clients before the Bureau of Tel. +1 202 585 6976 [email protected] Customs and Border Protection (CBP), the U.S. Department of Commerce, the U.S. International Trade Commission, the U.S. Department of State, the Federal Maritime Commission, the Office www.thompsoncoburn.com of the U.S. Trade Representative, and the U.S. Congress. We also have extensive experience in transactions guaranteed or insured by the Export-Import Bank of the United States and the Overseas Private Investment Corporation. Our trade group has developed several valuable resources, including the Trade Compliance Handbook and the Checklists of Foreign Countries Subject to Sanctions. Copies can be ordered at www.thompsoncoburn.com/tradepubs. Thompson Coburn was named as one of the top 30 firms in the nation for client service in 2014 by BTI Consulting, which also named the firm among the nation’s top firms at providing exceptional value. Our partners closely manage all aspects of each matter, including staffing, to achieve optimal results while reducing overall legal costs. We also recognise that the most important element in matter management is developing a close and collaborative relationship with the client; therefore, our strategies and solutions are developed and implemented with one goal in mind – to serve the interests of our clients as if they were our own.

34 WorldECR www.worldecr.com Washington, DC contacts Washington, DC contacts

Trade Pacific PLLC

Trade Pacific is a leading international trade law firm. We opened 719 A Street NE in 2004 with the sole purpose of specialising in compliance with Washington, D.C. 20002 international trade laws. Our attorneys and advisors collectively USA have decades of experience, and each has had a substantial career Export controls contact: either in trade practices at the largest global law firms or within the Corey L. Norton U.S. government. Our law firm provides sophisticated legal Tel. +1 202 223 3761 expertise through personalities that naturally find solutions the [email protected] largest firms typically do not offer. Our name reflects our particular experience with trade relations between the United States and Pacific nations, while our overall experience extends around the www.tradepacificlaw.com globe. For exports, our expertise keeps clients in compliance with export controls and economic sanctions, including the Export Administration Regulations (‘EAR’), International Traffic in Arms Regulations (‘ITAR’), Office of Foreign Assets Control’s (‘OFAC’) sanctions regulations, Foreign Corrupt Practices Act (‘FCPA’), and counterpart laws in other countries. Compliance is not the only goal, however. Business proceeds more smoothly because we reduce export licensing burdens and provide tailored policies, procedures and training. We also ensure clients can properly evaluate possible acquisitions by providing effective trade due diligence. In the event of violations, investigations or audits, clients rely on us to avoid or minimise consequences for the business while also resolving any compliance weaknesses. For imports, we specialise in cutting costs that result from trade remedies like antidumping, countervailing duty and safeguards investigations. Over the last 20 years, our trade remedy lawyers have been involved in every significant AD/CVD and safeguards case. Our clients have obtained substantial victories in these cases while also achieving competitive advantages in their industries. Companies also use our strategies to identify and prepare for cases to come. With our planning, clients have avoided substantial import duties. We understand how companies operate, and we guide them in structuring their operations to ensure products enter the U.S. market at the lowest possible duty rate. We prioritise going where industry is, both in the United States and abroad, and understanding each business’s particular concerns and issues. Our approach is to immerse ourselves in the complexities of business and law so that clients get the best compliance strategies without needlessly hampering their global business.

35 WorldECR www.worldecr.com Washington, DC contacts Washington, DC contacts

Zuckerman Spaeder LLP

Zuckerman Spaeder LLP is a nationally recognised litigation firm 1800 M Street, NW that boasts one of the country’s most highly regarded white-collar Suite 1000 criminal defence and investigations practices. The American Washington, DC 20036-5807 Lawyer called our firm ‘a haven for clients in trouble’ when it USA Tel. +1 202 778 1800 named us a finalist for its most recent ‘Litigation Boutique of the Fax +1 202 822 8106 Year’. Export controls contacts: With offices in Washington, DC, New York, Tampa, and Baltimore, Aitan D. Goelman our lawyers have significant experience in defending businesses [email protected] and individuals who have been the subject of investigations, Amit P. Mehta prosecutions, and administrative proceedings for violating export [email protected] control and sanctions laws involving commerce with countries such as Iran, China, Cuba, and Sudan. We are trial-ready litigators 1185 Avenue of the Americas who have defended clients in criminal trials and on appeal, with 31st Floor many members of our Export Control team having served as New York, NY 10036-2603 former prosecutors and public defenders. USA Tel. +1 212 704 9600 Our lawyers understand that export control and sanctions Fax +1 212 704 4256 enforcement actions place unique demands on defence counsel. We have assisted clients navigate the web of statutes and Export controls contact: regulations that govern commerce with foreign countries, Mitra Hormozi [email protected] including the International Emergency Economic Powers Act (IEEPA), International Traffic in Arms Regulations (ITAR), and 101 East Kennedy Boulevard regulations promulgated by the U.S. Department of State, U.S. Suite 1200 Department of Homeland Security, U.S. Department of the Tampa, FL 33602-5838 Treasury’s Office of Foreign Assets Control (OFAC), Office of the USA Comptroller of the Currency (OCC), and the U.S. Department of Tel. +1 813 221 1010 Commerce’s Bureau of Industry and Security. Fax +1 813 223 7961 National security issues often come into play in these cases, placing Export controls contact: a heavy burden on defendants in the discovery and use of classified Marcos E. Hasbun information. Our lawyers are knowledgeable about the special [email protected] rules and procedures concerning classified information under statutes such as the Foreign Intelligence Surveillance Act (FISA) 100 East Pratt Street Suite 2440 and the Classified Information Procedures Act (CIPA). Baltimore, MD 21202-1031 In addition, the firm has represented companies and individuals USA before both the U.S. Departments of Treasury and Commerce in Tel. +1 410 332 0444 regulatory enforcement investigations and actions. We understand Fax +1 410 659 0436 and have experience with the rules and regulations that govern Export controls contact: civil enforcement investigations and proceedings, including the Martin S. Himeles, Jr. factors that these federal agencies consider in settling such [email protected] matters. www.zuckerman.com

36 WorldECR www.worldecr.com WorldECR The journal of export controls and compliance

Contributors in this issue WorldECR Editorial Board Dr. Philip Haellmigk, Bird & Bird Michael Burton, Jacobson Burton PLLC www.twobirds.com [email protected] Sandra Strong, Strong & Herd Larry E. Christensen, Miller & Chevalier, Washington, DC www.strongandherd.co.uk [email protected] Curtis Dombek, Sheppard Mullin Richter & Hampton Iain Macvay, King & Spalding, London www.sheppardmullin.com [email protected] Carlos Eduardo de Arruda Navarro, Machado Associados Dr. Bärbel Sachs, Noerr, Berlin www.machadoassociados.com.br bä[email protected] Jeffrey G. Richardson, Miller Canfield Edmund Sim, Appleton Luff, Singapore www.millercanfield.com [email protected] Scott Gearity, the Export Compliance Training Institute George Tan, Global Trade Security Consulting, Singapore www.LearnExportCompliance.com [email protected] Stacey Winters, Deloitte, London [email protected]

General enquiries, advertising enquiries, press releases, subscriptions: [email protected] Contact the editor, Tom Blass: [email protected] tel +44 (0)7930405003 Contact the publisher, Mark Cusick: [email protected] tel: +44 (0)7702289830 Researcher, Cristina Rotaru: [email protected]

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