According to a recent report released by Moody’s credit rating agency, among the world’s top 20 economies, China, India, Indonesia, Saudi Arabia, and Turkey will be the fastest-growing economies of 2014. At the very least, they offer a starting point for exporters and investors with little experience in expanding their business abroad to begin searching for new opportunities.
The following suggestions will help you avoid wasting valuable time and money:
- Be proactive not reactive. In my opinion, the key to your success is finding the right local partner or distributor. Your long-term success depends on the relationship with this party. Therefore, you must actively research and investigate potential partners. There are cost-effective ways to do this research to reduce your risk
- Make sure you understand export “dos and don’ts,” including the export licensing requirements of each relevant government agency, U.S. economic sanctions, and your liability regarding the end-use and end-users of the items you export.
- Make sure you have a written agreement. This sounds simple but many companies skip this step and there are contract terms that can minimize your liability in the local country.
- Screen your foreign distributors, agents, and third-party business partners. With U.S. sanctions changing so often (sometimes weekly) it is best to screen these parties at least twice: once just before you sign the contract and again right before you ship your product. Manually checking government lists is one option, but screening software packages provide a quicker, more cost-effective and comprehensive check.
- Ensure that you and your partners have an up-to-date anti-corruption program that includes policies and training. This is vital to remaining compliant with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and the growing body of parallel foreign anti-corruption legislation that may apply in the new market where you are doing business. Relationships between government officials and the private sector in foreign markets may not always be easy to parse, so having a system in place to vet and clear each relationship and transaction is key, as is maintaining clear records of your accounting practices and compliance efforts.
- Avoid opportunities that seem too good to be true. They still are. Really. I still see this over and over. Clients receive an opportunity to participate in a foreign project that is not what it seems. In the long run making a commitment to a country and building trust with a reputable local partner will protect you and your company, make your management confident, and create viable economic growth.
Check out our online training… You get written materials including a checklist that covers all of your exporting requirements. It makes the process simple. We also have suggestions in earlier blog posts regarding finding partners overseas. And, of course were happy to discuss this with you. We have particular expertise in the Turkish market and the Middle East. We are happy to help.
Have a great day,
As of October 1, the State Department’s Directorate of Defense Trade Controls (DDTC) has added an additional requirement for foreign parties looking to re-export or re-transfer items that are under their jurisdiction by virtue of the fact that they are U.S. made (or made with U.S. parts or materials) and appear on the U.S. Munitions List (USML). Luckily, the new requirement is very straightforward. It consists of one piece of additional paperwork (a letter) that must be submitted by foreign parties when they are applying for a license from DDTC to re-export/re-transfer a USML item. The letter must say whether:
- The applicant or any senior officer of the co has been charged with violating ITAR or is ineligible to receive a license to temporarily import/export USML items.
- Any party involved in the export transaction has been charged with the same or is ineligible.
The statement also must be signed by a “responsible official empowered by the applicant.” The DDTC’s 1-page guidance on the new requirement can be found here. Make sure to update your procedures accordingly and inform your foreign partners immediately to avoid costly licensing delays.
Have a good day.
It’s been just about a year since the President’s Export Control Reform Initiative kicked off with revisions to four categories of the United States Munitions List (USML). Since then, two more rounds of changes has brought the total number of revised categories to 13, more than half of the total 21 categories contained in the USML. As a result of rounds 1-3, the following categories have been revised:
- IV – Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs, and Mines
- V – Explosives and Energetic Materials, Propellants, Incendiary Agents, and Their Constituents
- VI – Surface Vessels of War and Special Naval Equipment
- VII – Ground Vehicles
- VIII – Aircraft and Related Articles
- IX – Military Training Equipment
- X – Personal Protective Equipment
- XIII – Materials and Miscellaneous Articles
- XVI – Nuclear Weapons Related Articles
- XVII – Classified Articles, Technical Data, and Defense Services
- XIX – Gas Turbine Engines and Associated Equipment
- XX – Submersible Vessels and Related Articles
- XXI – Articles, Technical Data, and Defense Services Otherwise Not Enumerated
And in the last few months of 2014 certain items included in two more categories will be taken off of the USML and transferred to the 600 Series of the Commerce Control List (CCL). As was the case with items that were transferred to the 600 Series in previous rounds, the classification change will result in differing controls on those items and consequently, will require your company to reclassify items in the newly revised categories to determine whether they remain under the jurisdiction of the State Department’s International Traffic In Arms Regulations (ITAR, which apply to USML products) or have been moved to the CCL, which falls under the jurisdiction of the Commerce Department’s Export Administrations Regulations (EAR). Practically speaking, the potential classification changes brought about by the category revisions matter to exporters because they may bring about changes in licensing requirements as each department has a distinct set of requirements and separate application process. If an item you export may be reclassified as a result of the upcoming changes, it is important to determine if your licensing responsibilities have also changed so you don’t get caught inadvertently exporting with outdated paperwork – something that could stall your delivery and create export violations and penalties. Obviously, the whole point of Export Control Reform is to simplify the licensing process for exporters by relaxing controls on less sensitive items. But keep in mind that relaxed controls doesn’t mean that your licensing responsibilities will either remain the same or disappear altogether. They may require the implementation of a different procedure altogether. In light of this, it is important to keep in mind that the following two USML categories will be revised in the last few months of 2014:
- Revisions to XV – Spacecraft and Related Articles will take effect on November 10, 2014
- Revisions to XI – Military Electronics will take effect on December 30, 2014
By the end of the year, 15 USML categories out of 21 will have been revised. What’s unclear is when the following six categories will be revised as the State Department has still not announced effective dates for changes to these categories, which include I – Firearms; II – Artillery; III – Ammunition; XII – Fire Control, Sensors, and Night Vision; XIV – Toxicological Agents; and XVII – Directed Energy Weapons. As a reminder, it is not only items on the USML that are actually being used for military purposes that require a license from the State Department’s DDTC to be exported lawfully, but rather any item that is specifically enumerated in a USML category or included in a category by virtue of the fact that it is deemed to have been specially designed for military use (“specially designed” is the new definition that is now applied to determine if an item that is not directly mentioned is nevertheless included in a revised category). So if you know or suspect your item is included in a USML category make sure to consult the revisions to that category to ensure that your procedures satisfy the new regulatory framework.
As always, we are happy to help with the classification process of a specific item. Our online training program also comes with a step-by-step chart to ensure you are considering all the current regulatory requirements. And we will update the blog as more information becomes available regarding revisions to the final six categories. Have a great day!
Last Friday, China’s 15-month-long bribery investigation into British multinational pharmaceutical GlaksoSmithKline (GSK) ended after a one-day trial in which the court found GSK’s local subsidiary guilty of bribing doctors and hospitals and fined the company $490 million. The penalty – the largest ever imposed by a Chinese court – included suspended prison sentences for four Chinese GSK managers found guilty of bribery-related charges as well as a three-year suspended prison sentence and deportation order for their British former head of Chinese operations. The Chinese government has said that GSK made more than $150 million in profits by widely disbursing bribes meant to encourage the promotion of their products. In addition to this record-breaking case, GSK is currently being investigated for bribery in Poland, Syria, Iraq, Jordan and Lebanon. In the future, GSK could also be fined for its illegal behavior in China and elsewhere by the United States under the Foreign Corrupt Practices Act and Britain under the U.K. Bribery Act due to these laws’ extraterritorial reach. In China, GSK issued a formal apology to the government and plans to update its procedures to conform with evolving Chinese anti-corruption requirements and begin the long road towards rebuilding its tainted brand in this large, growing, but potentially perilous market.
In a sense, the message sent by the Chinese government in this case is clear: the days when illicit gift-giving and bribery were an entrenched and accepted cost of doing business in China are quickly coming to an end. And most importantly, foreign firms, their executives, and investors are in no way exempt from prosecution in China. In fact, some believe that foreign firms may be even more closely scrutinized than locally-owned businesses. At the same time, the Communist Party’s stronghold on the Chinese government and its courts and the lack of transparency has created an environment in which selective prosecution is a real possibility and the best way to minimize your Chinese compliance risk is often unclear. Fortunately for U.S. exporters the United States’ Foreign Corrupt Practices Act, a model for many of the bribery standards adopted by foreign governments in recent years, requires all U.S. firms (as well as some non-U.S. firms that fall under its jurisdiction) to apply FCPA standards globally. Therefore, remaining FCPA-compliant when transacting with Chinese parties can also ensure that you and your company remain compliant with the similar regulatory requirements that are being increasingly enforced by the Chinese government. As a refresher, a strong global anti-corruption compliance program that would provide protection against U.S. and Chinese prosecution should include:
- The tone at the top: a zero-tolerance policy with respect to corruption clearly articulated by management to all employees and business partners and reinforced regularly
- A sufficiently autonomous compliance officer with enough resources and authority (including access to outside counsel) to effectively perform necessary oversight and third party due diligence
- Written compliance procedures, policies, and certifications as well as periodic training (for both employees and third party business partners)
- Books and records that accurately reflect all transactions and payments
- An effective internal investigations apparatus, including confidential reporting and standardized disciplinary measures
- Continuous improvement through periodic testing, review, and modification of the compliance program based on specific and evolving industry risks and legislative developments
The GSK case is good news in that it signals that China has joined the global fight against corruption, fueling the continued trend towards a single, universally enforced global standard against bribery. As more countries follow suit international companies’ compliance obligations will become increasingly clear and uniform, driving down compliance costs and cross-border risk. As a result, your company will stand to make ever-larger gains in foreign markets, responsibly expand operations, and safely increase your bottom line. If you have any questions regarding the particulars of your company’s anti-corruption or export compliance program do not hesitate to contact me – I offer general as well as company-specific training.
Have a great weekend,
On Friday , September 12th, while a tenuous truce between Ukraine and rebel forces showed signs of cracking and government officials continued to trade verbal jabs, the United States amped up pressure on Russia by expanding its sanctions program to include some of the country’s largest companies. The following is an overview of U.S. sanctions on Russia as of September 18. As you know, these prohibitions can be changed or added to at any time. Currently, U.S. sanctions are focused mainly on the financial, energy, and military sectors so U.S. parties should be careful to vet all interactions with Russian parties in these industries. U.S. parties are expected to know who they are doing business with, what related parties might be benefiting from the transaction (such as a parent company or third party), and the end-user and end-use of any exports.
Executive Orders: The Administration has issued the following executive orders giving the Department of Treasury the ability to block Russian parties from transacting with the United States.
- 13660 – Blocking Property of Certain Persons Contributing to the Situation in Ukraine (March 6, 2014)
- 13661 – Blocking Property of Additional Persons Contributing to the Situation in Ukraine (March 17, 2014)
- 13662 – Blocking Property of Additional Persons Contributing to the Situation in Ukraine (March 20, 2014)
Ukraine-Related Sanctions Regulations: The Treasury Department’s Office of Foreign Assets Control (OFAC) issued regulations to implement the three Executive orders listed above. The regulations currently prohibit U.S. parties from transacting with listed entities and block their assets.
Specially Designated Nationals List (SDN): On Friday, OFAC added five parties to its SDN List, which imposes a blanket prohibition on transacting with the listed entities that applies to all U.S. parties.
Sectoral Sanctions Identifications List (SSI): In additional to listing certain prohibited parties on the SDN List, OFAC has created a list of entities with specific restrictions – the SSI List. Implemented under Executive Order 13662, U.S. parties are generally prohibited from transacting in, providing financing for, or dealing in new debt of longer than 90 days maturity or new equity for entities on this list. On Friday, OFAC further reduced the new debt dealing prohibition to 30 days for certain Russian entities, including many of its large oil companies and banks. The restrictions also apply to entities that are owned 50 percent or more by the listed parties. This means that U.S. parties need to ask questions and know who they are doing business with – especially when it comes to Russian banks and parties involved in Russian financing or the energy sector. Specifics regarding both recent additions and changes to the SDN and SSI Lists are available here.
Entity List: On Friday, the Bureau of Industry and Security (BIS) at the Department of Commerce added five Russian entities in Russia’s defense sector as well as five of the Russia’s largest energy companies to its Entity List. This list bars the export and reexport of items under the Department of Commerce’s jurisdiction to listed parties. Specifics regarding the most recent additions can be found here.
Denial of export licenses: BIS has instituted a policy of denying licenses for exports, reexports, and foreign transfers of “items for use in Russia’s energy sector that may be used for exploration or production from deepwater, Arctic offshore, or shale projects that have the potential to produce oil.” The timing and the exact goods affected were left unclear, however the policy appears to only effect items that would currently require a license from either of the two departments to export. The Department of State’s Directorate of Defense Trade Controls has implemented a similar policy, indicating that it “will deny pending applications for export or re-export of any high technology defense articles or services regulated under the U.S. Munitions List to Russia or occupied Crimea that contribute to Russia’s military capabilities.”
BOTTOM LINE: Even with this substantial expansion of sanctions the bottom line remains the same. With continued fighting despite the truce announcement, threats of retaliatory action from President Putin that might even include prohibiting western airliners from using Russian airspace, and the rebel’s continued insistence on total independence from the government in Kiev, it doesn’t seem like U.S. sanctions on Russia will be lifted any time soon. So U.S. companies involved in business with Russian entities must continue implementing internal programs that will ensure they have valid export licenses for each transaction and periodically check their business partners (as well as their business partners’ associates and ultimate end users of their products) against the lists discussed above. In the event that a transaction may be prohibited by any of the sanctions currently in force U.S. companies should make sure to follow up with thorough, documented due diligence and either clear the party beyond doubt or refrain from going forward. If you need further clarification on the sanctions programs or analysis regarding a specific transaction do not hesitate to contact me.
Have a great day,
In a June 12 post, I told you about U.S. Customs and Border Protection’s (CBP) plan to expand the previously importers only Customs-Trade Partnership Against Terrorism (C-TPAT) certification program to include exporters. As you may recall, C-TPAT certified importers have been enjoying a “lower level of scrutiny” when it comes to reviews of their documentation at the border in addition to other advantages. After a summer spent ironing out the details CBP has released a set of exporter eligibility requirements and is now accepting exporter applications. CBP has released a Fact Sheet for C-TPAT Export Entity hopefuls that can be found here.
It’s important to note that companies involved in international trade are increasing requiring all their foreign partners to satisfy similarly strict security and export compliance standards in order to avoid getting embroiled in trouble with their respective governments or suffering a public relations backlash (think Wal-Mart in Bangladesh or Apple in China). In light of this clear trend, the C-TPAT exporter program offers the opportunity to partner with CBP to get a leg up in ensuring your overall corporate compliance program is up to par and gain some additional benefits in the process, including:
- Increased facilitation of exports from foreign partners located in countries that have established Mutual Recognition Arrangements with the United States
- The ability to market the fact that C-TPAT certified cargo is secure
- Prioritized processing examinations over non-C-TPAT parties, reduced rates and times
- Increased coordination with C-TPAT partners during shipping disruptions
- Individually-assigned C-TPAT Supply Chain Security Specialist (SCSS) available to assist with supply chain security inquiries
- Access to C-TPAT trainings and seminar and various multi-media supply chain materials
- Use of C-TPAT common standards and security requirements that facilitate international trade by reducing the duplication of procedures
To be eligible, a company must:
- Be an active U.S. exporter (exporting out of the U.S.)
- Have a business office staffed in the U.S.
- Have an Employer Identification Number or Dun & Bradstreet number
- Have a documented export security program and designate an officer or manager as the C-TPAT point of contact and one as an alternate
- Commit to maintaining the C-TPAT supply chain security criteria
- Create/provide security profile to CBP outlining how applicant will enhance internal policies to satisfy C-TPAT security criteria
- Have an acceptable level of compliance for export reporting for the last twelve months and be in good standing with U.S. Federal Government departments
This could be a powerful tool in your efforts to streamline your company’s international transactions and increase profits, not to mention the fact that C-TPAT offers eligible exporters the opportunity to better protect themselves against inadvertent yet costly violations and participate in the greater effort to strengthen global supply chain security by allying themselves with CBP and working with it to strengthen their compliance procedures. If you want to learn more visit CBP’s main C-TPAT site and feel free to contact me for assistance.
Have a good day,
I recently came across yet another free service provided by the Government that will be helpful to business owners expanding overseas. The program is called “Direct Link” and is administered by the Department’s Bureau of Economic and Business Affairs. It consists of an ongoing series of teleconferences that are hosted by U.S. Ambassadors and other consular officials serving in the relevant country. Each teleconference focuses on current opportunities for U.S. companies in the featured market and addresses the unique challenges of doing business in that country, offering up practical advice on how to mitigate potential risks. Recent Direct Link teleconference topics include “Opportunities for U.S. Companies in Oman’s New Airports” and “Intellectual Property Rights and the South China Market: Basics for Protecting Your IP Rights.”
Specific information about Direct Link teleconferences and the countries and opportunities they feature can be found on the State Department website devoted to the Direct Link Program.
On the site, you can subscribe to receive emails about future teleconferences, submit questions, or suggest future teleconference topics. It’s a great opportunity to take advantage of free business insight provided by our American representatives abroad. Also, don’t forget about the Commerce Department programs about export.gov and at the Advocacy Center. Of course nothing beats specific tailored advice from your lawyer or strategic advisor. What we do is use these resources for opportunities and then supplement what is provided with individually tailored meetings with the local government and private sector representatives after we have done our due diligence on potential opportunities and partners.
Have a great day,
Although Obama Administration officials undoubtedly recognize the need to punish Russia and Russian-backed rebels for their alleged role in the MH17 tragedy, they also will continue to weigh the effects of further sanctions on U.S. entities. The Administration is truly caught between a rock and a hard place on this one: expand sanctions and you risk hurting your own economy; fail to act and you’re telling Moscow that there are no real consequences for Russian actions. Thus, the Ukraine-related sanctions likely will expand slowly, with each new round of sanctions becoming increasingly nuanced in order to minimize any damage to U.S. businesses. So, in the interest of understanding what the most recent changes to these sanctions means for your business before they are further expanded, keep the following highlights and advice in mind:
- The latest round of Ukraine-related sanctions were imposed on June 16th, 2014 (one day before the downing of commercial flight MH17), pursuant to (existing) Executive Order 13662 (dated March 20, 2014).
- 11 parties have been added to OFAC’s SDN List, including Kalashnikov Concern (makers of AK-47s), the Russian state research and production enterprise “Bazalt,” as well as both the rebel Donetsk People’s Republic and Luhansk People’s Republic (rebel-established governments in eastern Ukraine).
- A new list dubbed the “Sectoral Sanctions Identification List” (SSI List) has been created to target the Russian energy and banking industries. Among the notable additions to this list are Gazprombank (financial arm of Russian state-controlled gas producer Gazprom) and Vnesheconombank (state economic development bank). However, these entities are not ‘blocked parties’ like those on the SDN List so trading with them is generally allowed. Instead, two specific types of transactional prohibitions apply to SSI List entities:
- Transactions involving the establishment of certain debt (with a maturity of longer than 90 days) or new equity are prohibited if they involve SSI entities that fall under Directive 1.
- Transactions involving the establishment of certain debt (with a maturity of longer than 90 days) are prohibited if they involve SSI entities that fall under Directive 2.
These new “sectoral sanctions” have created a new list that you must run your potential trade partners against. If a potential trade partner is on the SSI List (or is 50% or more owned by entities on the SSI List, since the 50% rule applies to the SSI List as well) it does not automatically mean that a transaction involving them is prohibited. Rather, it means further due diligence is necessary to determine whether the transaction is of the particular type that SSI List Directives 1 or 2 (based on which one applies to the particular entity) prohibits. As you can see, this latest development does not amount to sectoral sanctions in the sense that trade with a given sector of the Russian economy has not been totally prohibited. Rather, these sanctions target a certain narrow set of transactions with certain named entities: that’s pretty good news for U.S. exporters doing business with Russia in that most transactions can still go forward for now! On the other hand, if you’re curious about how these sanctions are affecting the Russian economy check out this recent article by BBC News’ Katie Hope. And make sure to continue checking in for updates, because based on the big talk in Washington and around the globe, it’s likely this wasn’t the last round of sanctions.
Have a great weekend!
Casually, the words ‘embargo’ and ‘sanction’ are often used interchangeably. But when it comes to drafting a contract or assessing the viability of an export opportunity, failing to use the correct word can have serious consequences. Generally, both terms describe government measures that prohibit individuals and entities under the jurisdiction of one country (not necessarily just its citizens and companies) from engaging in trade or transacting with those of another. Historically, an embargo connotes a complete ban on all commercial activity between two nations, while sanctions are more limited in scope and prohibit trade in certain types of goods or transactions with particular individuals and entities. In fact, sanctions are described by some as a ‘partial embargo.’ The current measures governing commercial relations between the United States and Cuba are a classic example of what is considered an embargo. But even this characterization can be misleading. Strictly speaking, the measures imposed against Cuba are not a total embargo as certain transactions involving journalistic pursuits, certain foodstuffs, humanitarian assistance, and religious travel are allowed despite the ‘embargo.’ Thus an embargo to one person may not be an embargo to all. Another example is Iran. There is an embargo on US goods going to Iran unless you export medical and dental “devices” or foodstuff. However, consider N. Korea where most people would say we also have an embargo. US entities are permitted to make financial investments in North Korea. Who knew that? Of course it isn’t true for Iran or Cuba. Each country has its own specific unique set of sanctions.
When drafting sanction and embargo clauses in contracts or considering where to do business, keep these points in mind:
· If you (or your company) are a U.S. person, the U.S. sanction or embargo restrictions apply everywhere in the world: whether you are in the United States, in the country being sanctioned, or anywhere else. So avoid language that ties a party’s sanctions obligations to a physical location.
· Just because a country is sanctioned (or even embargoed) it does not mean that all commercial opportunities in that country or with that country’s nationals are off limits. Each sanctions regime is different (compare the fairly limited sanctions currently imposed on certain Russian and Ukrainian individuals and entities with the broader sanctions that are imposed on most transactions with the Iranian government, Iranians, and Iranian entities), so in certain cases a particular deal can go forward because it falls outside the scope of applicable restrictions. Of course, a detailed review of current regulations is necessary to determine whether this is true in a particular case, but make sure to leave room for lawful activity in sanctioned countries by avoiding blanket statements that prohibit parties from involving themselves in any transaction that involves a sanctioned country. ( I have seen really high priced lawyer make this mistake.
· Due to the political nature of sanctions and the fact that they are used by the US government as diplomatic tools to influence the behaviors of other nations they are constantly changing in response to the ever-evolving geopolitical landscape. So avoid including lists of specifics countries in your contracts because if sanctions against a particular country are lifted while the contract is still in force such outdated language could potentially complicate a party’s plans to enter an attractive new market.
· In most cases, due to the all-encompassing nature of the concept of an embargo discussed above, it is preferable to describe measures as sanctions in a contract in order to allow for the intricacies of each individual sanctions regime and avoid a reading that would prohibit all (including legal) activity in or with a sanctioned country.
An appreciation for the business activities that remain permissible in or with sanctioned countries along with sufficiently permissive contract language and a comprehensive export compliance program that requires your employees to perform the necessary due diligence on each individual transaction will ensure your company remains compliant but doesn’t miss out on perfectly legal and potentially lucrative opportunities in the process!
Have a great day,
The $963 million settlement OFAC recently reached with French banking giant BNP Paribas SA (BNP) was both the largest OFAC settlement to date and represents only a small fraction of the nearly $9 billion in total fines imposed on the bank by state and federal agencies. With figures this high and the additional imposition of a one-year ban that will prevent certain BNP units from clearing transaction in U.S. dollars, it’s obvious why this is big news in the world of international trade and finance. But for SME exporters (and internationally-oriented businesses of all sizes for that matter), the story should simply serve as a front page reminder that taking the necessary steps to ensure your company’s actions do not violate OFAC’s sanctions should be a no-brainer. Implementing a sanctions compliance program is relatively straightforward while the peace of mind you’ll enjoy knowing your company is protected against potentially crippling government fines is priceless.
The heavy-handed punishment imposed on BNP was the result of the government’s determination that the bank engaged in the “systematic practice of concealing, removing, omitting, or obscuring references to information about U.S.-sanctioned parties” in nearly 4,000 international transactions over the course of seven years and violated U.S. sanctions against Sudan, Iran, and Cuba in the process. The bank’s blatant disregard for U.S. sanctions and active efforts to conceal their illegal behavior no doubt played a large role in raising the amount of fines imposed, which leads us to the first point about sanctions: it’s fairly obvious that wilful sanctions violations (when you are aware what you are doing is illegal, but you do it anyway) are big no-nos, but also keep in mind that ignorance is no excuse. The language “known or should have known” is often used in such regulations to allow for the imposition of substantial punishments on violators that were not aware what they were doing was wrong because they never bothered to check. Here is a list of the key elements every sanctions compliance program should include. Remember, the list is not in any type of hierarchical order of importance – to be effective your program must include each of these steps:
- Develop a company sanctions compliance policy and certification and distribute it to all company employees and ask each business partner (including foreign representatives and customers) to review and sign it before going forward with a transaction;
- Distribute a questionnaire to each business partner and in relation to each transaction designed to determine whether the individual or entity, destination country, and ultimate end-use and end-user falls within the scope of U.S. sanctions;
- Consult applicable sanctions at the time each specific transaction is being cleared in order to determine if sanctions could potentially apply (because they function as a diplomatic tool, sanctions are constantly in flux as the U.S.’s relationships with other countries develop and change, so it is important to consult current potentially applicable sanctions at the time of the transaction, a general periodical check will not suffice);
- Run each individual and entity involved in a given transaction against OFAC’s Specially Designated Nationals (SDN) List to make sure they are not prohibited parties;
- Keep an eye out for red flags including receipt of payments from unrelated third parties, customers that appear curiously uninterested in learning about the product, or requests for shipments of products that are incompatible with the country of destination;
- Maintain records of the due diligence that you’ve performed as proof of your compliance efforts in the event that an inadvertent violation occurs.
Have a great week,