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On March 9, 2020, a new US federal firearms export control rule (the Rule) that has been in the works for many years went into effect, changing the way the United States regulates international trade in firearms, guns, ammunition and related articles. Essentially, the Rule makes the US Commerce Department responsible for the regulation of most commercially available firearms exports and enforcement of those regulations, rather than the US State Department. While the Rule should come as a welcome relief to firearms manufacturers and dealers, as it will reduce the procedural burdens and costs of export compliance, it does not deregulate the items transferred to Commerce. In fact, Commerce is expected to be just as exacting in its civil/administrative regulation of the firearms trade, and just as tough in criminal enforcement.
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Continue Reading US Civilian Firearms Exporters Take Heed as Commerce Department Takes Lead Over Enforcement under New Rule

Following Steptoe’s Client Advisory of April 7, 2020, “US and EU Sanctions Policies on Humanitarian Exports and COVID-19 Relief,” the US Office of Foreign Assets Control (OFAC) issued a Fact Sheet on April 16, “Provision of Humanitarian Assistance and Trade to Combat COVID-19,” which provides additional information on OFAC policies covered…

Patrick Linehan, Zoe Osborne, Brittany Prelogar, Katherine Dubyak, and Jefferson Klocke co-authored an article titled “Considerations For Conducting Remote Internal Investigations” for Law360. The article, published April 3, discusses some of the legal and practical considerations in conducting remote investigations as the world grapples with containing the spread of COVID-19.

In a series of Frequently Asked Questions (“FAQs”) released on March 31, 2020, the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”) issued new clarifying guidance for companies with ongoing business based on expired Technical Assistance Agreements (“TAAs”) or Manufacturing License Agreements (“MLAs”) under the International Traffic in Arms Regulations (“ITAR”).  Companies in the defense sector should take note of these FAQs, which highlight important limitations on the use of expired TAAs and MLAs.

TAAs and MLAs authorize U.S. persons to export (and non-U.S. persons to exchange outside the United States) ITAR-controlled technical data and “defense services.”  An MLA can also authorize the provision of manufacturing rights or know-how.  MLAs and TAAs typically have a 10 year duration, and questions often arise about what activity can and cannot continue if an agreement expires without obtaining a new or rebaselined agreement.  The non-U.S. parties to the agreement at that point may have developed or produced information or products derived from ITAR-controlled technical data and U.S.-origin manufacturing rights or know-how, and the underlying commercial relationships or agreements may be ongoing after the ITAR authorization has expired.  For example, the non-U.S. parties may have continuing sales contracts or opportunities, or obligations such as repairs and maintenance.  So, which types of activity under the ITAR can continue without a renewed MLA or TAA in place, and which types of activity require additional authorization?  DDTC has provided some useful answers in these new FAQs.

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Continue Reading Expired MLA or TAA? New Guidance Clarifies that Certain Activity under an ITAR Agreement Can Continue

Exporters, non-governmental organizations, financial institutions, and individuals that are subject to US jurisdiction may require a license from the US Treasury Department’s Office of Foreign Assets Control (OFAC) to support COVID-19 relief efforts in territories subject to comprehensive US sanctions (e.g., Crimea, Cuba, Iran, North Korea, Syria) and territories whose governments are subject to stringent…

It would be an understatement to describe the difference in fines levied by the US Office of Foreign Assets Control (“OFAC”) and the UK Office of Financial Sanctions Implementation (“OFSI”) as a gulf.  Prior to 31 March 2020, OFSI had concluded a total of three enforcement actions, the most significant of which resulted in a fine of just over £146,000.

By comparison, OFAC has levied nearly $9 million in fines in the first few months of 2020 and during the previous year levied nearly $1.3 billion in total.  The largest of these was a fine of $657 million that was handed down to Standard Chartered Bank (“Standard Chartered”) for violations of numerous sanctions regulations.  The majority of the OFAC settlement was part of a global settlement that included numerous US federal and state regulators, as well as the UK’s Financial Conduct Authority (which handed out a £102 million fine for anti-money laundering breaches).

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Continue Reading Standard Chartered fined £20.47 million; OFSI finally showing its teeth?

*The title of this post has been corrected to clarify the BIS Undersecretary’s decision.

In an unusual decision, the Undersecretary for the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) remanded a civil penalty of $31,425,760 assessed by an Administrative Law Judge (“ALJ”) against Nordic Maritime Pte. Ltd., (“Nordic Maritime”) a Singapore-based marine seismic company and its chairman for violations of the Export Administration Regulations (“EAR”). While agreeing with the seriousness of the charges, the Undersecretary found that the statutory maximum penalty—double the value of the contract underlying the violations—was disproportionate in comparison to other BIS cases.  The Undersecretary’s decision is available here.

The decision offers a rare public view into the BIS enforcement process involving ALJs, which differs from other agencies such as the Office of Foreign Assets Control (“OFAC”), while demonstrating that the U.S. government continues to accept limits on reasonable penalties for violations of sanctions and export control regulations, notwithstanding the administration’s otherwise intense policy focus on Iran and other sanctioned territories.

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Continue Reading BIS Undersecretary Vacates Administrative Law Judge’s $31 Million Civil Monetary Penalty for Iran Export Controls Violations; Remands for Further Consideration

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What can we learn from recent SDN designations by the US Office of Foreign Assets Control (OFAC) on multinationals such as subsidiaries of COSCO and Rosneft Trading S.A.?

OFAC has shown a willingness to impose, then lift, sanctions on major companies that play an…

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On December 28, 2019, China’s Standing Committee of the National People’s Congress (NPC) published a new draft Export Control Law (the draft law) for public comment. As China’s first export control statute, this law is intended to unify and significantly enhance China’s existing export control…