Key Elements of International Trade Compliance. Presented by:

Transcription

1 Key Elements of International Trade Compliance Presented by:

2 International Business Transactions International Civil Litigation 2

3 I. Introduction Every international shipment implicates at least TWO legal regimes 3

4 I. Introduction US Trade Laws When importing, exporting or dealing with foreign affiliates, numerous US trade regulations must be observed. - Certain goods have special rules. 4

5 II. Import Compliance Customs and Border Protection (CBP) agency within Department of Homeland Security primary responsibility for policing the U.S. border and enforcing U.S. import laws. CBP also enforces import-related rules for over 40 federal agencies. 5

6 II. Import Compliance (Cont d) Brief History of Customs Pre-NAFTA After NAFTA Reasonable Care Audits Post 9-11 ISA/FA C-TPAT 6

7 II. Import Compliance (Cont d) Pillars of Importing Quantity Classification Value Country of Origin Marking 7

8 II. Import Compliance (Cont d) Import Penalties - Civil False Statement or Omission Domestic value of imported goods Record Keeping Up to $100,000 per transaction Marking 10% of domestic value Other Customs Enforcement measures Seizure & Forfeiture Criminal 5 yrs; $500,000 Additional scrutiny, exams & audits Referral to other agencies for action 8

9 II. Import Compliance (Cont d) Common Importing Pitfalls Over-reliance on 3rd Parties Failure to supervise and control vendors & agents No (or inadequate) written ICP Assists Samples and other non-sales transactions Country of Origin marking 9

10 II. Import Compliance (Cont d) Imports and IP Generally, IPR owners must self-police U.S. Trade law provides protections for certain IPR against infringing imports Trademarks / Trade Names Copyrights Patent Surveys IP Violations 19 USC 1526 No culpability required Detention, seizure & forfeiture Penalties up to US resale price of goods 10

11 II. Import Compliance (Cont d) $$$ Savings Programs Trade agreements (e.g., NAFTA, CAFTA-DR) US Trade promotion programs (e.g., GSP) Foreign-Trade Zones/Bonded Warehouses Duty Drawback 11

12 III. Export Compliance The Bureau of Industry and Security (BIS) has primary responsibility for enforcing export control laws Export Administration Act (EAA) Export Administration Regulations (EAR) Other agencies have export-specific regulations that must also be observed. (e.g., Department of Defense Trade Controls (DDTC) Most export documents are delivered to CBP 12

13 III. Export Compliance (Cont d) What is an Export? Physical shipment of EAR-subject goods, technology, or technical data outside US Customs Territory Downloads and s of technology and technical data outside US Sharing technology with a foreign national, even on US soil ( deemed export) 13

14 III. Export Compliance (Cont d) 4 Key Questions for Exports What is it? description & classification Where is it going? country Who will be receiving it? person/entity How will it be used? dual use 14

15 III. Export Compliance (Cont d) Pre-Shipment Checks and License Requirements (i.e., General Prohibitions ) 1. Determine whether a license is required to export the commodity. 2. Ensure export would not violate U.S. sanctions. See current Office of Foreign Asset Controls (OFAC) Sanctions ( 15

16 III. Export Compliance (Cont d) 3. Check the various bad guy lists Denied Parties List - BIS Specially Designations Nationals and Narcotics Traffickers - OFAC Entity List - BIS Debarred Parties List State Unverified List BIS See 16

17 III. Export Compliance (Cont d) 4. Don t ignore Red Flags 17

18 III. Export Compliance (Cont d) Penalties for Export Violations Up to $1 million Up to 5 years in prison Denial of export privileges 18

19 III. Export Compliance (Cont d) Common Exporting Pitfalls Failure to check bad guy lists Failure to secure IP abroad Unlicensed exports Deemed exports Recordkeeping Incorrect SEDs/documents 19

20 IV. Other Trade Regulations International Traffic in Arms Regulations (ITAR) Prohibits shipments of certain defense articles and technology. Controls trade in Munitions - Including Mil Spec/Std. Requirements - Registration - Licenses - Recordkeeping 20

21 IV. Other Trade Regulations Common ITAR Pitfalls No export/re-export license Recordkeeping/Reporting Shipments to affiliates Dual use items Deemed export 21

22 IV. Other Trade Regulations ITAR Penalties Criminal & Civil: Up to $1 million per violation for corporations Up to $1 million per violation and up to 10 years in jail for individuals Other Enforcement Measures: Seizure or forfeiture of goods Debarment from licensing for as long as three years Potential debarment from Government contracting for up to three years 22

23 IV. Other Trade Regulations (Cont d) 1 Anti-Boycott Laws Cannot support illegal boycotts. Prohibited conduct includes: Agreements to do business with Israel or blacklisted companies, or other persons based on race, religion, sex, national origin or nationality. Furnishing information about business relationships with these persons or entities. Failure to report requests for boycott info 23

24 IV. Other Trade Regulations (Cont d) 2 Common Anti-Boycott Pitfalls Providing information unwittingly Failure to report Foreign agents/subsidiaries 24

25 IV. Other Trade Regulations (Cont d) 3 Anti-Boycott Penalties Fines up to $50,000 or five times the value of the exports involved, whichever is greater Imprisonment for up to 10 years. Loss of foreign tax benefits/credits Penalties under EAR 25

26 III. Other Trade Regulations (Cont d) Foreign Corrupt Practices Act (FCPA) Bribery of foreign officials is illegal, even if local custom Bribery - Any payment made with the intent to secure an unfair advantage Issuers (i.e., large corporations) also have accounting rules as per the SEC Max. - - Penalties Up to twice the benefit sought or gained 20 years in prison Employers cannot pay employee penalties Last updated:

27 V. Keys to Compliance - Know & Follow the Rules - Implement & update written compliance program - Periodic compliance training - Hands on management of vendors, agents, brokers, forwarders, etc. 27

28 V. Keys to Compliance - Check your Work - Periodic compliance reviews - Self-awareness cuts off contingent liabilities - Prior Disclosures reduce/ eliminate potential penalties 28

29 V. Keys to Compliance - Implement record retention program - Different periods required for various records - Once Requisite period expires, record becomes unnecessary contingent liability 29

30 VI. Conclusion - International trade involves numerous rules & agencies - Must be aware of rules and ensure compliance through training and internal reviews - Rules change frequently - Self-policing reduces liabilities 30

31 VI. Conclusion Failure to be diligent with trade compliance = Lost opportunities Substantial penalties Interruptions in global supply chain Companies can budget and plan for compliance, but not for enforcement. Socrates - The unexamined life February 13, 2006

32 Direct