Apple, the tech giant, is currently engaged in a fight with the US Government (2016). At the request of the Department of Justice, a California court has issued a warrant requiring that Apple help the FBI to unlock the iphone used in a terrorist attack that killed 14 people. Apple is resisting the order.
Some analysts have raised questions about the court’s order:
“If a court has the power to order a third party like Apple to devise software that it does not already possess . . . what can’t a court order a company to do?” (Why Apple is in a Historic Fight over One iPhone).
The fact is that, when it comes to national security issues, U.S. courts tend to defer to the U.S. government. This includes in the area of international trade.
The International Emergency Economic Powers Act (IEEPA) allows commerce to be restricted in response to a threat to U.S. national security. Several U.S. trade rules have been enacted under IEEPA, many of which carry penalties and sanctions that can deprive a company of its very livelihood.
Denial of Export Privileges
The Bureau of Industry and Security (BIS) of the US Department of Commerce enforces the laws that regulate the export of products with both commercial and military applications (dual use) from the United States – the Export Administration Regulations (EAR). Exports regulated by the BIS are listed on the Commerce Control List (CCL). Products on the CCL can range from the obvious to the apparently innocuous — nuclear materials, supercomputers, oxygen tanks. The rules for exporting products on the CCL also depend on the specific countries and entities to which they are being exported. Penalties for violating the EAR include huge civil fines and imprisonment of up to twenty (20) years.
In addition, the BIS also has the authority and discretion to deny an individual or company found guilty of violating the EAR the right to export their products that are on the CCL for up to ten (10) years. This authority extends to domestic and foreign exporters. The BIS may also act to prevent a future potential violation of the EAR by denying an individual or company the right to export products on the CCL or to receive such exports from the United States for up to 180 days. The order can be renewed.
Orders denying export privileges are published in the Federal Register (US Government daily publication). Persons or companies denied the right to export their products or services are placed on the Denied Persons List. Exporting to or doing business with individuals or companies on the Denied Persons List is itself a violation of the EAR. Violators can in turn find themselves on the List.
Restriction of Export Privileges
The BIS may also determine that a license is required to export specific products to certain persons or companies. These persons are placed on the Entity List and the Unverified List.
It is essential that exporters check these Lists of Parties of Concern before concluding an export transaction.
Disgorgement of Profits
The United States maintains economic and trade sanctions against several countries and regimes with which commerce is either prohibited or restricted. These laws are also evoked by the IEEPA to address such U.S. national security concerns as terrorism, narco-trafficking, and nuclear proliferation. They are enforced by the Office of Foreign Assets Control (OFAC) in the US Department of Treasury. Violations can result not only in fines, but also in seizure of assets the U.S. considers to have been illegally earned.
The BIS is also empowered to deprive export violators of the profits earned from illegal exports. The value of forfeited assets can greatly exceed the cost of fines.
Disgorgement of profits earned is a widely-used tool to sanction violations of another law — the U.S. Foreign Corrupt Practices Act (FCPA). The FCPA prohibits all persons subject to U.S. law from paying bribes to foreign government officials to win or to keep business. In addition to the civil and criminal penalties authorized by the law, the US Securities Exchange Commission (SEC) negotiates settlement agreements with violators under their jurisdiction. These agreements require the FCPA violators to “disgorge” the profits earned as a result of having paid the bribe.
In summary, U.S. laws are pretty clear about the power of US agencies and courts to enforce powerful sanctions for violations of trade rules that implicate national security. Contact us for support with building an effective compliance program to avoid these penalties.
DevelopTradeLaw, LLC provides business-oriented advice to the legal challenges that face companies doing business internationally. Contact us for more information or advice on the topic of this article.
