COMMERCE, TREASURY, AND JUSTICE ISSUE TRI-SEAL COMPLIANCE NOTE ON U.S. SANCTIONS AND EXPORT CONTROL LAWS
April 8, 2024
On March 6, 2024, the U.S. Departments of Commerce, Treasury, and Justice published a Tri-Seal Compliance Note (the “Note”) emphasizing the applicability of U.S. sanctions and export control laws to foreign-based persons and entities. As the primary enforcer of economic and trade sanctions, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) regularly exercises its enforcement authority against persons and entities located outside the United States. A foreign-based entity or person can become subject to the applicability of U.S. sanctions by causing U.S. persons to violate OFAC sanctions. For instance, behavior that obscures or omits reference to the involvement of a sanctioned party in the documentation of a financial transaction may subject a foreign-based person or entity to U.S. sanctions.
The Note also explains how the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) enforces export controls through the Export Administration Regulations (“EAR”). Importantly, the Note makes clear that U.S. export control laws extend to items anywhere in the world and to foreign persons dealing with items subject to the EAR. In other words, U.S. export control laws follow the goods, meaning that the EAR applies to numerous movements of goods including reexports, in-country transfers, and exports from abroad in addition to initial exports. While most countries limit export-related authorities to direct exports, the expansive reach of U.S. export control laws mitigates the efforts of bad actors attempting to bypass the EAR by shipping items through a third country.
To avoid U.S. sanction and export control violations, foreign-based persons and entities should implement a robust compliance program with internal controls to monitor the payment and movement of goods. Doing so helps to identify sanctioned persons or jurisdictions that may otherwise be obstructed by complicated payment and invoicing structures. By understanding their touchpoints to the United States, foreign-based persons and entities can avoid criminal prosecution which is punishable by imprisonment of up to 20 years and a $1 million fine per willful violation.
If you have any questions, please contact Evelyn Sahr at 202.659.6622 or esahr@eckertseamans.com; Drew Derco at 202-659-6665 or dderco@eckertseamans.com; Jay Julien at 202.659.6648 or jjulien@eckertseamans.com, or any other attorney at Eckert Seamans with whom you have been working.
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