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Specialized Export Compliance Topics

Alexandra López-Casero Nixon Peabody

Ann Marie Paul, U.S. Customs and Border Protection

James Kevin Wholey Phillips Lytle LLP

Omari Wooden U.S. Census Bureau

U.S. SANCTIONS UPDATE: IRAN, CUBA, RUSSIA AND CRIMEA

ALEXANDRA LOPEZ-CASERO JUNE 10, 2016

SANCTIONS AND EMBARGOES

— The Treasury Department’s Office of Foreign Assets Control (“OFAC”) administers and enforces most sanctions programs and embargoes.

— The prohibitions vary by country and program, but usually target: • Transactions with sanctioned countries or entities in those

countries • Transactions with individuals or entities identified on lists

maintained by the U.S. government • Exports to sanctioned countries • Imports from sanctioned countries

ACTIVE U.S. SANCTIONS PROGRAMS

— Examples of active U.S. sanctions programs: • Burma • Burundi • Côte d’Ivoire • Cuba • Crimea • Democratic Republic of the Congo • Iran • Iraq

— The sanctions programs against Iran, Cuba, Syria, North Korea, and Sudan are the most comprehensive.

• Lebanon • Libya • North Korea • Russia • Somalia • Sudan • Yemen • Zimbabwe

IRAN

JANUARY 16, 2016 CHANGES

January 16, 2016: U.S. implements sweeping changes U.S. sanctions relief applies mostly to non-U.S. entities and individuals.

The JCPOA lifts many (but not all) of the “secondary” sanctions.

U.S. sanctions relief is only for nuclear-related sanctions.

U.S. will maintain sanctions (including secondary sanctions) on Iran related to terrorism and human rights violations.

THE SANCTIONS RELIEF WILL PRIMARILY BENEFIT NON-U.S. COMPANIES

U.S. companies (incorporated or formed under U.S.): Primary sanctions remain fully in place (limited exceptions for e.g., aviation industry, medical products)

U.S. owned or controlled subsidiaries abroad: New General License H. Only if export has no nexus to the U.S.

Other non-U.S. companies: Can export to Iran, as long as there is no nexus to the U.S. (E.g.,

products may not contain ≥ 10% U.S.-origin content)

CUBA

NEW BUSINESS OPPORTUNITIES UNDER NEW GENERAL LICENSES

• Cuba embargo remains in effect • Rule:

o Most transactions between the U.S. or persons subject to U.S. jurisdiction and Cuba are prohibited

• Exceptions: o General license (i.e., blanket authorization)

o Specific license

o The new changes introduce new general licenses

EXPORTS FROM THE U.S. TO CUBA

• Rule: All exports from the U.S. to Cuba require a license, unless authorized by a license exception

• Key License Exceptions o Consumer Communications Devices (CCD)

o Support for the Cuban People (SCP)

o Agricultural Commodities (AGR)

o Gift parcels and humanitarian donations (GFT)

• Changes to Licensing Policy • Redefinition of “cash in advance”

EXAMPLE OF NEW LICENSE EXCEPTION: EXPORTS UNDER SCP

• New License Exception Support for the Cuban People (SCP) authorizes the export and re-export without a license to Cuba of: o Building materials, equipment, and tools for use by the

private sector to construct or renovate privately-owned buildings, including privately-owned residences, businesses, places of worship and buildings for private sector social or recreational use

o Tools and equipment for private sector agricultural activity

o Tools, equipment, supplies, and instruments for use by private sector entrepreneurs.

• Eligible items: EAR99 or only AT controls

RUSSIA AND CRIMEA

NOT COMPREHENSIVE, BUT TARGETED SANCTIONS

— Not geared toward entire Russian economy, but broader scope with each successive Executive Order

— U.S. has blocked several, significant Russian entities and individuals

— Sanctions also target prominent sectors of the Russian economy:

Financial Services/Capital Markets Energy Defense

— Beware of providing goods, services, or technology to oil and gas projects in Russia’s far east

BEWARE OF THE (REVISED) 50% RULE

Screening only the counterparty would not have flagged this potential transaction with a blocked (but not listed) company.

Blocked Shareholder A

Blocked Shareholder B Shareholder

Russian customer/ intermediary

U.S. Exporter/ Financial institution

45% 5%

50%

U.S. SANCTIONS ON CRIMEA

— Comprehensive sanctions imposed by OFAC/BIS.

— General Rule: Nothing can be exported to Crimea.

— Exception:

• Food, • Medicine, • Software that is necessary to enable personal

communications over the Internet (e.g., social networking, instant messaging, e-mail, web browsing, blogging, sharing of photos and movies).

THANK YOU

This presentation contains images used under license. Retransmission, republication, redistribution, and downloading of this presentation, including any of the images as stand-alone files, is prohibited. This presentation may be considered advertising under certain rules of professional conduct. The content should not be construed as legal advice, and readers should not act upon information in this publication without professional counsel. ©2015. Nixon Peabody LLP. All rights reserved.

ALEXANDRA LÓPEZ-CASERO NIXON PEABODY Partner alopezcasero@nixonpeabody.com (202) 585-8372

Buffalo Field Office

Field Operations For Official Use Only 18

Buffalo Field Office Operations Director, Field Operations – Rose Hilmey

Assistant Director, Border Security – Richard Roberts

Assistant Director, Trade – Ann Marie Paul

Assistant Director, Mission Support – Brad Richardson Staffing as of April 1, 2016 • Over 1,100 Uniformed Officers • Over 240 Support Personnel

Field Operations For Official Use Only 19

CBP Field Operations Role in Export Compliance

• To enforce other U.S. Government agency laws and regulations. • Inspect and examine cargo, passengers and export documentation. • Detain questionable shipments. • Seize shipments in violation of export control laws. • Interdict unreported currency, stolen vehicles, and other illegal exports. • Prevent terrorist groups, rogue nations and other criminal organizations

from obtaining U.S. Munitions List (USML) and Commerce Control List (CCL) commodities.

• Enforce sanctions and embargoes against individuals, groups, organizations, and countries.

• Increase export compliance.

Field Operations For Official Use Only 20

How Does CBP Conduct Export Enforcement

Risk-Based Assessment :

• Automated Export System (AES) • Automated Targeting System - filters the AES data to look for suspect

shipment characteristics. • Cargo manifests (Bills of lading, Invoices, Packing Lists, Hazmat

Certifications, Other shipping documentation). • Company History or the lack of history. • Routing (high-risk destination). • Other paperwork.

Field Operations For Official Use Only 21

Iran and Cuba Sanctions

Cuba

Effective January 27, 2016 – Policy is loosened pertaining to restrictions on a number of general licenses:

• Carrier services by air, • Temporary sojourn for vessels and

aircrafts, • Informational materials, • Professional meetings, • Public performances, clinics, workshops,

athletic and other competitions, exhibitions, and

• Humanitarian projects.

The policy for exports and re-exports to Cuba was modified from a general policy of denial to a general policy of approval for certain items.

Export license is still required!!!

Iran

Effective January 16, 2016 – Executive Order signed regarding changes to the Iran Sanctions Program. Imports allowed under general license:

• Iranian foodstuffs for human consumption,

• Textile floor coverings, and • Carpets used as wall hangings.

Exports allowed under specific license:

• Aircraft, and • Aircraft parts for civilian.

The policy for exports and re-exports to Cuba was modified from a general policy of denial to a general policy of approval for certain items.

Export license is still required!!!

Field Operations For Official Use Only 22

Foreign Trade Regulations

Examples of FTR Violations:

• Failure to File EEI • Late Filing of EEI • Other EEI Violations (incorrect EEI, failure to provide authorized agent

with accurate and timely export information, failure to obtain POA, failure to correct EEI, failure to provide carrier with proof of filing citation or exemption, failure to retain records)

• Carrier Violations

Enforcement of FTR Violations:

• The Secretary of the Department of Commerce delegated to the Secretary of Homeland Security the authority to enforce the FTR.

• The Secretary of DHS delegated the authority to the Commissioner of CBP. • CBP can issue civil penalties. • CBP can also seize violative shipments.

Omari Wooden

Assistant Division Chief Trade Outreach and Regulations

International Trade Management Division

June 10, 2016

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Legal Requirements

Parties to an Export Shipment

Filing Requirements

Compliance and Best Practices

Foreign Trade Regulations (FTR) Topics

Export Statistics: U.S. International Trade in Goods and Services (FT900)

Enforcement:

Foreign Trade Regulations 15 CFR Part 30

Parties to an Export Shipment

Domestic Parties: U.S. Principal Party in Interest U.S. Authorized Agent Carrier

Foreign Parties: Foreign Principal Party in Interest Ultimate Consignee

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What is a Shipment? [FTR 30.1]

ONE U.S. Principal Party in Interest shipping their merchandise, to

ONE Foreign consignee, on ONE Carrier moving the product out of the U.S., on ONE day, and over $2,500 per Schedule B number or

requires a license

1 Tip: The ONE Rule

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Filing Requirements

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When is EEI required? [FTR 30.2(a)(1)(iv)]

Shipment licensed by government agencies ITAR controlled items Sanctioned by the Office of Foreign Asset Control Rough diamonds Used self-propelled vehicles

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When is EEI Not Required? - Exemptions [FTR 30.2(a)(1)(iv)]

Country of ultimate destination is Canada [30.36(a)] $2,500 or less per Schedule B number [30.37(a)] Tools of Trade: hand-carried, personal or company

use, not for sale, not shipped as cargo, returned within 1 year [30.37(b)]

Temporary exports that are exported from and returned to the US in less than one year

Goods previously imported under a TIB for return in the same condition as when imported

Compliance &

Best Practices

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Mail on company letterhead to:

Voluntary Self Disclosure (VSD) [FTR 30.74]

Submit a letter detailing:

Type of violation When & how the violations occurred All parties (foreign & domestic)

related to the violations Any mitigating circumstances Number & value of shipments affected Corrective measures Corrected or filed shipments

Chief, Foreign Trade Division U.S. Census Bureau 4600 Silver Hill Road, Room 6K032 Washington DC 20233-6700

Sample VSD: census.gov/foreign-trade/regulations/sample_vsd.pdf

Implement Best Practices

Document!!! Document!!! Document!!!

Correct information as soon as possible

Maintain compliance Education & cross training Automation & Procedures Perform regular audits

Attend Seminars & Workshops

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Export Compliance seminars Full day training for exporters covering topics of reporting

requirements, export regulations, classification assistance and enforcement issues

Domestic/International trade shows Partnership with trade promotion agencies to provide real time

training and expertise to help businesses expand abroad

Webinars Online training covering a wide range of topics

Archived and stored for your convenience

OUTREACH AND TRAINING Outreach and Training

Export Compliance Seminar & Workshops

All seminars: Baltimore, MD – June 21 Miami, FL – July 21 Orlando, FL – September 20 Laredo, TX – October 12 Chicago, IL – November 2 Boston, MA – December 7

To register visit: census.gov/foreign-trade/aes/meetingsandpresentations/index.html

Upcoming Compliance Seminars

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• Automated Export System Opt. 1 askaes@census.gov

• Classification Assistance Opt. 2 eid.scheduleb@census.gov

• Regulations Opt. 3 itmd.askregs@census.gov

• Data Dissemination Opt. 4 eid.international.trade.data@census.gov

• Trade Outreach Opt. 5 itmd.outreach@census.gov

Secure Fax: 301-763-8835

Website: www.census.gov/trade

Blog: http://globalreach.blogs.census.gov/

Call Us: (800) 549-0595

INTERNATIONAL TRADE HELP LINE International Trade Help Line

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EXHIBITOR LIST

Littler Mendelson, P.C. Digital Rochester SEKO Worldwide Global NY, Empire State Development Export-Import Bank of the U.S. U.S. Small Business Administration U.S. Department of Commerce

Mohawk Global Logistics Language Intelligence ER – Select LLC CentriLogic Wells Fargo Bank ALT Translations, LLC

High Tech Rochester Brockport Small Business Development Center St. John Fisher College PC Results Inc. Monroe County Economic Development SPEED Global Services

THANK YOU SPONSORS