Is your company interested in selling products or conducting business abroad? If so, you should carefully review the U.S. export laws and regulations to ensure proper compliance.
The U.S. government regulates international business transactions through several laws and regulations. Two common situations that these rules apply to are: 1) the export (and re-export) of most commercial items; and 2) the manner in which U.S. residents and entities (and some foreign entities with ties to the U.S.) can conduct business abroad (i.e., the Foreign Corrupt Practices Act). This article will briefly discuss both of the aforementioned items.
U.S. parties involved in international transactions must ensure that they comply with all export control laws, including, if necessary, obtaining an export license. An export license grants permission to engage in a certain type of export/re-export activity (please note that the export of certain items may be prohibited altogether). It is issued by the applicable government agency after a review of the circumstances surrounding the proposed transaction. Some of the U.S. agencies that are responsible for ensuring that parties comply with the applicable export control laws and regulations include the: Department of Justice, Department of Commerce, Department of State, Customs and Border Protection, and Department of the Treasury.
Pursuant to U.S. law, exporters are responsible for determining if an export license is required for their goods. While most export transactions do not require a license, export licenses can be required based on a number of factors, including:
- The final destination of the product. Exports to certain countries may, as a result of foreign policy or national security reasons, be prohibited or require a license (i.e., trade embargos, economics sanctions, etc.).
- The end-user of the product. Some items that do not normally require an export license may still require a license to be exported to certain parties. The U.S. government: (i) has prohibited certain organizations and individuals from receiving U.S. exports; or (ii) may permit certain parties to receive U.S. exports only if those exports have been licensed. The various regulating agencies have established a number of “lists” which enumerate the restricted parties; and/or
- The type of product. Certain items, particularly defense-related items (e.g., munitions, nuclear materials, etc.), may require a license from the applicable regulatory agency prior to export.
Companies that violate these export control laws can face substantial civil and criminal fines. Individuals who violate these laws may also face imprisonment in addition to fines.
Foreign Corrupt Practices Act
U.S. businesses conducting business abroad must comply with the Foreign Corrupt Practices Act (“FCPA”). The anti-bribery provisions of the FCPA prevent U.S. persons, business entities (and their officers, directors, employees and agents) and other parties acting within the U.S. from paying, offering, or promising anything of value to a foreign official in order to obtain or retain business. In other words, the FCPA essentially prohibits the payment of bribes to foreign officials in exchange for business or other unfair advantages. It should be noted that the FCPA also has accounting provisions that make it illegal for a company that reports to the SEC to have false or inaccurate books and records or to fail to maintain a system of internal accounting controls.
The restrictions of the FCPA have broad application. The act applies to U.S. persons, certain foreign issuers of securities, and foreign parties who take (either by themselves or through an agent) acts in furtherance of such restricted behavior while in the U.S.
The FCPA broadly defines the term “foreign official” to essentially mean: 1) any officer/employee of a foreign government, a public international organization, or any department/agency thereof; and/or 2) any person acting in an official capacity.
Penalties for violating the anti-bribery provisions of the FCPA vary based on whether the violator is a U.S. company or a U.S. individual. Generally speaking, significant fines, civil penalties and criminal penalties are all possible.
Before entering into any export transaction or engaging in other business abroad, an exporter should be sure to review the applicable laws and regulations to determine whether the transaction requires a special license or is prohibited by federal law.
The Attorneys at Fitzpatrick Lentz & Bubba have extensive experience advising clients on a wide variety of international business transactions, including regulatory compliance matters. For more information, please contact Kenneth Charette or any other attorney in our International Trade Law Group.