International Compliance Digest is the new Adams and Reese monthly newsletter focused on international trade compliance and enforcement. Each month we will recap the latest in compliance and enforcement updates, including issuances from the Department of Justice, Department of Commerce, and U.S. Customs and Border Protection, as well as any notable enforcement actions.
March was an important month for trade compliance. Most notably, the DOJ, Commerce, and OFAC issued a joint note on the obligations of foreign-based individuals and entities to comply with U.S. sanctions and export control laws and the risks of non-compliance. The DOJ also announced a new whistleblower program under the FCPA, and U.S. Customs unveiled new dashboards with data on import evasions.
March also saw a number of high-profile guilty pleas and settlements that highlight the importance of corporate compliance programs and other due diligence efforts. These include CBP violations over misclassification of merchandise, bribery violations under the FCPA, OFAC settlements of allegations of violations of U.S. sanctions laws, and one of the largest civil fines involving ITAR violations.
Compliance Updates
Export Compliance
On March 6, 2024, the Department of Justice, Department of Commerce’s Bureau of Industry and Security (BIS), and the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a Tri-Seal Compliance Note on the obligations of foreign-based individuals and entities to comply with U.S. sanctions and export control laws and the risks of exposure that they face for non-compliance.
The Note also provides an overview of compliance considerations for non-U.S. companies and measures that could help mitigate their risk. As with prior multi-agency advisories, the Note underscores the importance of an effective and robust compliance program to mitigate any risks of non-compliance. This is especially true for foreign companies who do business with both the United States and jurisdictions, people, or entities who are subject to restrictions under U.S. sanctions or export control laws.
Anti-Bribery and Corruption
On March 7, 2024, the DOJ announced a new whistleblower reward program intended to help prosecutors bring more foreign corruption cases. Under the program, individuals who report corporate misconduct can earn a share of any resulting DOJ forfeiture. Read more about the Foreign Corrupt Practices Act (FCPA) and the importance of compliance programs here.
Anti-boycott
On March 28, 2024, BIS published a new resource for companies, financial institutions, freight forwarders, and others to assist with anti-boycott compliance by identifying boycott-related requests they may receive during the regular course of business. The resource is a public list of entities who have been recently reported to BIS, as required by Section 760.5 of the EAR, as having made a boycott-related request in connection with a transaction in the interstate or foreign commerce of the United States. The list is not exhaustive and will be updated quarterly.
U.S. Customs
On March 11, 2024, CBP unveiled its Enforce and Protect Act and e-Allegations dashboards, providing the trade community with transparent data on evasions and reporting of alleged violations. Transshipment continues to be the primary means of evading duties, with the vast majority of cases involving Southeast Asia, particularly Malaysia, as seen below. The top 3 types of e-allegations in 2023 involved IP, Health and Safety, and Merchandise Classification.
Enforcement Actions
Export Compliance
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) settled with EFG International AG, a Switzerland-based global private banking group, for $3,740,442 over EFG’s potential civil liability for processing 873 securities transactions in apparent violation of the Cuban Asset Control Regulations, the Kingpin Act, and Executive Order 14024. The transactions involved customers in Cuba and for a Chinese national blacklisted for foreign narcotics trafficking. The settlement took into account EFG’s voluntary self-disclosure and a finding that the violations were non-egregious.
Anti-Bribery and Corruption
Gunvor S.A. (Gunvor), an international commodities trading company based in Switzerland, pled guilty and agreed to pay over $661 million to resolve an investigation by the DOJ into violations of the FCPA. Gunvor’s guilty plea stemmed from the company’s scheme to pay bribes to Ecuadorean government officials to secure business with Ecuador’s state-owned and state-controlled oil company, Petroecuador.
Trafigura Beheer B.V. (Trafigura), an international commodities trading company, pled guilty and agreed to pay over $126 million to resolve an investigation by the DOJ into violations of the FCPA, stemming from the company’s scheme to pay bribes to Brazilian government officials to secure business with Brazil’s state-owned and state-controlled oil company, Petróleo Brasileiro S.A. – Petrobras (Petrobras).
The DOJ noted that, in addition to cooperating on a number of fronts, the company also engaged in remedial measures, including: (i) developing and implementing enhanced, risk-based policies and procedures relating to, among other things, anti-corruption, use of intermediaries and consultants, third party payments, and joint venture and equity investment risk assessment; (ii) enhancing processes and controls around high-risk transactions; (iii) investment of additional resources in employee training and compliance testing; (iv) enhancing ongoing compliance monitoring and controls testing processes; and (v) proactively discontinuing the use of third-party agents for business origination.
U.S. Customs
Ford Motor Company agreed to pay $365 million to resolve allegations of import violations by misclassifying and understating the value of hundreds of thousands of its Transit Connect vehicles to avoid paying higher duties. Ford imported the vans from Turkey into the United States and presented them to CBP with sham rear seats and other temporary features to make the vans appear to be passenger vehicles. In classifying the vehicles as passenger, Ford avoided paying the 25% duty rate applicable to cargo vehicles. After customs clearance, each of the vehicles was immediately stripped of its rear seats and returned to its original identity as a two-seat cargo van.
An importer pled guilty in federal court to conspiracy to avoid paying over $1 million in Antidumping and Countervailing Duties. The parties conspired to smuggle goods to avoid paying antidumping duties of approximately 330.69%, countervailing duties of approximately 358.81%, and other duties of approximately 25% which were owed when importing tiles from the Peoples Republic of China to the United States. To avoid the duties, the parties caused a container with porcelain tiles manufactured in PRC to be shipped from PRC to Malaysia to change the country of origin to Malaysia.