Companies involved in sanctions compliance should closely communicate with regulators during the COVID-19 pandemic and carefully document compliance procedures during work-from-home operations, according to Nicole Sayegh Succar, a trade lawyer with Crowell & Moring. Those steps could minimize scrutiny and potential sanctions penalties after the pandemic subsides, Succar said during an April 2 webinar hosted by the law firm.
Ian Cohen
Ian Cohen, Deputy Managing Editor, is a reporter with Export Compliance Daily and its sister publications International Trade Today and Trade Law Daily, where he covers export controls, sanctions and international trade issues. He previously worked as a local government reporter in South Florida. Ian graduated with a journalism degree from the University of Florida in 2017 and lives in Washington, D.C. He joined the staff of Warren Communications News in 2019.
Expectations for sanctions compliance are increasing amid the COVID-19 pandemic as both U.S. and United Kingdom agencies continue sanctions enforcement, trade lawyers said. The U.S. Treasury Department Office of Foreign Assets Control and the U.K. Office of Financial Sanctions Implementation continue to issue sanctions, pursue enforcement and expect heightened due diligence from industry, the lawyers said, “You've got OFAC doing its continuing expansion of U.S. sanctions and … you've got increasing pressure from even the U.K.,” said David Wolff, a trade lawyer with Crowell & Moring, speaking during an April 2 webinar hosted by the law firm. “The regulatory expectations, if anything, are getting worse.”
The U.S. may consider lifting sanctions on countries significantly impacted by the COVID-19 pandemic, Secretary of State Mike Pompeo said. While Pompeo said the U.S. provides exemptions for exports of humanitarian goods, he suggested the Trump administration will review its sanctions regimes. “Would we ever rethink it? Of course,” Pompeo said during a March 31 press conference. “We’re constantly trying to make sure we have our policies right.”
The European Union will suspend certain import duties and customs penalties, and is “strongly” encouraging traders to only apply for “essential customs declarations,” due to the COVID-19 pandemic, the European Commission said in a March 30 guidance. In the guidance, the EU presented measures intended to ease burdens for European customs agents, postal operators and couriers, who are “struggling to cope” with trade operations, especially the large number of imported e-commerce goods. The measures also ease time pressures on customs officials and industry by extending deadlines for approving customs declarations.
The Trump administration should be doing more to restrict sales of emerging technologies to China, lawmakers said in interviews earlier this month. Senators commended the administration for increasing foreign direct investment restrictions (see 2002260042) and going further than previous administrations in confronting China’s unfair trade practices, but said they will continue pushing for tighter restrictions.
The COVID-19 pandemic may lead to an increase in electronic trade documentation as both governments and industries are increasingly forced to communicate online, said Kevin Shakespeare, director of stakeholder engagement at the Institute of Export and International Trade. Although there has already been a global shift toward online customs and trade procedures, the coronavirus spread may cause that process to speed up, Shakespeare said during a March 26 webinar hosted by the institute.
The COVID-19 pandemic may hinder the United Kingdom and the European Union from striking a deal before the Brexit transition period ends in December, potentially creating export control confusion for companies, according to a trade lawyer. The U.K. has formed sanctions regimes for its official departure from the EU, but the two sides have not made much progress on export control regulations, which could have substantial impacts on supply chains, said Ross Denton, an export control lawyer with Baker McKenzie.
European Union countries should closely monitor attempts to acquire European medical goods and technology through foreign direct investment and should increase investment screening tools, the European Commission said March 25. The EU’s “openness to foreign investment” needs to be “balanced by appropriate screening tools … now more than ever,” the commission said in guidelines to EU member states. The commission urged member states to be “vigilant” and “use all tools available … to avoid that the current crisis leads to a loss of critical assets and technology.”
Countries will more strictly review transactions involving foreign direct investment as the COVID-19 pandemic continues, especially the U.S., which could increase scrutiny and export controls in the biotechnology sector, trade lawyers said. The Committee on Foreign Investment in the U.S. may increase reviews of transactions involving health care technology to keep critical virus-fighting resources in the U.S., said Aimen Mir, a trade lawyer with Freshfields Bruckhaus Deringer. Mir, who also formerly served as the Treasury Department’s deputy assistant secretary for investment security, said the pandemic will also cause CFIUS and other agencies to increasingly look to prevent transfers of pathogen-related technologies and to maintain technology leadership in the biotechnology sector.
Companies will likely be faced with a reshuffled supply chain after the novel coronavirus COVID-19 pandemic subsides, placing greater importance on maintaining sound trade compliance programs even as business uncertainty increases, said Kerry Contini, an export control and sanctions lawyer with Baker McKenzie. As supply chain actors struggle to stay in business and as new parties enter and leave the supply chain, companies may face a host of new suppliers or customers, Contini said, a transition that will likely affect global industries on a large scale.