Is Your Business Impacted By US Law Governing International Trade?
There are some important things you may not know about United States laws governing international trade. You might say, “I don’t export anything” and “I haven’t invested in anything overseas so I don’t have to worry about these laws.” Don’t be too sure about that.
Under the provisions of the Export Administration Act of 1979 as amended, the US government has established the Export Administration Regulations. They apply to US persons and to transactions which you may not realize are governed by the regulations. Some examples follow.
Example #1 - You have a research project in a sensitive area and have hired a Chinese national who is in the US on an F1B visa. In his work at your research facility in Virginia, the Chinese national has access to some of your proprietary information. You might think this is not a problem since no information has left the country. But the disclosure of confidential, proprietary information to a foreign national who is not a permanent resident of may be an illegal export under the Export Administration Regulations regardless where the disclosure is made.
Example #2 - You have received an order from a company or individual with a foreign address, but the sale will be Free on Board (FOB) your manufacturing plant. Since it is a domestic sale, you may incorrectly think you don’t have to worry about any export related governmental regulations. Under the Export Administration regulations, the US identifies a number of individuals and companies that are denied export privileges for US goods and technologies. The list of prohibited persons is published in the Federal Register and the list is updated regularly as names are added and deleted from the list. You are responsible for ensuring that any of your transactions involving an individual who is denied export privileges, do not violate the terms of the order. If you run an e-commerce web site, your software should be able to identify prohibited persons.
Example #3 - You have received an order from a foreign company, but the sale will be FOB your manufacturing plant. The order requests that you confirm that you are not on the Arab black list or that no part of the goods were manufactured in a named foreign country. The order also requests that none of your owners or employees are of a given nationality or religion or that you will not do business with any person or company in a named foreign country. Both the Department of the Treasury and the Department of Commerce have regulations prohibiting a US person from participating in a boycott not supported by the federal government. Each of the regulations has different punishments for participating in a boycott. As a US person you cannot:
- agree to refuse or require another person to refuse to do business with or in a boycotting country;
- agree to discriminate against any individual who is a US person on the basis of race, religion, sex or national origin;
- agree to discriminate against any corporation or other organization which is a US person on the basis or race, religion, sex or national origin of any of its officers, directors or employees;
- require that any other person take any such action; or
- furnish or agree to furnish any information about the race, religion, sex or national origin of any US person or of any officers, directors or employees of a company or other organization that is a US person.
Even if you decide that you will not comply with the request, it may still be reportable to the federal government, both at the time the request is received and at the time you file your tax return.
Example #4 - You decide to take a vacation overseas. In a certain central European country, you stay in a given hotel only to find out that the hotel is owned by a company that is wholly owned by the Government of Libya, a country against which the US government has established economic sanctions. Under the Libyan Sanctions Regulations, the company owning the hotel has been designated by the US government as a “Specially Designated National” and by paying your hotel bill you have violated the US regulations. The five countries against which the US currently has sanctions are Iran, Iraq, Libya, North Korea and Cuba. In addition, there are limited US sanctions against Rwanda and various countries of the former Yugoslavia, Liberia and Somalia.
Copyright 2002 Nagel & Associates, LLC