Jon P. Yormick to Speak on the FCPA at Northeast Ohio Trade & Economic Consortium Seminar

International business and trade attorney, Jon P. Yormick, who also serves as Special Counsel for Phillips Lytle LLP, will speak at a Northeast Ohio Trade & Economic Consortium (NEOTEC) seminar on the “Foreign Corrupt Practices Act and International Due Diligence.”  The event will take place on Tuesday, October 6, 2015 from 8:30 a.m. – Noon, at Corporate College East, 4400 Richmond Road, Cleveland, Ohio.  He will be joined by Christopher Weiss, Global Due Diligence Consultant with The Kreller Group.

The seminar will address compliance requirements under the FCPA and recent case developments, including a summary of the U.S. Department of Justice’s recent announcement that it will focus on individual liability.  Messrs. Yormick and Weiss will also provide an overview of major antibribery laws in Brazil, Canada, and the UK, discuss the international due diligence process, and how to manage the bribery/corruption and information risks involved in doing business with foreign companies.

For more information and registration, visit

OFAC Authorizes U.S. Companies to Open Offices, Rent Space in Cuba

Today’s announcement that the Office of Foreign Assets Control (OFAC) has amended the Cuban Assets Control Regulations (CACR), 31 CFR 515, offers significant new opportunities to U.S. companies seeking greater access to the Cuban market for those transactions that are currently authorized.

To enhance and better facilitate the business opportunities U.S. companies are seeking in Cuba, OFAC is issuing a series of general licenses – authorizations without the need to apply for and obtain specific licenses from OFAC to conduct an authorized transaction.

Significantly, under § 515.573 of the CACR, OFAC is authorizing U.S. companies to establish a physical presence in Cuba to engage in authorized transactions (or those exempt from the CACR prohibitions), including: leasing office, warehouse, classroom, or retail outlet space, and securing goods and services, related to doing so, including paying rent and other expenses associated with the leased premises; marketing related to the physical presence; employing Cuban nationals in Cuba; and employing persons subject to U.S. jurisdiction, mainly U.S. citizens. In a note, the amended regulations state that employment of persons subject to U.S. jurisdiction are authorized to “engage in all transactions necessary to establish domicile in Cuba, including accessing U.S. assets, for the duration of their employment.”

The physical presence in Cuba must be related to the export of goods that are authorized under § 515.533 or § 515.559 of the CACR. These sections govern exports from the U.S to Cuba, the reexport of 100% U.S.-origin items to Cuba, the negotiation of executory contracts; and certain exports and imports by U.S.-owned or -controlled foreign firms, respectively. Notably, the amendment requires a physical presence in Cuba; therefore, a so-called virtual office or post office box used frequently when entering new markets are not authorized.

In addition, OFAC is issuing a General License for travel that is incident to the export or reexport of authorized items for conducting “market research, commercial marketing, sales negotiation, accompanied delivery, installation, or servicing in Cuba” as long as the travel does not allow for recreational time in the schedule. Therefore, spending the weekend sightseeing or strolling the Malecón before a week of scheduled sales and business meetings or the installation of exported parts and equipment, remain prohibited.

Several other amendments to the CACR have been announced and may be the subject of future client alerts. Of course, authorization from OFAC does not affect Cuban laws and regulations that must be met in order to conduct business in Cuba.

For more information and guidance regarding the Cuban Assets Control Regulations or other sanctions programs administered and enforced by OFAC, please contact Jon P. Yormick, Attorney and Counsellor at Law, or by calling +1.866.967.6425 (Toll free in Canada & U.S.) or + (mobile). 

Iran Nuclear Deal Offers Greater Opportunities for Aircraft Parts and Services Exports

The recently announced Joint Comprehensive Plan of Action (JCPOA) negotiated between the U.S., the other permanent members of the UN Security Council (China, France, Russia, and the UK), plus Germany and the High Representative of the European Union, and Iran will offer U.S. companies expanded opportunities to export aircraft items and services to Iran, but with restrictions.

Since January 2014, under prior versions of the JCPOA and extensions of it, the Office of Foreign Assets Control (OFAC) has had a favorable licensing policy for spare parts to ensure the safe operation of Iranian commercial passenger aircraft and associated services and safety related inspections and repairs. This licensing policy extends to U.S. companies (including U.S.-owned or -controlled foreign entities), and parties involved in the export of U.S.-origin goods. Under this licensing policy, a specific license application can be submitted to OFAC for consideration on a case-by-case basis.

Under the JCPOA, the U.S. has agreed generally to issue licenses that will allow U.S. companies to (i) export, re-export, sell, lease or transfer to Iran commercial passenger aircraft for an exclusively civil aviation end-use; (ii) export, re-export, sell, lease or transfer to Iran spare parts and components for commercial passenger aircraft; and (iii) provide associated services, including warranty, maintenance and repair services and safety-related inspections, provided the licensed items and services are used exclusively for commercial passenger aviation.

OFAC has authority to issue both specific and general licenses. A general license is essentially a “blanket” authorization to transact business under the terms and conditions set out in the general license. A specific license is issued for a particular transaction or series of transactions. The JCPOA does not indicate whether a general license will be issued with respect to these commercial passenger aircraft items and services. Therefore, unless and until a general license is issued, U.S. parties seeking new opportunities under the JCPOA will be required to apply for a specific license from OFAC.

Nonetheless, this development provides greater certainty that opportunities to supply commercial passenger aircraft items and services to Iran will exist into the future and U.S. companies will not have to await the announcement of an extension of temporary Iran sanctions relief, as was the case before the JCPOA.

For assistance with understanding and complying with the JCPOA, Iran sanctions, other economic sanctions laws, regulations, and Executive Orders, as well as representation before OFAC in investigations, civil penalty, and voluntary self-disclosures, please contact Jon P. Yormick, Attorney and Counsellor at Law, or by calling +1.866.967.6425 (Toll free in Canada & U.S.) or + (mobile). 

SMEs Facing Customs Negligence Penalties may Benefit from SBREFA


Unlike many other federal laws, small and midsize enterprises (“SMEs”) that import into the U.S. are not exempt from compliance with customs laws. The cornerstone of customs law is the Customs Modernization Act of 1993 (the “Mod Act”) which introduced the principle of “reasonable care.” Under the Mod Act, importers must exercise “reasonable care” when introducing or entering merchandise into the commerce of the U.S. or are attempting to do so. “Reasonable care” is not defined in the Mod Act, but is connected to the customs penalty statute, codified at 19 U.S.C. § 1592 (“Section 592”).

In general, under Section 592, no person (individuals and entities) by fraud, gross negligence, or negligence may enter or introduce (or attempt to do so) merchandise into U.S. commerce by making a material, false statement or material omission, whether oral or written in a document or electronically transmitted. The law also prohibits aiding or abetting others in violating the first subpart of the law summarized above. Violations of Section 592 are subject to monetary penalties that, depending on the level of culpability, can range from a maximum of 2 times the loss of duty (negligence) to 4 times the loss of duties (gross negligence) to 2 times the domestic value of the imported merchandise (fraud). Like many of its sister agencies, U.S. Customs and Border Protection (“CBP”) has significantly increased its enforcement efforts and is oftentimes issuing penalties regardless of a company’s size, revenue, or ability to pay.

For SMEs, a significant Customs penalty (or proposed penalty) can be a “bet the company” event, threatening the company’s viability and the livelihood of its employees, many of who may not be involved in the company’s importing practices at all. For those SMEs, SBREFA may offer some relief.

In March 1996, the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”) was enacted. A section of the law requires U.S. Government agencies, including CBP, to establish a policy or program that reduces or waives civil penalties for violations of law or regulation by a small business, under certain circumstances. In May 1997, CBP’s legacy agency, the U.S. Customs Service, issued its Policy Statement Regarding Violations of 19 U.S.C. § 1592 by Small Entities (T.D. 97 – 46), setting forth the circumstances and procedures to waive the assessment of a Section 592 civil penalty for violations committed by small entities. These guidelines provide for a reduction in the initial assessment of a Section 592 civil penalty and a reduction in the ultimate penalty amount found to be due when certain mitigating factors exist.

Potential relief under SBREFA is available to small businesses, as defined under the laws governing the U.S. Small Business Administration (“SBA”). Generally, businesses with up to 500 employees may be eligible. An alleged violator has the burden of establishing to CBP that it is a small entity and that all of the following facts exist: “(1) the small entity has taken corrective action within a reasonable correction period, including the payment of all duties, fees and taxes owed as a result of the violation within 30 days of the determination of the amount owed; (2) the small entity has not been subject to other enforcement actions by Customs; (3) the violation did not involve criminal or willful conduct, and did not involve fraud or gross negligence; (4) the violation did not pose a serious health, safety or environmental threat, and (5) the violation occurred despite the small entity’s good faith effort to comply with the law.”

SMEs that are alleged to have violated Section 592 must provide evidence that they are independently owned and operated; are not dominant in their field of operation; provide copies of tax returns for the past 3 years and a current audited financial statement; and show their average number of employees over the previous 12 months.

CBP states that its SBREFA policy does not limit the U.S. Government’s right to initiate a civil enforcement action in the U.S. Court of International Trade to collect all duties, penalties, fees, and taxes due, limit the penalty amount that the Government may seek in a de novo trial in the CIT, or confer any substantive rights on the alleged violator in such a penalty and duties payment enforcement action.

CBP’s policy under SBREFA is not a “free pass” for SMEs facing a Customs negligence level penalty under Section 592. The proper circumstances must exist and the evidence must establish each element under the policy. For instance a 5-person company and its owners facing a $1.3M fraud penalty for an alleged “double invoicing” scheme resulting in $54,000 in lost duties cannot rely on SBREFA for relief from a potential business-ending penalty in the Port of Cleveland, but a 50 employee company facing a $1.7M negligence level in the Port of Miami arising from failure to properly file entries as subject to and submitting payment of antidumping and countervailing duties totaling more than $1M may rely on SBREFA for potential relief. The circumstances of each Customs Section 592 penalty case must be evaluated on a case-by-case basis to determine whether an SME can benefit under SBREFA. SMEs and their customs counsel who are familiar with CBP’s policy under SBREFA for Section 592 penalties is certainly helpful, but SMEs exercising “reasonable care” when importing have the best defense against alleged violations.

For assistance with understanding and complying with U.S. Customs laws and regulations, as well as representation before CBP in investigations, civil penalties, prior disclosures and other matters, please contact Jon P. Yormick, Attorney and Counsellor at Law, or by calling +1.866.967.6425 (Toll free in Canada & U.S.) or +1.216.928.3474. 

Gazprom, Lukoil, Other Russian Energy and Defense Companies Targeted in Latest Round of U.S. Export Controls and Ukraine-related Sanctions

Last Friday, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) dramatically increased targeted economic sanctions and export controls against several Russian energy and defense companies, including Gazprom OAO, the largest gas extraction company in the world, and privately-owned petroleum company, Lukoil.  The BIS action is in addition to the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) issuing new Ukraine-related economic sanctions against Russia’s financial services, energy, and defense sectors, also announced on Friday.

BIS added the following major energy sector companies to the Entity List:

  • Gazprom OAO; Gazpromneft; Lukoil, OAO; Rosneft; and Surgutneftegas.

BIS maintains the Entity List to impose a specific license requirement for the export, reexport or foreign transfer of items subject to the Export Administration Regulations (EAR) on those parties – businesses, research institutions, government and private organizations, and individuals – named on the list.  These license requirements are in addition to any other requirements and restrictions imposed elsewhere in the EAR.  Often, the stated License Review Policy for parties on the Entity List is “Presumption of denial,” although certain parties have a stated License Review Policy of determining a license application on a “Case-by-case” basis.  Currently, the License Review Policy for nearly every Russian party on the Entity List is Presumption of Denial.  This License Review Policy applies to the newly added parties.

The five (5) Russian energy sector companies added to the Entity List are subject to a license requirement when the exporter, reexporter or transferor knows those items will be used directly or indirectly in:

  • exploration for, or production from, deepwater, Arctic offshore, or shale projects in Russia. License applications for such transactions will be reviewed with a presumption of denial when for use directly or indirectly for exploration or production from deepwater, Arctic offshore, or shale projects in Russia that have the potential to produce oil.

Notably, it appears that licenses for natural gas projects will be reviewed on a case-by-case basis; therefore, exporters, reexporters, and parties seeking in-country transfers to the listed companies should be sure to obtain specific end-use information and document the stated end-use for potential licensing application purposes.   It should be further noted that this latest action is in addition to and does not replace export controls imposed by BIS on August 1 that designated certain items used in used in Russia’s energy sector, including exploration and production from deepwater, Artic offshore, and shale projects.  In its 1 August rule, BIS designated those items by specific Schedule B (export classification) numbers and other by the Export Commodity Control Number (ECCN).  A prior post explains those controls,

The Russian defense sector parties added to the Entity List include:

  • Almaz-Antey Air Defense Concern Main System Design Bureau, JSC; Tikhomirov Scientific Research Institute of Instrument Design; Mytishchinski Mashinostroitelny Zavod, OAO; Kalinin Machine Plant, JSC; and Dolgoprudny Research Production Enterprise.

Similar export controls as those imposed on the energy sector companies apply to the defense sector companies, with a License Review Policy of “Presumption of Denial.”

BIS and OFAC action continue to be largely coordinated.  OFAC updated the Sectoral Sanctions Identifications (SSI) List by adding Russian energy sector and financial services companies (and other names by which the companies operate or are known), AK Transneft OAO, Lukoil OAO, OJSC Gazprom Neft, Gazprom OAO, Rostec, Sberbank of Russia, Surgutneftgas, Bank of Moscow, as well as other financial services companies.  Additionally, OFAC added each of the defense sector parties to the SSI List that BIS placed on the Entity List.

For assistance with understanding and complying with the latest BIS action, Ukraine-related and other economic sanctions laws, regulations, and Executive Orders, as well as representation before BIS and OFAC in investigations, civil penalty, and voluntary self-disclosures, please contact Jon P. Yormick, Attorney and Counsellor at Law, or by calling +1.866.967.6425 (Toll free in Canada & U.S.) or + (mobile). 


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