Archive | September 2013

Sales Department Wake-up Call: Costly Antiboycott Violations Lurk in Documents and Communications

Violations of the U.S. Antiboycott sections of the Export Administration Regulations (EAR) tend to not get much attention compared to other violations of the EAR, such as those involving evasion, acting with knowledge, or aiding and abetting.  Antiboycott violations tend to lead to fewer civil penalty settlements with the Office of Antiboycott Compliance (OAC), Bureau of Industry and Security, U.S. Department of Commerce (BIS). When settlements are reported, they tend to be relatively minimal, but that might be changing in the wake of 2 settlements in the last several days.

In general, the OAC explains that the Antiboycott regulations “prohibit U.S. companies from furthering or supporting the boycott of Israel sponsored by the Arab League, and certain other countries, including complying with certain requests for information designed to verify compliance with the boycott.”  Sales forces of U.S. companies that are well-trained in export control compliance know that complying with these requests might be prohibited under the EAR and just the request to comply may be reportable to BIS.

The June 7, 2013 Proposed Charging Letter to the Director of Sales & Marketing Operations at one of the companies that recently settled its alleged Antiboycott violations seems to show that the sales teams (and maybe the Credit Department) at some  companies might not be knowledgeable enough about the Antiboycott regulations and compliance with them.  The first case involved a $32,000 settlement with the OAC on 16 violations occurring between 2009-11 – one violation of furnishing information about business relationships with boycotted countries or blacklisted persons and 15 violations of failing to report the receipt of requests to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S. aka Israel.  The company was alleged to be involved with selling or transferring goods or services from the U.S. to Bahrain, Oman, Qatar, and the UAE, all of which are generally friendly to the U.S. as well.

A table attached to the Proposed Charging Letter shows that the company provided information in a transport certificate for Oman stating “…the ship is permitted to enter Port Sultan Qaboos, in accordance with the Laws of Sultanate of Oman.”  The company failed to report boycott compliance requests from Bahrain and Oman found in various transaction documents (possibly emails) and letters of credit.  The requests included requests to ensure that the company “Delete all products, manufactured in Israel as they are banned in Bahrain,” or noting that “All Produce of Israel are Banned” and that the shipping company or agent was to issue a certificate that the ship was permitted to enter Muscat or Sultan Qaboos.

The second settlement with OAC involved 63 violations of the Antiboycott regulations – 5 for furnishing information and 58 for failing to report requests to comply with the boycott. This case was settled for $56,000.  The 5 violations of furnishing information arose from emails and invoices, each confirming certain parts sold to a UAE party were not made in Israel.  Additionally, 57 sales orders from the UAE and one from Malaysia each requested that the U.S. company cancel portions of the order because parts originated from Israel, requested substitute parts, confirm that parts were not made in Israel, of otherwise made clear that Israeli-origin products were prohibited.

As with all civil penalty settlements that are released to the public, these recent settlements with the OAC should be a “wake up call” for U.S. companies doing business in the Middle East and in other countries that support the Arab League boycott against Israel.  The failure to train the sales and credit teams on identifying boycott requests, properly analyzing those requests for potential reporting to the OAC and complying with the U.S. Antiboycott regulations can be costly in terms of penalties and reputational harm.

For assistance with understanding and complying with the Antiboycott regulations, other provisions of the Export Administration Regulations (EAR) or other export controls and economic sanctions, as well as representation before BIS in investigations, civil penalty, and voluntary self-disclosure matters, please contact Jon P. Yormick, Esq., jon@yormicklaw.com or by calling +1.866.967.6425 (Toll free in Canada & U.S.) or +1.216.928.3474.

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Mexican Attorney Joins Firm as Counsel in Buffalo

Ms. Brenda A. Cisneros Vilchis has joined the Law Offices of Jon P. Yormick Co. LPA as Counsel in the firm’s Buffalo office.  Ms. Cisneros is licensed to practice law in Mexico and is awaiting admission to the bar in New York State.

Ms. Cisneros is a native of Monterrey, Mexico and earned her LL.M. from SUNY Buffalo Law School, where her classmates included students from Canada, Colombia, India, South Korea, and Ukraine.  The LL.M. program is designed for practicing lawyers who hold a law degree from outside the U.S. and wish to broaden their skills and knowledge by learning more about the U.S. legal system.   Ms. Cisneros earned her law degree from Facultad Libre de Derecho de Monterrey, A.C. and she also holds a Masters in Banking and Finance from Universidad de Alcala de Henares in Madrid, Spain.

“My international law practice assists private and publicly-traded companies on a wide-range of matters.  Brenda’s addition in Buffalo will help me to better serve middle market clients in Upstate New York and Ontario,” said Jon Yormick, founder of the international business law firm, based in Cleveland.  The firm also has an affiliation with the Mexican law firm Boutique Legal Internacional, based in Chihuahua, with an office in Ciudad Juárez.   “As more U.S. and Canadian companies focus attention on Mexico as a growing market and manufacturing location for sectors such as aerospace, Brenda and our affiliate firm will be able to serve the increasing needs of those companies,” added Yormick.     

Ms. Cisneros will be advising U.S. and Canadian clients on doing business in Mexico with private and state-owned companies and throughout Latin America.  She will also work with Boutique Legal Internacional to assist companies seeking to expand in the Mexican market, ensuring that companies with operations in Mexico are complying with customs and tax regulations, and maximizing the benefits of the maquiladora program, IMMEX.  Ms. Cisneros’s practice also includes advising foreign clients on U.S. business formation, drafting, reviewing, and negotiating international commercial agreements, and general corporate law.   

For assistance, Ms. Cisneros can be reached at bcisneros@yormicklaw.com , Toll free:  +1.866.967.6425 (Canada & U.S.) or Mobile: +1.716.930.0594.