Last week the Trump administration announced new Iran-related sanctions imposed against 18 Iranian entities and individuals. The sanctions are the administration’s response to Iran’s ballistic missile program and destabilizing actions in the region.

The actions of the administration were taken pursuant to Executive Order (E.O.) 13382, which targets proliferators of weapons of mass destruction and their means of delivery by freezing the assets of those proliferators, as well as E.O. 13581, which blocks the property of transnational criminal organizations.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) placed sanctions on individuals and entities for their support of the Iranian military and the Islamic Revolutionary Guard Corps, and for engaging in international hacking efforts. The U.S. Department of State placed sanctions on entities for their involvement in ballistic missile research and development for the Iranian government.

These sanctions were announced only a day after the Trump administration recertified Iran’s compliance with the Joint Comprehensive Plan of Action (JCPOA). The JCPOA is a 2015 nuclear deal that was agreed to by the P5+1 (China, France, Germany, Russia, the United Kingdom, and the U.S.), the European Union (EU), and Iran, to ensure a peaceful nuclear program in Iran. The JCPOA offers Iran sanctions relief if it continues to curb its nuclear program and follow the timeline of requirements set forth in the JCPOA.

The JCPOA states that its participants anticipate that the “full implementation of this JCPOA will positively contribute to regional and international peace and security.” However, the U.S. believes that the other actions taken by Iran undermine the positive contributions and goals of the JCPOA to bring about peace and security in the Middle East.

These new sanctions mean that Americans are prevented from doing business with these newly sanctioned entities and individuals. It also means that any assets these entities and individuals have in the U.S. will be frozen.

In a press release issued in connection with the announcement of the sanctions, the State Department also called upon Iran to release Baquer Namazi, Siamak Namazi, and Xiyue Wang, all of whom are U.S. citizens detained by Iran.

Despite the announcement of the new sanctions, the U.S. is still committed to complying with its commitments under the JCPOA, and Iran will continue to receive the same sanctions relief it received under former President Obama.

Zachary Feldman writes:

Model of an atom
Copyright: Yulia Glam / 123RF Stock Photo

What Is the NRC and Who Does It Regulate?

For those corporations that create, sell, and distribute goods with traces of radioactive materials, the United States Nuclear Regulatory Commission (NRC) is the governing agency. Smoke detectors, clocks, fertilizer, lanterns, and even glass can be subject to regulation depending on the chemical composition of the items.

Congress created the NRC as an independent agency in 1974 to ensure the safe use of radioactive materials for beneficial civilian purposes while protecting people and the environment. The companies that sell regulated products are designated licensees under the agency, and their facilities are consistently inspected to ensure compliance with NRC requirements.

Any allegations of wrongdoing are thoroughly investigated and reported through a comprehensive procedure within the agency. The allegation is vetted through a series of steps and ultimately results in a 90-day investigation phase, concluding with a closure report addressing each specific allegation of wrongdoing.

The NRC’s assigned Special Agent for a given case conducts an investigation looking for both criminal and regulatory law violations, and the more information that the Special Agent has to work with, the easier his or her job becomes. If the NRC finds wrongdoing outside the scope of its regulations, the NRC is permitted to refer the issue to the appropriate governing body.

The NRC’s investigative reach proved useful in the case In the Matter of the Shaw Grp. Inc.[1] In this case the defendant company moved to quash a subpoena for confidential information by the NRC, and it was denied. The Commissioner held that the associated concerns about revealing confidential company information were outweighed by the NRC’s obligation to conduct investigations to ensure nuclear safety. This means that in the world of regulating radioactive materials, companies have an increased ability to learn information about potentially infringing companies when they go through the NRC.

Why Is This Important?

When a company operating under an NRC license suspects that its product is wrongfully advertised, sold, and/or distributed by another person or company, it would be a prudent first step to file an allegation with the NRC. There are substantial costs associated with NRC regulation compliance, and it would be to a company’s benefit to monitor where and how its products are sold. An NRC investigation could help bring some of this information to light.

When an investigation substantiates misconduct, the alleging company or persons could additionally have a case for copyright or trademark infringement – two causes of action the NRC does not handle, but which are nonetheless viable.

Working with a law firm can be helpful when navigating the allegation filing process through the NRC. In order to amass the necessary evidence and support for the NRC to conduct its full-fledged investigation, companies can employ attorneys to gather as much information as possible to prepare preliminary memorandums of law. By outlining the company’s grievances and reasons for believing their validity, a company is effectively beginning and supporting a successful investigation by the government agency.

[1] See In the Matter of the Shaw Grp. Inc., Nuclear Reg. Rep. (CCH) ¶ 31672 (N.R.C. Apr. 2, 2013).


Zachary Feldman is a summer associate in the firm’s New York office.

Almost one year ago, the Department of Justice (DOJ) announced that Norwegian Shipping company Wallenius Wilhelmsen Logistics AS (WWL) had agreed to pay a $98.9 million fine for its role in a conspiracy to control prices for roll-on, roll-off cargo (such as cars, trucks, and agricultural equipment) shipped to and from the United States.  At the time, the DOJ acknowledged that, in addition to the fine, WWL was cooperating in ongoing investigations and affirmed the Department’s commitment to holding “companies and executives” accountable.

Last week, the DOJ announced that the indictment against three current and former executives of WWL subsidiaries had been unsealed and that the prosecutions of these individuals were proceeding.  The indictment – presented to the grand jury in November 2016 – alleges that the individuals attended meetings and engaged in communications in which executives from several large shipping companies allocated customers and routes by agreeing to the amounts that each company would bid for certain contracts.

The DOJ also announced that these prosecutions represented three of eleven executives who have been charged in connection with this conspiracy. Four executives had plead guilty and were sentenced to prison terms. The rest are considered “international fugitives.”  Further, the DOJ again made clear that it remains committed to prosecuting individuals as well as corporations, stating: “WWL has pleaded guilty. Now we are working to ensure that its executives who conspired to suppress competition at the expense of American consumers will be held accountable.”

It appears that the DOJ is following through with the directives of the September 2015 Yates Memo and is no longer satisfied by large corporate fines.  The fact that four executives have been sentenced to prison, three are being actively prosecuted, and five more are considered fugitives — all almost a year after the $98.9 million fine headline — shows that the DOJ is genuinely re-focused on individual accountability.  Accordingly, compliance and whistle-blower programs must have new found importance not only to corporations, but to the individual officers, directors, and executives who may be held accountable for corporate malfeasance.

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On June 16, 2016, Teva Pharmaceutical’s Russian subsidiary (Teva LLC) pled guilty to one count of conspiring to violate the Foreign Corrupt Practices Act (FCPA).  Judge Kathleen M. Williams of the United States District Court for the Southern District of Florida hesitated, however, in entering a final judgment under which Teva LLC would pay no fine.  While there is no doubt that Teva LLC’s parent entity will pay over a half-billion dollars for violations of the FCPA, the proposed sentence for Teva LLC did not include any obligation to pay fines or civil claims.

The claims against Teva LLC stem from payments made to a Russian official who also ran a pharmaceutical distribution company.  Between 2010 and 2013, Teva LLC offered the official’s company favorable pricing terms in exchange for his push to have Russian government entities purchase more Teva drugs for the national health care system.  Notably, Teva LLC’s transactions passed internal FCPA checks because Teva LLC omitted key facts such as the official’s ownership of the distribution company and a Russian investigation of possible corruption within the distribution company.  The facts of Teva LLC’s violations are not what raise questions at this phase.

Rather, potential cause for concern in the contemporaneous settlement of numerous FCPA against Teva Pharmaceuticals and its subsidiaries in Europe and Mexico.  Collectively, Teva Pharmaceuticals and federal prosecutors have agreed to settle all of the outstanding claims in exchange for (i) a $238 million criminal penalty, (ii) a deferred prosecution agreement and (iii) $236 million to settle civil claims.  Significantly, while Teva LLC agreed to plead guilty as part of the settlement, Teva Pharmaceuticals has been given a deferred prosecution agreement and is not admitting guilt. Teva Pharmaceuticals, however, will pay the criminal penalty and civil claims.  As a result, Judge Williams was presented with the prospect of a guilty plea accompanied by no punishment.  In particular, the Court expressed concern regarding what would happen if Teva Pharmaceuticals did not pay its fine and final judgment had already been entered against Teva LLC.

While there is no concern that the Court and counsel will work out the nuts and bolts of the the overall settlement and component pleas in the near future, the potential complexities of FCPA litigation should give practitioners and their clients pause.  Further, with directives in place focused on individual liability and strict parameters on cooperation credit, counsel must keep an eye on the broader liability landscape because, ultimately, the Court will demand that violators are held responsible.

 

On Thursday, the Senate passed legislation to impose additional sanctions on Russia. The bill passed by an overwhelming majority, 98-2, with only Senator Rand Paul and Senator Bernie Sanders voting against it.

In addition to the Russian sanctions, Iran sanctions, and the requirement that Congress review any effort by the Trump administration to loosen sanctions against Russia, the bill also includes a reassertion of the United States’ commitment to the North Atlantic Treaty Organization’s Article 5 charter provision that states that an attack on one member of NATO is considered an attack on all members.

The bill will now go to the House of Representatives, where the fate of the bill is less certain. Although the White House has signaled that it wants to improve relations with Russia, it has not yet said whether President Trump would sign the bill into law.

North America from space
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Public comment on NAFTA renegotiations has been extended until midnight tonight ET, according to an Alert by Nevena Simidjiyska published on June 13:

The process of renegotiating the North American Free Trade Agreement (NAFTA) with Mexico and Canada officially began on May 18 when the Office of the U.S. Trade Representative (USTR) notified Congress, triggering a 90-day period during which the administration will consult with Congress before NAFTA negotiations can begin. The USTR requested public comments on its negotiation of NAFTA, which were initially due by June 12. The USTR has extended its deadline to June 14 at 11:59 p.m. ET.

After originally calling for a complete withdrawal from NAFTA, the administration displayed a more lenient position in its announcement and notice to Congress. The administration continued to criticize NAFTA’s provisions on labor and environmental protection, digital trade, intellectual property protection, and state-owned enterprises, however, it called for modifying certain aspects of the agreement, rather than comprehensive revisions.

Canada and Mexico have shown a willingness to renegotiate portions of NAFTA, provided that the majority of the Agreement stays intact.  The two countries are likely to push back on certain topics, including the administration’s plan to increase local content for country-of-origin calculations, including that of automobiles, reduction in Canada’s protective measures of its dairy industry, and easing of Mexico’s restrictive policy on foreign investment in its energy sector.

The USTR requested public comment on its negotiation of NAFTA on a broad number of topics listed at the end of this article.  Parties may also testify at an open hearing scheduled for 9 a.m. on June 27, 2017 held in the Main Hearing Room of the U.S. International Trade Commission in Washington, D.C. Written comments and requests to testify must be submitted to USTR.  Although the deadline for submission was originally June 12, the deadline has been extended to June 14 at 11:59 pm ET.

To read Nevena’s full update on the USTR’s call for public comment on NAFTA, including topics open for public comment, please visit the Fox Rothschild website.

 

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On Monday, U.S. senators reached an agreement regarding imposing new sanctions against Russia. The agreement will be filed as an amendment to a larger Iran sanctions bill that is nearing passage in the Senate.

The sanctions are meant to punish Russia for several Russian actions. The sanctions will punish Russia for the alleged meddling in the U.S. 2016 presidential election, its annexation of Ukraine’s Crimea region, and its support of, and supplying weapons to, the government of Syria.

The new measure will also codify existing sanctions and place new economic restrictions on Russia. It will allow new sanctions on Russian mining, metals, shipping and railway industries.

The proposed legislation is backed by both Republicans and Democrats, and it is expected to pass the Senate. It could come to a vote as early as later this week. To pass into law, the legislation will also need to be approved by the House of Representatives and be signed into law by President Donald Trump.

In a statement released late Monday, top Republican and Democratic senators on the Foreign Relations Committee and the Committee on Banking, Housing and Urban Affairs said the agreement would “provide for a mandated congressional review” if the White House sought to ease penalties against Russia unilaterally.

In a letter dated May 16, 2017, the Internet Association, a trade group representing some of the largest internet companies in the country (and the world), pressed newly confirmed U.S. Trade Representative Robert Lighthizer to see their perspective on trade policies in the digital age.

Among the companies that the Internet Association represents are established giants such as Google, Amazon, and Facebook as well as those pushing the newest frontiers of Internet commerce, including Uber, Airbnb, and Dropbox.  This distinguished group of companies set forth six key principles that it asked Representative Lighthizer to consider implementing to defend and grow digital trade around the world.

First, the Internet Association calls for the creation of specific policies to clarify and support the cross-border transfers of information.  Specifically, the group highlights the need to eliminate requirements that data stored or processed in facilities located within the United States.

Second, the coalition requests that the Representative defend and promote the ‘balance’ achieved by current U.S. copyright laws.  The Internet Association cites the centrality of ‘fair use’ to web search, machine learning, data mining, and cloud technologies and notes that internet companies rely on safe harbors and liability limitations in copyright law as they push to create innovative new products and services.

Third, the Internet Association similarly lauds section 230 of the Communications Decency Act which insulates internet content host from liability for the ‘speech’ of its users.  As the letter notes, this protection, which fosters an environment of open discourse, is not realized in all countries.

Fourth, the group believes that streamlining customs procedures would foster growth in small and micro internet business who connect consumers to new goods from around the world.

Fifth, the Internet Association cautions that restrictions and outright prohibitions on access to the internet and specific digital services will negatively affect the U.S.’s strong internet economy and that the Representative should work to ensure non-discriminatory market access.

Finally, the group calls for the designation of a senior-level official to oversee digital trade matters and negotiations.

The Internet Association’s letter underscores that the internet sector of the U.S. economy is – and must remain – a focus of U.S. trade policy.  While the Internet Association represents some of the largest internet companies in the world, concerns over potential liability, customs delays, and non-discriminatory access to international markets are shared by all companies with an internet presence.  As the internet drives an ever growing sector of the U.S. economy, all companies must be ready to navigate their compliance with import and export barriers that are no longer merely physical.

Last week, the D.C. Circuit affirmed the U.S. Treasury Department’s Office of Foreign Assets Control’s (“OFAC”) wide latitude to impose Iran sanctions, but it set aside a $4.07 million penalty against car accessory seller Epsilon Electronics (“Epsilon”). The D.C. Circuit found that the agency cut too many corners in its investigation of Epsilon.

In July 2014, OFAC imposed the $4.07 million penalty on Epsilon, alleging that a series of shipments in 2012 by the company to Asra International Corporation, LLC in Dubai, United Arab Emirates (“Dubai Asra”) were destined for end-use in Iran. Sending products to Iran would violate the Iranian Transactions and Regulations. OFAC is authorized to impose civil penalties against individuals or entities who export to a third party who it has reason to know intends to send those goods to Iran.

The case dealt with the initial question of whether OFAC must prove that the goods ended up in Iran in order to hold the company liable for the breach of U.S. sanctions. The court determined that OFAC had enough evidence to support a finding that the first 34 shipments from Epsilon to Dubai Asra violated the sanctions. However, for the final five shipments, the court found that OFAC failed to explain why it discounted certain evidence and why the conclusion about the first 34 shipments applied to the last five, in light of the countervailing evidence presented. The evidence included several email exchanges between Epsilon’s sales team and Dubai Asra’s manager that indicated that the last five shipment were intended for a Dubai retail store and not Iran.

The U.S. Court of Appeals for the D.C. Circuit remanded the case to the district court, with instructions to remand the matter to OFAC for further consideration of the alleged 2012 violations relating to the final five shipments, and calculation of the total monetary penalty imposed for all liability findings. While the court found that the government does not need to show that the goods actually ended up in Iran, the court did conclude that OFAC did not adequately explain its determination that Epsilon had reason to know that the goods would end up in Iran. Because OFAC failed to justify its conclusion that Epsilon should be held liable for the last five shipments as well as the first 34, the final liability determinations were deemed capricious and arbitrary.

The decision establishes key precedents related to trade compliance. The case shows that OFAC does not need to prove that the goods actually reached the sanctioned country in order to impose penalties. Additionally, the case shows that agency enforcement actions from OFAC can be subject to judicial review. This could lead to enhanced transparency between violators and the government imposing sanctions. For more information about the case, read the opinion here.

The Senate confirmed Robert Lighthizer as the US Trade Representative (USTR) on Thursday. The USTR is a Cabinet position, and thus Lighthizer will now serve as President Trump’s top trade negotiator.

The Senate confirmed Lighthizer with support from both Republicans and Democrats. The 82-14 vote followed months of delays prior to his confirmation.

In order to serve as USTR, Congress had to first pass a waiver to confirm him. Section 141 of the Trade Act of 1974 bars anyone who has “directly represented, aided or advised a foreign entity … in any trade negotiation, or trade dispute” from serving as USTR or Deputy USTR. In the mid-1980s Lighthizer represented Brazil in a trade dispute over ethanol with the US, and in the early 1990s he represented an electronics trade group linked to the Chinese government.

The Senate Finance Committee approved a waiver of this restriction, and the waiver passed the House and Senate and was signed into law on May 5, 2017. The confirmation of Lighthizer means that the administration can now begin the formal process to begin renegotiating the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico, as well as moving forward with other trade deals.