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.

Earlier today, the Department of Justice announced that construction conglomerate Odebrecht SA and its affiliate Braskem SA have pleaded guilty to their maintenance of an elaborate bribery scheme which paid out approximately $788 million in bribes to government officials around the world since 2001.

To facilitate its massive bribery scheme, Odebrecht established its “Division of Structured Operations,” which federal prosecutors dubbed the “Department of Bribery.” The Division of Structured Operations operated on its own floor and used its own communication and computer networks. Code names and secure emails were used by those requesting bribes, bribe recipients, and financial institutions to make payments out of a ‘shadow budget.’ The shadow budget, which accounted for and tracked all bribe payments in complex spreadsheets, was comprised of funds funneled by Odebrecht into off-shore entities and then back into the Division of Structure Operations.

Under their respective plea agreements, Odebrecht and Braskem agreed to pay, at least, a combined $3.5 billion in penalties.  Odebrecht agreed with the DOJ that $4.5 billion would be an appropriate criminal fine, but has claimed that is unable to pay a fine of that amount.  Accordingly, the plea agreement states that Odebrecht will pay at least $2.6 billion, however, an ongoing review of Odebrecht’s ability to pay may result in Oberbrecht paying an amount closer to $4.5 billion. Braskem will pay approximately $957 million in criminal fines.  Brazil, where both of the companies are headquartered, will receive 80% of the fines and the United States and Switzerland will each receive 10%.  Notably, Oderbrecht was credited with 25% reduction in the fine sought based on its cooperation with investigators. Braskem was credited with a 15% reduction based on its partial cooperation.

This blockbuster plea agreement highlights the growing trend of global enforcement. While few companies will ever consider implementing a bribery scheme of the magnitude Odebrecht’s, even small acts to grease the wheels create a slippery slope and companies of all sizes must take precautions — through compliance and training programs — to make sure that a culture where bribery is condoned and supported never begins to gain momentum.

The Miami Herald is reporting that the Cuban government used the Panamanian law firm Mossack Fonseca to create at least 25 corporations registered in the British Virgin Islands, Panama and the Bahamas. Mossack Fonsenca, and its clients, have come under immense scrutiny since the leak of hundreds of thousands of pages of the firm’s files, which have been come known as the “Panama Papers”, revealed elaborate tax shelters used by some of the world’s wealthiest individuals and organizations.

In a June 7, 2016 report, the Miami Herald alleges that at the Cuban government used Mossak Fonseca to set up numerous corporations and then used these off-shore entities to conduct business, including numerous exchanges of oil for Cuban goods, which was prohibited by the US embargo on Cuba. Although the Panamanian firm’s aid or involvement with the Cuban government is likely beyond the jurisdiction of US officials, the potential ramifications for US corporations who may have dealt with the alleged off-shore Cuban entities is uncertain.

Under Cuban Assets Control Regulations (31 C.F.R. Part 515), an entity can potentially avoid penalties if it is able to demonstrate that is did not willfully violate the regulations, had no reason to know or suspect that it was involved in a prohibited transaction, and the entity reported the prohibited transaction to the Office of Foreign Assets Control (OFAC) as soon as it became aware of the violation. (31 C.F.R. 515.203). It is also possible that individual transactions may have been authorized pursuant to specific licenses issued by OFAC. The critical issue, therefore, is whether any US entities knew or should have known that they were dealing with an entity connected to the Cuban government. As investigations of the Panama Papers continue, correspondence contained therein could potentially demonstrate knowledge by US companies about the Cuban connections of the off-shore entities identified in the Miami Herald report.

US companies who may have engaged the Cuban off-shore entities should be proactive and investigate what, if any, contact they may have had with these entities as self-reporting any transactions to OFAC is a necessary first step in cooperation. Depending on the size of the organization, using a third-party investigator, such a law firm, may ensure the preservation of documents and, in turn, the integrity of the investigation should an investigation by OFAC become necessary.

On June 20, 2016, U.S. President Barack Obama will deliver the keynote address at the meeting of the international trade and investment delegation. This event is being organized by the United States – India Imports Council (USIIC).

The USIIC will be taking a trade and investment delegation composed of 18 members from Gujarat, India, to the U.S.  The delegation will attend SelectUSA, a project of the U.S. Department of Commerce, where the U.S. will present its trade benefits to over 50 other countries. The goal is to promote foreign direct investment and trade in the U.S.  The delegates from Gujarat represent several business sectors, including infrastructure, mining, logistics, pharmaceuticals, automotive, and financial services.

For more information about the USIIC and the trade relationship between the U.S. and India, visit the USIIC website.

Copyright: paulprescott72 / 123RF Stock Photo
Copyright: paulprescott72 / 123RF Stock Photo

On Thursday, April 28, 2016, the United States and Sri Lanka adopted a joint plan to boost trade between the countries. U.S. Trade Representative Michael Froman and Sri Lanka Minister of Development Strategies and International Trade Malik Samarawickrama announced the deal after a meeting in Washington, D.C, under the nations’ bilateral Trade and Investment Framework Agreement.

The goal of the plan is to expand trade and encourage foreign investment. The plan also focuses on promoting business in Sri Lanka. The plan aims to make Sri Lanka’s business and trade sectors more accessible to women and to promote workers’ rights and ethical practices in the work force.

The two countries aim to achieve the goals of the plan over a five year period, and they will release their proposals for implementing the plan later this year.

The U.N. Security Council unanimously approved sanctions that will toughen penalties against North Korea. The approved resolution contains the most stringent measures ever passed against North Korea, which will undermine North Korea’s ability to raise money and secure technology and other resources for its nuclear program.

The sanctions include the following:

  • All countries are required to inspect all North Korean cargo entering or leaving that country.
  • North Korea cannot sell gold, titanium ore, vanadium ore and rare earth minerals.
  • A ban on aviation fuel exports to the country, including “kerosene-type rocket fuel.”
  • Watercraft, snowmobiles and other recreational sports equipment have been added to a ban on luxury goods.
  • North Korea cannot send martial arts experts to train police officers in foreign countries.
  • Countries are required to expel North Korean diplomats accused of illicit activities.

The U.S. administration also announced related actions by the Treasury and State Department that levied sanctions against additional individuals and entities. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated two entities and ten individuals with ties to the Government of North Korea and its nuclear and weapons proliferation efforts.  In a related action, the State Department designated three entities and two individuals for activities related to weapons of mass destruction proliferation. These designations freeze any properties the individuals or entities may have under U.S. jurisdiction and bars U.S. citizens from doing business with them.  For information on the designated individuals and entities, see OFAC’s SDN List update.

Treasury Secretary Jacob J. Lew commented on the resolution, stating: “Today the United Nations Security Council approved a historic Resolution which included key designations against North Korea, and the United States issued sanctions also targeting supporters of this repressive regime.  Together, these actions reflect a strong and unified response to North Korea’s provocative, destabilizing, and dangerous activities…. Our coordinated efforts send a clear message: the global community will not tolerate North Korea’s illicit nuclear and ballistic missile activities, and there will be serious consequences until it modifies its reckless behavior.”

The U.N. Security Council has delayed its vote on the proposed sanctions against North Korea until Wednesday, at the request of Russia.

Last week, the United States and China proposed expanded sanctions against North Korea, which include mandatory inspection of cargo leaving or entering North Korea, by sea or air. The United States and China had spent seven weeks negotiating the new sanctions in response to North Korea’s nuclear tests.

The U.N. Security Council, composed of 15 member nations, will vote on the resolutions on Wednesday. The vote was delayed after Russia invoked a procedural 24-hour review of the resolutions.  Russia has requested more time to review the lengthy text of the resolutions and consider the changes to the current sanctions.

Copyright: hypermania2 / 123RF Stock Photo
Copyright: hypermania2 / 123RF Stock Photo

The United States and China agreed on draft resolutions, which, if accepted by the United Nations Security Council, would result in increased sanctions against North Korea. The United Nations has enforced sanctions against North Korea since 2006 because of its multiple nuclear tests and rocket launches. Currently there is a U.N. embargo on arms exports to and imports from North Korea, and Pyongyang (North Korea’s capital) is banned from importing and exporting nuclear and missile technology and is not allowed to import luxury goods.

The United Nations Security Council has adopted four major resolutions since 2006 that impose and strengthen sanctions on North Korea. These resolutions are aimed at preventing North Korea from continuing to develop its nuclear weapons program, and they also call on Pyongyang to dismantle its nuclear program and refrain from ballistic missile tests.

In response to the claim in January of this year that North Korea tested a nuclear weapon, the United States and China began intense negotiations to once again strengthen sanctions against North Korea. The United States and China have reached an agreement, but to-date the text of the resolution proposed by the two countries has not been supplied to the public.  Diplomats believe that the resolutions should come before the United Nations Security Council within the coming days.

Skepticism exists as to whether the proposed new sanctions would actually curb North Korea’s nuclear program, and whether other countries would enforce the sanctions. However, if adopted, the resolutions would be legally binding.

The proposed sanctions would require countries to inspect all North Korean cargo entering or leaving a country. Additionally, 31 ships that have been identified as trafficking in illegal nuclear goods will be banned from docking in any port.  The resolutions are expected to call for the blacklisting of certain individuals and entities.  The resolutions would also prohibit countries from sending any item to North Korea that could be used by the North Korean army, like trucks that could be repurposed for military use.

Despite the new sanctions, North Korea would still be able to buy oil and sell coal and iron ore, provided that such materials are not being used to fund its nuclear weapons program, something which would be difficult to prove.

 

President Obama announced on Thursday that he would travel to Cuba in March and meet with Cuban President Raúl Castro. The two men first met face-to-face during a summit in Panama last year, but President Obama has never visited Cuba. In fact, President Obama will be the first sitting American president to visit Cuba in 88 years. The last president to visit Cuba was President Coolidge who attended the Pan American Conference in Havana in January 1928.

Recently, there has been significant communication between the two countries, including American officials traveling to Havana on Tuesday to sign a pact that will for the first time in decades allow scheduled commercial flights between the two countries. Cuban officials are also in Washington this week to discuss ways of expanding business ties between the two countries.

Despite the President’s announcement in December 2014 regarding significant changes in the U.S. policy toward Cuba to normalize relations between the two countries, the Cuba embargo remains in place. Most transactions between the United States, or persons subject to U.S. jurisdiction, and Cuba continue to be prohibited, and OFAC continues to enforce the prohibitions of the Cuban Assets Control Regulations (CACR).

Effective on January 27, 2016, there have been several changes to the trade relationship between the two countries. These changes are targeted at further engaging and empowering the Cuban people by facilitating authorized travel to Cuba; certain authorized commerce; and the flow of information to, from, and within Cuba.  For more information about the loosening of Cuban sanctions, see our earlier post here.

Copyright: maxkabakov / 123RF Stock Photo
Copyright: maxkabakov / 123RF Stock Photo

The U.S. Department of Commerce and the European Commission announced the Privacy Shield framework to replace the invalidated U.S-E.U. Safe Harbor Agreement, but the agreement has not yet been committed to paper.

The Safe Harbor Agreement between the United States and the European Union permitted the importation of personal data from the E.U. by American businesses that self-certified as complying with the E.U. data protection laws. However, the E.U. Court of Justice (EUCJ) ruled in its October 6, 2015 decision in Schrems v. Data Protection Commissioner (Case C-362/14), that the Safe Harbor failed to protect Europeans and invalidated the Safe Harbor.  After the Safe Harbor was invalidated, businesses have been unsure how to legally continue to import data from the European Union to the United States.

The Privacy Shield is a new framework intended to govern the flow of data between the U.S. and the E.U. As of now, the details are still being worked out, but the negotiators involved in creating the Privacy Shield have outlined its broad principles.  The Privacy Shield will have three main components: (1) new corporate obligations for U.S. businesses to commit to robust obligations on data processing, (2) granting E.U. citizens redress to challenge alleged misuse of their data, and (3) limitations on U.S. government access to personal data.

The Article 29 Working Party (Working Party) will need to approve the Privacy Shield before it can go forward. The Working Party is an independent and enforcement oriented advisory board composed of representatives of the national data protection authorities (DPA), the European Data Protection Supervisor (EDPS) and the European Commission. It expects to have the documents to review the new Privacy Shield by the end of February.

In the meantime, the Working Party has announced that the DPAs will not be enforcing actions until March or April against businesses that rely on the invalidated Safe Harbor while the details of how to proceed are still being worked out. The Working Party provided some assurances that during the period of review and assessment transfer mechanism such as the Standard Contractual Clauses and Binding Corporate Rules (BCRs) can still be used to transfer personal data to the U.S. The Standard Contractual Clauses are form data transfer agreements approved by the European Commission, and BCRs are internal data processing rules binding on all members of a global corporate group to permit intragroup transfers of personal data.

However, virtually all transfers of E.U. personal data to the U.S. are still at risk as there is no guarantee of how things will shape out during this critical interim time. Thus, until the Privacy Shield is finalized, much uncertainty regarding the transfer of personal data from the European Union still exists.