The 15-member U.N. Security Council (the Council) imposed new sanctions on North Korea (also known as the Democratic People’s Republic of Korea or DPRK) on November 30, 2016 by unanimously approving a resolution imposing new sanctions — UN Security Council Resolution (UNSCR) 2321.

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The resolution is a clear response to North Korea carrying out its fifth and largest nuclear test so far in September 2016. The resolution tighten the sanctions adopted by the Council in March 2016 and is aimed at cutting North Korea’s hard currency that it uses to fund its prohibited weapons programs.

The sanctions impose a cap on coal exports, which is North Korea’s chief source of hard currency and constitutes about one third of North Korea’s export revenue. Pursuant to the resolution, North Korea can sell no more than 7.5 million metric tons of coal a year, or bring in no more than $400 million in sales, whichever comes first. In addition to restricting the export of coal, the resolution also bans North Korean copper, nickel, silver and zinc exports.

Two of the five permanent members of the Council, China and the United States, have been working together to pass the resolution. China is North Korea’s principal patron and coal customer. China’s permanent representative to the United Nations, Liu Jieyi, called on North Korea to halt its nuclear tests. He said the resolution demonstrated “the uniform stance of the international community.”

The U.S. Ambassador to the United Nations, Samantha Power, said that “the United States recognizes that China is working closely with us.” Power stated that “[n]o resolution in New York will likely, tomorrow, persuade Pyongyang to cease its relentless pursuit of nuclear weapons. But this resolution imposes unprecedented costs on the DPRK regime for defying this council’s demands.”

The resolution also requires countries to tell the United Nations how much North Korean coal they are buying and expands the list of banned items for import by North Korea, including luxury goods like rugs and tapestries valued over $500 and porcelain and bone china worth more than $100.

In addition to other export controls, the resolution also imposes banking restrictions and transportation restrictions. The resolution includes an expanded list of individuals and entities that are subject to travel bans and asset freezes, including North Korea’s ambassadors and envoys to Egypt, Sudan, Syria and Myanmar.

On December 2, 2016, the US Treasury Department’s Office of Foreign Assets Control announced related sanctions designations of additional individuals and entities with ties to the Government of North Korea or its nuclear and weapons proliferation efforts, and aircrafts blocked as property of a designated entity.

North Korea has been under United Nations sanctions since 2006 over its nuclear and ballistic missile tests. For United States businesses the resolution does not significantly change the status quo, as US law already prohibits nearly all activity involving North Korea. The resolution will primarily impact areas where North Korea has a strong international presence, including banking, transportation and commodities trade.

UK-Based biopharmaceutical company AstraZeneca agreed to pay the U.S. Securities and Exchange Commission (SEC) $5.5 million to settle claims that its Chinese and Russian subsidiaries had made improper payments to state-controlled health care providers in violation of the Foreign Corrupt Practices Act (FCPA).

In an order released earlier this week, the SEC outlined both the claims against AstraZeneca and the company’s cooperative and remedial efforts which were taken into account as part of the settlement.

Between 2007 and 2010 in China, sales staff made payments and gave gifts to physicians and administrators to ensure that state-owned health care providers would purchase AstraZeneca products. In one scheme described in the SEC Order, Chinese sales staff paid individuals for their appearance at fabricated speaking engagements. The conduct in Russia occurred between 2005 and 2010 and similarly paid members of state-owned health care providers to use AstraZeneca products.

AstraZeneca did not self-report its violations; however, it was still able to work toward a settlement based on its cooperation with the SEC. The SEC specifically noted that AstraZeneca disclosed documents and information collected during its own internal investigation including translations of key documents. The SEC also cited AstraZeneca’s remedial efforts including creation of a centralized compliance program with key compliance individuals placed in high-risk markets. AstraZeneca also took appropriate steps with regard to the employees involved ranging from trainings and reassignment to lower-risk areas of responsibility to voluntary separations and dismissals.

Yet again, full and complete cooperation appears to be the key to forging settlement of FCPA claims. Even after failing to self-report, the SEC lauded AstraZeneca’s cooperation and the information that the company’s internal investigation provided which would not have been discernable without the company’s assistance. In addition, the SEC recounted the numerous remedial steps that AstraZeneca undertook. If a company does not have the capacity to guide its own internal investigation or plan and implement remedial measures, it should contact a law firm that has the knowledge and resources to help the company make meaningful contributions to the investigation of any claims that arise.

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.

U.S. President Barack Obama announced that the U.S. would fully lift a ban on the sale of lethal arms and military equipment to Vietnam. President Obama announced this change in U.S. policy, which has been in place for about fifty years, during his visit to Vietnam on Monday, May 23, 2016. At a joint news conference with Vietnamese President Tran Dai Quang, President Obama said this move would remove a lingering “vestige of the Cold War” and complete what has been a lengthy process towards normalization with Vietnam, which began in 1995.

Despite the complete embargo lift, sales with Vietnam will still need to meet strict trade requirements. The sale of arms will still depend on Vietnam’s human rights commitments and will be made on a case-by-case basis.

Reporters suspect that this measure is a response to the activity of China in the South China Sea. China has claimed several contested reefs in the South China Sea and constructed military capable airfields. Critics claim that the decision to lift the arms ban suggests that the U.S. is more concerned with China’s activity in the South China Sea than it is with Vietnam’s record of improving human rights in Vietnam. However, President Obama said the arms lift was not related to China.

The trip to Vietnam is meant to strengthen the bond between the U.S. and Vietnam. Both imports and exports between the two countries have steadily increased in recent years. Security experts see the U.S. decision to lift the arms embargo as an effort to form a bond with Vietnam as a trade and security partner in that region.

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.S. Securities and Exchange Commission has agreed to a $28 million settlement with software producer PTC, Inc. following allegations of bribes paid to Chinese officials between 2006 and 2011 in violation of the Foreign Corrupt Practice Act (FCPA).

In the administrative proceeding (No. 3-17118), the SEC alleged that two of PTC’s Chinese subsidiaries bribed Chinese officials by paying for trips to the United States.  Although the trips were ostensibly for training purposes, nearly $1.5 million dollars were spent on trips which included touring and golfing across the United States.

The settlement represents $14.5 million in fines and $13.6 million in disgorgement ($11.8 million plus $1.8 million in interest) to be paid by PTC.  Although the penalty is significant, the toll may have been much greater.  Significantly, PTC publicly reported the potential FCPA violations in 2011 and, since then, has cooperated with investigators and made significant improvements to its own compliance protocols.

The SEC has also agreed to defer the prosecution of Yu Kai Yuan, a former employee of one of PTC’s Chinese subsidiaries, based on his cooperation in the investigation.  This is potentially significant in light of the recent memorandum of Assistant Attorney General Sally Quillian Yates (the “Yates Memo“), which announced a new focus among federal agencies on holding individuals accountable for corporate acts.  Following the Yates Memo, there has been concern that individuals would be unable to avoid personal liability as part of a large-scale corporate settlement.  The SEC’s agreement with Mr. Yuan may signify that personal cooperation may still help individuals avoid the full measure of potential penalties.

Nevertheless, the penalties PTC is to pay are significant and come despite its efforts to cooperate with the investigation and improve their own compliance protocols.  Compliance programs that engage not only U.S.-based employees but also foreign subsidiaries are an absolute necessity for any company dealing in foreign markets.  Moreover, FCPA compliance programs must be tailored to anticipate the social and cultural norms in a company’s target market and, perhaps most significantly, must be meaningfully implemented across your organization.

 

The Story

Asia-Pacific Region
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After many years of negotiations, the 12 countries making up the Trans-Pacific Partnership (TPP) (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam) finally reached a trade agreement on October 4, 2015.  Note that the deal still needs to be approved by Congress (after the President gives Congress a 90 day advance notice that he intends to sign it).

Why Does it Matter?

The deal opens up trade and promotes regional integration among 12 countries that collectively produce almost half of the world’s products and services. This can have a huge impact on the global economy.

The goals of the deal are to promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty; and promote transparency, good governance, and enhanced labor and environmental protections.  Geopolitical reasons of establishing a strong partnership in Asia to challenge China’s stronghold in the region is also certainly a motivating factor.

Key Features Of The Deal

  1. Comprehensive market access. The TPP eliminates or reduces tariff and non-tariff barriers across substantially all trade in goods and services, to create new opportunities and benefits for businesses, workers, and consumers.
  2. Regional approach to commitments. The TPP facilitates the development of production and supply chains, and seamless trade, enhancing efficiency and supporting the goal of creating and supporting jobs, raising living standards, enhancing conservation efforts, and facilitating cross-border integration, as well as opening domestic markets.
  3. Addressing new trade challenges. The TPP promotes innovation, productivity, and competitiveness by addressing new issues, including the development of the digital economy, and the role of state-owned enterprises in the global economy.
  4. Inclusive trade. The TPP includes commitments to help small- and medium-sized businesses understand the Agreement and take advantage of its opportunities.  It also includes commitments on trade capacity building, to ensure that all Parties are able to meet the commitments in the Agreement and take full advantage of its benefits.
  5. Platform for regional integration. The TPP is intended as a platform for regional economic integration and designed to include additional economies across the Asia-Pacific region.

What Does the Deal Mean for US Businesses?

  1. The deal reduces tariffs for American products traded in the TPP region and, therefore, opens up the TPP region for American products. It also makes it cheaper for American companies to purchase products from the TPP region.
  2. Expedited customs procedures for TPP members will ensure faster and easier shipment.
  3. More transparent, non-discriminatory rules for technical regulations will mean easier compliance with trade regulations for US companies.
  4. Investment in TPP countries will become easier and more transparent.
  5. E-commerce companies doing business in the TPP region will encounter fewer restrictions.