I. Export Laws at a Glance
Most U.S. companies are aware at least generally that U.S. export laws regulate activities such as the shipment of tangible products out of the country and that certain countries are subject to strict economic sanctions. But many companies are unaware of the actual breadth and complexity of U.S. export laws and regulations and what impact those laws have on their business — the result being that many companies do not even know that they are in a legal minefield until it is too late.
The problem that many companies run into is that, though U.S. export laws were intended to focus on the export of sensitive goods to hostile countries and keeping potentially dangerous items out of the hands of persons intent on harming the U.S., the regulations that implement these laws — the very dense and complicated Export Administration Regulations (“EAR”) enforced by the Commerce Department — cover virtually every commercial good and technology originating in the U.S. Additionally, as explained below, the EAR cover much more than the shipment of goods from the U.S. to a foreign country. Rather, the EAR cover the re-export of U.S.-origin goods from one foreign country to another, as well as the release of technology to a foreign national located in the U.S. When overlaid with dozens of stand-alone economic sanctions programs enforced by the Treasury Department, such as the U.S. embargoes of Iran and Cuba, these laws and regulations come together to form a complicated web that effects virtually every U.S. company that does business overseas or that has a product for which there is a market overseas.
When these laws and regulations are violated, the sanctions can be severe. At a minimum, goods can be returned or seized by U.S. or foreign customs officials. More ominously, huge fines (up to twice the value of the transaction) can be imposed, willful violations can result in significant jail time for individuals, and resulting internal investigations and/or government investigations can be burdensome, distracting, very expensive, and cause serious reputational harm to a company.