Dear Friends and Colleagues:
CEOs, investors, entrepreneurs, corporate attorneys – and yes, even politicians of all varieties – today’s message is that if foreign policy risk assessment isn’t already on your agenda, it’s time for a change. Recent and accelerating shifts in US trade and regulatory enforcement could pose serious threats to your financial, legal and reputational interests – even if you have ZERO involvement in cross-border activities. Not an exporter? The US government might disagree. For example, US Department of Commerce Export Administration Regulations at Section 730.4(c) explains: “The release of technology to a foreign national in the United States through such means as demonstration or oral briefing is deemed an export. Other examples of exports under the EAR include the return of foreign equipment to its country of origin after repair in the United States, shipments from a U.S. foreign trade zone, and the electronic transmission of non-public data that will be received abroad.” Different than what you expected? Perhaps you haven’t kept up with recent American U2 observation flights over disputed Indo-Pacific waters and subsequent demonstrations of China’s self-described “carrier killer” missile system. In that case, let’s hope your business doesn’t have certain connections (whether you know it or not) with any of 24 Chinese companies added to a list of restricted entities LAST WEEK – a retaliation against China’s retaliation. Seems confusing? I'm not surprised. You’ll likely discover that simply learning where your (or any) business’s goods and services (especially parts) originate – and what they do – requires slightly more than a friendly phone call with IT. Then there’s Section 889(a)(1)(B) of the John S. McCain National Defense Authorization Act (NDAA) for Fiscal Year 2019 (mostly put into effect August 13. 2020 with updates expected in September) which “prohibits executive agencies from entering into, extending or renewing, a contract with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system.” Under many circumstances, this provision – designed specifically to address alleged espionage conducted by Chinese telecom giant Huawei and its related corporations extends to US government contractors (often including their vendors and customers) – And that's even when no direct connection exists between the banned technology and the government contract. During an election year in which “unitary executive theory” (the idea that the President has virtually unlimited power to establish regulations like those described above) is one of the biggest issues up for debate. Pretending the world beyond our borders doesn’t exist is a terrible strategy.
Instead, by seizing the initiative today, potentially enormous losses in financial and human capital can still be saved. Don't delay.
James Berger Global Enforcement Partner
