The Law Firm for
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Business Law

Subject 2: US Export Law

Current legal documents, including references to our services offered

A. Legal documents (as of 19 May 2008)

B. Notes regarding the legal documents

US export law is of particular importance to your company because it is the only national export law with an explicitly extra-territorial conception and provides for more severe sanctions than German export law. For example, if you export from Germany to Austria goods “made in Germany”, which contain 25% of listed US components, you will require a re-export licence from the Commerce Department (represented by the BIS - Bureau of International Trade and Security)! If you breach that obligation - even if only because you were not aware of it - you may be subject to the full range of US sanctions: In addition to heavy fines (like in Germany), you may be punished by imprisonment of up to 10 or 20 years and may also be listed on the DPL (Denied Persons List), which may result in a denial of export privileges by the USA for up to 25 years. The latter alone may be sufficient to drive an enterprise into the risk of insolvency.

The US jurisdiction is based either – in case of US Export Law - on territorial or personal sovereignty (this being the case if you either have a business enterprise with residence in the USA or make deliveries from, into, or through US territory, or have a right of residence, or qualify as a “US person”) or – in case of US Re-Export Law - on US origin (especially if your German product contains US products of a substantial value). In cases of US re-exports, where the US origin is decisive, the de minimis calculation is of special importance (note however: a few products will always be governed by the EAR, without application of de minimis). If the US components consist of US software/technology, you will be required to prove the accuracy of your de minimis calculation by submitting a One Time Report, failing which you will commit a criminal offence.

If the export relates to dual-use goods, the EAR will primarily apply. If the export relates to arms or defence articles, the ITAR will primarily apply. The EAR are administered by the Commerce Department (the BIS), while the ITAR are administered by the State Department (the DDTC - Directorate of Defense Trade Controls). In the context of the application of embargos and sanction lists, the OFAC Regulations will primarily apply. The OFAC (Office of Foreign Assets Controls) belongs to the Treasury Department. In practice, the regulations of the EAR and the OFAC Regulations are quite often conflicting; in that case, your legal counsel ought to review which of those two regulations will apply in relation to the embargo programme.

Your legal counsel ought to review first of all, whether you are subject to US export law (especially as a “US Person”, or at least indirectly as a “factual US person” or as “related person”) or whether you are subject to US re-export law (because you are exporting US goods, or EC goods with US components with a value more than de minimis).

Secondly, your counsel ought to establish the duties and risks and, thirdly, consider the actions to be taken in the event of a potential breach of such duties. Those required actions might also include the establishment of a risk management system (such as an Export Management System) and the registration as a C-TPAT partner. It must currently be assumed, however, that the duties under EC in respect of the AEO certification are substantially stricter than those applicable to the C-TPAT registration (a C-TPAT implementation should, however, partly be recognised for the AEO certificate). Currently, extensive additional security initiatives are being developed by the US government almost monthly, which initiatives result in comprehensive advance information and the 100 % screening of all containers. The latter is a clear violation of WTO law, but must nevertheless be complied with by you (unless you are willing to refer those provisions to a WTO panel for a procedure, which might result in a demand to the USA to modify the law).

You should consult a lawyer very soon if there are indications available for a potential breach of US export law, in order to obtain recommendations as to the steps to be taken by you to minimise your high risk of sanctions. It is recommendable in that respect to make a voluntary self-disclosure; unlike under German or Community law, a voluntary self-disclosure is explicitly provided for under US law. The voluntary self-disclosure may reduce the sanctions considerably (at least to half of the applicable sanctions, or even to a mere warning etc.), but will only be admissible if you act very quickly before the competent US agency commences investigations in relation to you.

C. Our services offered in relation to US export law

 

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