Supply Chain Security
Because of the nature of global commerce and the reality for businesses of all sizes, the product supply chain spans from research and development to sourcing components and the final product assembly and serving. This often involves a patchwork of suppliers, vendors, manufacturers, and engineers from multiple countries. Mapping a supply chain is crucial not only for quality assurance and accountability. Government regulations could complicate your business or prohibit the use of your products based on your International touch-points.
The main focus of regulatory attention is on supply chains with a nexus to Russia or China. Even companies headquartered in countries with close ties to the U.S., such as the European Union and Israel, can be problematic. Depending on who controls the companies and the nature of your business—perform due diligence on your suppliers, service providers, and vendors to understand where products are sourced, the ownership structure, and any affiliations with foreign interests.
There are several industries currently in the spotlight. U.S. businesses that procure information and communications technology or services from China or Russia are under a microscope, along with he compares that operate in the solar or semiconductor industries. The government may refuse to use your products incorporating or utilizing specific Chinese and Russian parts components—vendors or service providers in their supply chains. The U.S. government may require domestic sourcing of certain products under the “Buy America” rules. Different U.S. government departments have various human rights restrictions.
Sanctions
OFAC implements economic and trade sanctions based on foreign policy and national security goals targeting foreign countries, regimes, and certain restricted parties. Under various programs, the OFAC sections can be either comprehensive or selective in blocking assets, restricting trade, or limiting transactions in particular industries. Every U.S. business must comply with the OFAC’s rules. It is essential to have a baseline compliance measure to screen your transactions. This baseline will need to include customers and contract counter-parties.
When you are in product development, you need to be already thinking about sanctions. It is easy and helpful to start small because sanctions can be easy to overlook at the beginning and hard to correct once a company hits its stride. When investors question or uncover due diligence violations, sanctions can quickly become a problem. The OFAC recently issued a comprehensive framework explaining that all U.S. persons and businesses are expected to Emily a risk-based approach to sanctions compliance by developing and implementing a program that is tailed to their profile.
There is no one-size-fits-all approach to sanctions. Baseline sanctions compliance programs typically address two elements. The OFAC maintains comprehensive sanctions programs against several countries. Although some exemptions exist, these country-based programs prohibit all trade practically. And transactions. Sanctions can be targeted at particular individuals or entities. The PFAC published a list of SDNs containing gin gate names of individual sea dentures that are blocked and that U.S. persons are prohibited from dealing with. Ensure your business has adequate screening to prevent transactions with restricted governments, countries, individuals and entities, and their subsidiaries.
It is imperative to evaluate your compliance programs and train staff on implementation periodically. Violation of U.S. sanctions can result in criminal, civil, and administrative penalties imposed on the responsible individual and the companies that employ them. Strict liability may be charged for a violation of sanctions such that a person may be subject to liability, even where such a person was unaware or did not have reason to know they were engaging in a prohibited transaction.
Working with our experienced lawyers can help you understand your risks and ensure that your company stays compliant with these ever-changing regulations. Contact Wilson Hand now if you are starting a new product or have an existing business with which you are not sure you are still compliant.