The WorldECR Export Controls and Sanctions Forum 2023

In response to the copious number of recent regulatory changes, how should companies best organise their export compliance function? This is a question many organisations are asking themselves in the face of new challenges, evolving business models, and fluid supply chains.

In this presentation, KPMG’s Steven Brotherton sets out a state-of-the-art vision of the way that the function should be organised that includes a division between strategic vs operational responsibilities, use of shared service centres and outside support for classification and alert reviews, and improved structures for career development (leading to higher staff retention).

Against a backdrop of impactful change – such as increased end-use restrictions, expansion of the US Foreign Direct Product rule, and ever-increasing classification challenges – having a fit-for-purpose compliance function is a necessity, not a luxury.

In April of this year, the US Bureau of Industry and Security (‘BIS’) issued new guidance to incentivise voluntary disclosure ‘when industry or academia uncovers significant violation of the EAR’, setting out the circumstances in which it was appropriate to do so, and how best to go about it.

Many organisations are kept on their toes by the need to assess potential disclosure situations: how, when, and where? And of course, that pertains not just to the EAR, but in the US, OFAC and DDTC programmes while UK and EU companies must be mindful of local regimes. 

In this session, Hogan Lovells partners Stephen Propst, Lourdes Catrain and Aline Doussin take stock of the current guidance and best practice including different national enforcement law and practice throughout the 27 EU Member States, the UK and the US. They are joined by Keith O’Leary, Global Trade Compliance Manager at Hitachi Vantara, who brings an industry perspective to bear on this key issue for trade controls teams.

The United Kingdom is home to some of the world’s most renowned names in the aerospace and defence sectors, many enjoying strategic partnerships with companies from the US, EU, and elsewhere. The sector is amongst the most stringently regulated from a trade control/compliance perspective.

In his presentation, Brinley Salzmann, Director of Overseas and Exports for the UK aerospace, space and defence trade association the ADS Group, considers the key regulatory and business challenges facing the aerospace/defence sector today. How have companies and supply chains responded to the exigencies of the times, amongst them the impact of BREXIT, divergence from the EU export control regulations, and an evolving ‘indigenous’ regime? And, of course, what issues have been raised by Russia’s invasion of Ukraine?

Brinley will also discuss how new paradigms of national and human security impact not only compliance thinking and best practices, but supply chain management and due diligence.

Clamping down on sanctions and export control evasion attempts has become central to the G7 countries’ efforts to bring the war in Ukraine to an end. As OFAC set out in a March guidance note, the role of the private sector is ‘critical in identifying and countering sanctions evasion.’

In response, businesses are designing ever-more-sophisticated compliance programmes to detect and prevent circumvention and evasion attempts. But what are the key steps to ensuring that such programmes are fit for purpose?

This session, presented by Debevoise’s highly experienced practitioners, sets out the challenges posed by actors seeking to skirt, circumvent and evade sanctions, and examines best practices for avoiding legal and reputational risks associated with poor compliance.

Since Russia launched its invasion of Ukraine, businesses have had to pay heed to the many sanctions subsequently imposed against Russia, and also make ethical/business decisions relating to corporate partners, clients and counterparties.

Among the sanctions are restrictions on the extent to which service providers – including lawyers, management consultants, and other professionals – can represent, advise, or act on behalf of certain persons. Difficult times force difficult choices, but is there a risk that lawmakers’ attempts to constrain circumvention will  jeopardise the very rule of law that they seek to uphold as a bulwark against autocracy? And what processes should businesses and service providers establish to ensure an ethical, compliant – and sustainable – approach to cross-border relations?

These are not easy questions to answer, but in her presentation, Barbara Linney, partner at the law firm BakerHostetler and Adjunct Professor at Georgetown University Law Center, sets out the considerations.

WorldECR is delighted that Scot Gonzales, Regional Export Control Officer of the US Department of Commerce Bureau of Industry and Security (BIS), will be presenting on how non-US companies can stay mindful of potential violations of US export control laws – and describing his role and activities as a Europe-based Export Control Officer who conducts site visits.

Scot’s session will cover:

• Red flags: not knowing could be costly. How to comply with end-use checks, identify red flags, conduct due diligence and establish strong Internal Compliance Programmes (ICP) to safeguard sensitive data and technologies and prevent bad actors from procuring sensitive items – and a review of the consequences of failing to comply.
• Recent European trends: A review of the current diversionary techniques employed in the European theater as well as a recent case study to illustrate transshipment through Europe/UK to Asia.
• A new era of export controls: Russia’s invasion of Ukraine has prompted sweeping changes to US export regulations, enforcement and international cooperation: what are the key components of this new era?
• End-use monitoring: End-use monitoring is an important tool in BIS’s efforts to prevent diversion. Scot will describe the role of Export Control Officers (ECO), who are based in strategic locations and conduct end-use checks (including post-shipment verifications and pre-licence checks) on non-US business facilities to ensure compliance with US export control regulations.

Diversion of products – especially to use in a conflict zone or a weapons programme – is the kind of event that keeps compliance officers awake at night. And it is one that the conflict in Ukraine has brought to the fore, with government agencies and others highlighting heightened diversion attempts, and risks associated with transhipment and sanctions/export control evasion.

How should companies best anticipate illicit attempts to acquire their products? What kind of best practice and due diligence should they put in place to prevent it? And what are the appropriate steps to take if it does? These are the kinds of issues that Julie Cooper, Group Head of Global Trade Compliance, Spectris, and Keith O’Leary, Global Trade Compliance Manager, Hitachi Vantara, will be addressing in this practical – and essential – presentation that tackles what has become very much a ‘real-world’ challenge to supply chain integrity, and corporate reputation alike.

While the art of actual clairvoyance is denied most of us, the practice of horizon scanning – assessing and evaluating potential and emerging risks and opportunities – is within the gift of everyone. In the trade compliance context, this means taking stock of regulatory developments corresponding to changes in the geopolitical landscape.

Against the backdrop of fast-moving geopolitical change and uncertainty around Russia’s continued aggression in Ukraine, trade tensions between the West and China, and North Korean nuclear military ambitions, Hogan Lovells lawyers Stephen Propst and Aline Doussin are joined by Keith Huffman, Chief Legal Counsel, Export Control at SAP, and Lawrence Koh, Chief Export Compliance Officer at ZTE Corporation, to discuss tips for managing corporate compliance programs in this dynamic environment.

The use of ‘catch-all’ mechanisms permits government agencies to prohibit – or scrutinise – exports of non-listed items where they have concerns about end use. For a variety of reasons, catch-all has become a very vital part of the toolkit for licensing and enforcement authorities, reflecting the shift from list-based to end-use(r)-based approaches to export control.

EU (and even UK) companies are now not only familiar with Article 4 of Regulation 821/2021 but also with Article 5, which stipulates the need for a licence for non-listed cyber-surveillance-related items where exporters have been informed or are aware of their possible use in connection with repression or violations of human rights.

But why have catch-all, or end-user controls, acquired such importance in recent years? What due diligence measures should be put in place to watch for transactions that may lead to such violations? And what are the requisite standards of ‘awareness’ that might put exporters in breach if they fail to respond appropriately to red flags or internal protocols?

In this masterclass on ‘catch-all’ – reflecting current concerns and changes in the law – Klaas Leenman, currently Enforcement Advisor for the EU’s P2P outreach programme for dual-use goods, and with extensive experience as a former investigator in the Dutch Ministry of Economic Affairs and the Netherlands Customs Administration, charts the changes, setting out best practice for industry, regardless of sector.

Since the invasion of Ukraine in 2021, Europe – in the largest sense – has had to reassess its role in the world. The result: a new mandate for the EU, post-Brexit, to forge a stronger foreign policy role; a revised relationship with the US through, for example, the prism of the TTC; the prospect of NATO’s expansion to include new member states.  As this ‘security architecture’ continues to evolve, what are the potential consequences for supply chains in critical industries, defence, and technology?

In this session, Mareike Heesing and Stephan Müller, of German law firm Oppenhoff, explore this new European landscape, touching on topics including:

• Export control licences for importers in NATO member states
• Sanctions enforcement
• Stronger controls on technology transfers and ‘emerging’ technologies
• Increased ‘protectionism’

…and the ‘elephant in the room’, Europe’s evolving strategy toward China.

The requirement for multinationals to comply with the laws of the host countries as well as those of the home jurisdictions is fundamental. But in every case, the contours are shaped by specific geopolitical considerations. India and Turkey, for example, each present key challenges for the many western companies that invest in and/or export to and from each of those powerhouse economies.

Both are subject to western sanctions on account of their procurement of Russian S-400 missile systems. India has consistently adhered to its policy of non-alignment and continues to do so in the Russia context but has recently signed strategic relationships with the EU and US, as ‘the West’ courts allies in its rivalry with China. NATO member Turkey, by contrast, aligned with the West, has been seeking to reset its geopolitical alliances.

 How, then, should businesses and banks reconcile their ‘host and guest’ compliance policies in jurisdictions such as India and Turkey amidst fast-changing geopolitical change?

In this important and highly topical session, Ameeta Duggal, of New Delhi’s DGS Associates   and Şafak Herdem, of Herdem Attorneys at Law in Istanbul, set out the challenges faced by some of their multinational clients, and talk through approaches to resolving them.

On account of the very real tensions and lack of constructive cooperation between the West and China, and the West and Russia, the multilateral export control regimes (Wassenaar Arrangement, Australia Group et al) are under serious threat. So much so that a paradox is presented that sees some members using export controls principally against others.

Impasse within the regimes has prevented progress – most notably in implementing controls on new technologies – and given rise to new arrangements between like-minded and allied countries, focused on emerging technologies and ITT.

In his thought-provoking presentation on the evolving changes to the very fabric of export controls, Louis Reitmann explores the opportunities and challenges presented by the tectonic shifts currently in process.

A Research Associate with the Vienna Center for Disarmament and Non-Proliferation (‘VCDNP’), Louis is a board member of the Emerging Voices Network, an initiative of the British American Security Information Council (‘BASIC’) and has been selected as one of 25 Leaders for Tomorrow by the UN programme #Youth4Disarmament.

Sanctions imposed under ‘Magnitsky’-type legislation (e.g., the US Global Magnitsky Act, the UK’s Global Human Rights and Global Anti-Corruption Sanctions Regulations and equivalent laws in the EU, Canada and elsewhere) provide a novel tool to punish those responsible for serious human rights abuses and corruption and send a strong signal about the kinds of behaviour that the international community will not tolerate.

Such tools are being used with increasing frequency. At a time when human rights and serious corruption-related issues are increasingly being framed within a national security remit, their future use is assured. However, ensuring they are applied in a consistent and coordinated manner with allies remains a challenge.

Few organisations in the United Kingdom have analysed Magnitsky-type sanctions, their application, their impact, and criteria for designation as closely as London- and The Hague-based NGO Redress. Its extensive work has helped shape government policy and understanding of the value and impact of the sanctions.

We are delighted that Natalie Lucas and Natalia Kubesch from Redress will be presenting on this important tool for international accountability and the protection of human rights.

Russia’s invasion of Ukraine has elicited both significantly more far-reaching and complex sanctions than previously have been imposed and greater coordination, with the key measures agreed – and implemented by – G7 members and allies.

But sanctions practitioners understand that dangers lie in assuming that, where the principles and objectives of a prohibition are broadly the same, companies are able to take a blanket approach to compliance. In reality, in such situations close attention must be paid to differences – in law, best practice and procedure, in addition to discrepancies between lists of designated individuals and entities.  Companies conducting cross-border business must understand the unique aspects of each jurisdiction’s regime and consider their compliance obligations holistically to ensure they remain compliant.

The session, featuring partners from Steptoe’s offices in London, Brussels, and Washington, DC, explores the critical points of divergence between EU, UK and US sanctions responses and offers guidance on navigating these nuances while remaining fully compliant