Three Signs of a New Era in U.S. Export Controls and Sanctions Enforcement

In light of Russia’s invasion of Ukraine and intensifying strategic competition with China, the U.S. government is prioritizing enforcement of export controls and economic sanctions in unprecedented ways. We expect higher budgets and greater interagency coordination for international trade enforcement to result in previously unseen compliance risk. Here are three signs of a new era of U.S. trade controls enforcement:

    The U.S. government is allocating additional resources.

  1. Increased Hiring of Prosecutors for Trade Violations . The National Security Division at the Department of Justice (DOJ), responsible for the criminal prosecution of trade controls violations, is adding 25 prosecutors, including a new “Chief of Counsel for National Security Corporate Enforcement.”
  2. Increased Budget for Export Controls Enforcement . For FY 2023, Congress increased funding for the Department of Commerce’s Bureau of Industry and Security (BIS), which has primary export control enforcement responsibility, by more than 25%.
  3. Increased Budget for Sanctions Enforcement . Congress also increased sanctions-enforcement funding for the Department of the Treasury’s Office of Terrorism and Financial Intelligence, which includes the Office of Foreign Assets Control (OFAC), by more than 20% and allowing more than 60 new hires.
  1. Disruptive Technology Strike Force . In February 2023, the DOJ and BIS announced a new joint “Disruptive Technology Strike Force” to target unlawful exports of critical technologies, such as semiconductors, supercomputing, and artificial intelligence, to countries including China, Iran, Russia, and North Korea.
  2. Joint Compliance Note . In March 2023, the DOJ, BIS, and OFAC published a first Joint Compliance Note outlining compliance expectations and identifying red flags related to trade restrictions against Russia. The Joint Compliance Note is part of an interagency effort to inform the private sector about enforcement trends and convey expectations as to national security-related compliance.
  3. Task Force KleptoCapture . In March 2022, the DOJ launched Task Force KleptoCapture, an initiative comprised of multiple law enforcement agencies dedicated to enforcing trade restrictions against Russia in the aftermath of its invasion of Ukraine.

Companies should adapt their compliance arrangements to the federal government’s new prioritization of export controls and sanctions enforcement. It is especially important to ensure that international trade compliance programs and compliance training programs are sensitive to the variety of new, complex restrictions regarding China and Russia.

We at Orrick are closely tracking related developments. Stay tuned for updates.

Authors

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Harry Clark Partner, International Trade and Investment, Mergers & Acquisitions

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Practice:

Harry Clark Partner

Harry is experienced in areas such as CFIUS/Exon-Florio examinations of foreign investment, military and “dual use” export control regulations (ITAR/EAR), economic sanctions administered by the U.S. Treasury Department (OFAC), customs regulations, the Foreign Corrupt Practices Act, anti-money laundering rules, anti-boycott requirements and defense industrial security requirements. He executes internal corporate investigations regarding trade and investment rules and advises on such rules in the context of corporate transactions.

Additionally, Harry has extensive experience with government contracting matters. His government contracting work has included, for example, design and implementation of U.S. Defense Department renewable energy projects. He also represents broad industry coalitions on major trade litigations and international negotiations. His experience in these areas includes a leading role in what is often considered the largest-ever international trade dispute: the controversy regarding unfair softwood lumber imports from Canada. It has involved myriad administrative proceedings before federal agencies, NAFTA panel appeals, WTO dispute proceedings, judicial proceedings and international settlement agreements.

Harry has represented a coalition of major U.S. oil companies in antidumping and countervailing duty litigation. As a related matter, he pursues policy issues with congressional and executive branch officials and advises on international trade rules (e.g., GATT, WTO agreements and NAFTA).

Chambers 2022 recognizes Harry as a leader in the field of export controls and economic sanctions (Chambers Global and Chambers USA), as well as CFIUS (Chambers USA). Previous editions have also recognized Harry’s achievements regarding his work related to the Foreign Corrupt Practices Act. Clients note that Harry provides “accurate, straightforward guidance incredibly efficiently” and “he has an ability to translate complex legal requirements and rules into business-friendly jargon.”