By Corporate Law Enterprise Expert Colleen Pleasant Kline, Esq. & Partner at Miles & Stockbridge
Deciding to expand your business is an exciting time, especially when you realize the opportunities to go global and reach a larger market place. In addition to the traditional challenges inherent in working with a country where the language is different, the culture is different, and the laws are different, there are certain restrictions under U.S. law that regulate how and when businesses can do business outside of the United States.
First and foremost, under the USA Patriot Act of 2001, the U.S. Department of the Treasury and the Department of Defense regulate and restrict businesses from interacting and assisting with certain restricted persons. Restricted persons include individuals or businesses that have been identified as having ties to terrorism and other activities identified as threatening United States national security. Not all of these individuals would appear on their face to be malignant and some are guised as charities and other respectable business that have been found to have unacceptable ties to terrorism or similar activities, either financially or otherwise. Doing business with any of these restricted persons can subject the business and the individual to certain criminal and civil penalties, including suspension of the right to contract with the U.S. Government. In order to determine if the foreign national and potential partner that you are considering working with is a restricted person, you should review the most updated version of the “Specially Designated Nationals and Blocked Persons List,” published by the U.S. Department of Treasury, Office of Foreign Assets Control, and available at www.treasury.gov/ofac.
In addition to the restricted persons list, the U.S. Commerce Department regulates and restricts certain services and products to be exported out of the United States, and these restrictions may vary from country to country. Under the Export Control Act and related legislation, for example, the provision of certain engineering services to a country such as Abu Dhabi to provide construction advice on building a bridge might be prohibited, but it would be acceptable to provide engineering services in the United Kingdom on the same or similar project. As with a violation of the Patriot Act, a violation of the Export Control Act can result in civil and/or criminal penalty. It is important to review and understand the scope of the project, product or service you are contracting for and determine in advance whether or not such activity is permissible. Visit the U.S. Department of Commerce, Bureau of Industry and Security for more information at www.bis.dol.gov/licensing/exportingbasics.htm. A company may also need to register under the International Traffic in Arms Regulations (ITAR); failure to do so can result in significant fines and jail time.
Even those businesses that are successful in establishing non-USA operations need to be cognizant of the Foreign Corrupt Practices Act, which restricts the use of certain payments or other consideration intended to influence any foreign government or other party in purchasing or using certain goods. In general, the Foreign Corrupt Practices Act prohibits corrupt payments to foreign officials for the purpose of obtaining or keeping business. There are certain exceptions available for “facilitating payments” for “routine government action,” but these must be strictly construed. Significant civil and criminal penalties (including jail time) exist for Foreign Corrupt Practices Act violations. For more information, visit the U.S. Department of Justice, Fraud Section at www.justice.gov/criminal/fraud/fcpa, or contact the Office of the General Counsel of the U.S. Department of Commerce.
Lastly, for those who are intending to outsource certain activities, you should also consider that if you contract with the federal, state or local government, there may be restrictions on how much product or services can be provided that are not of U.S. origin. Laws, such as the Buy American Act, and certain treaty or trade agreements might regulate this activity.
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