Exporter Alert
from
January/February 2002
by Edward Rubinoff
Threats to America’s national security often prompt drastic legal and policy responses from the government. After the 1991 Persian Gulf War, for example, the first Bush administration implemented the Enhanced Proliferation Control Initiative. This set of vague export restrictions was intended to prevent the transfer of technology related to weapons of mass destruction; instead it puzzled and frustrated U.S. exporters for a decade, with few or no discernible security benefits.
Be prepared for similar government reactions to the attacks of September 11—and similar frustrations. The U.S. is already adopting sweeping measures against terrorism, such as the new antiterrorism legislation and President Bush’s September executive order freezing the assets of suspected terrorists and their supporters.
Banks and other financial institutions are particularly vulnerable to the new restrictions, since they must screen transactions closely to determine whether any designated terrorists, or people associated with them, are involved. U.S. banks are not the only ones at risk. If foreign banks refuse to follow suit in their own countries, the president’s order also threatens to freeze whatever assets they have in the U.S.
More new trade restrictions are likely to be imposed. The possibilities include:
Sanctions. On the night of the attacks, President Bush pledged that the U.S. would make no distinction between the terrorists and those who “harbor” them. Accordingly, we may see sanctions programs directed at a number of countries that, however anti-American they may seem, have so far escaped being officially sanctioned. Syria is a possible candidate; more remotely, so is Saudi Arabia. Some Saudi banks have already been targeted under the new terrorist-sanctions order, and others may be added to the list.
But as the saying goes, politics makes for strange bedfellows, and some existing sanctions may be eased for countries that cooperate with the American antiterrorism campaign. Indeed, the U.S. has lifted many of the sanctions it placed on India and Pakistan in 1998 in response to their detonation of nuclear devices. Iran could also be the beneficiary of such a policy. That would aid American oil companies, which currently cannot compete with foreign companies there.
Export controls. The U.S. may roll back some of the reforms painstakingly achieved over the past several years, among them the decontrol of most exports of encryption products. As the intelligence community seeks to explain how the terrorists coordinated their attacks without detection, made-in-the-U.S.A. encryption products may emerge as a culprit. If so, the government could soon require users of encryption to provide decryption keys to federal authorities, who could then monitor communications here and overseas. Such actions would affect the sales of encryption software and hardware, since most consumers of these products are reluctant to give government enforcement agencies access to their data. Similarly, providers of medical equipment and agricultural commodities would suffer if pending legislation succeeds in revoking the recent reforms that authorized sales to embargoed countries such as Cuba.
Compliance measures. Companies engaged in international trade must be alert to new laws, regulations, and orders deployed by the U.S. and its allies in the war against terrorism, and must take appropriate responses to safeguard against potential violations and their onerous consequences.
In addition, companies should review their international-trade compliance programs (or develop one). They should make sure the programs meet best-practice benchmarks in addressing the legal issues that stem from new antiterrorism regulations. They should also do their utmost to avoid inadvertent violations. One essential procedure is to screen customers, business partners, and all other parties to a transaction by checking them against the lists of people and entities the U.S. has identified as terrorists or supporters of terrorism.
Finally, companies should consider developing crisis-management plans that address the range of possible legal, political, and public-relations issues they might face if they become entangled in a problem associated with the new antiterrorism laws.
Edward Rubinoff is a partner in the Washington, D.C., office of Akin Gump Strauss Hauer & Feld LLC.
