International Business Law and Its

Environment, 10e

Chapter 13
Export Controls and Sanctions

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 Introduction

• Export controls: laws and regulations that

govern the licensing of certain goods and
technology exported from the U.S. or
transferred to non-U.S. citizens
• Sanctions: regulations that prohibit U.S.
citizens or companies from doing business
with certain foreign entities

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 Multilateral Cooperation in
Controlling Technology (Slide 1 of 2)
• The Wassenaar Arrangement
• Voluntary agreement between 41
governments on “dual-use goods,” goods used
for both commercial and military applications
• Missile Technology Control Regime: keep
information away from rogue nations
• The Nuclear Suppliers Group: share
information among members
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 Multilateral Cooperation in
Controlling Technology (Slide 2 of 2)
• Wassenaar Agreement focused on
cyber-security, intrusion software, and
listening technology.
• Australia Group combats spread of
biological and chemical weapons

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 History of U.S. Export
Control Laws (Slide 1 of 2)
• Started with Continental Congress in
1775
• In early 1960s export controls toughened
• But in late ‘60s foreign availability
softened rules
• In 1979, Congress passed Export
Administration Act of 1979
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 History of U.S. Export
Control Laws (Slide 2 of 2)
• Changes in Export Environment Since
2001 – Several forces:
• Terrorism
• Nuclear proliferation
• Rise of China’s power
• Russian geopolitical aggression
• Challenge: Balancing national security
with economic competitiveness
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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 1 of 12)

• Export Administration Act of 1979 and

Regulations (EAR)
• Commercial and Dual-Use Goods and
Technology

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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 2 of 12)

• Reasons for Control

• National Security Controls
• Foreign Policy Controls
• Trade Controls for Reasons of Short Supply
• Trade Controls for the Protection of Wildlife,
the Environment, Public Safety, or of
Antiquities
• See U.S. v. Mandel (1990) case
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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 3 of 12)

• National security controls

• Foreign Availability
• Foreign policy controls
• Export: shipping controlled items out of U.S.
• Reexport: shipment/transfer of U.S.-controlled
items from one foreign country to another

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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 4 of 12)

• Illegal Diversions of Controlled Items

• Diversion: the unlawful transfer,
transshipment, rerouting, or reexporting
of controlled goods or technology

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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 5 of 12)

• Deemed Exports
• Communication or transfer by an American
citizen of technology, technical data, software,
encryption technology, etc., to a foreign
national
• Application of the law is not always easy,
especially if foreign nationals work within the
same company but live in different countries

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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 6 of 12)

• Export Licensing
• U.S. exporters are responsible for determining
if an export license is required
• Unlawful to release items to End Users:
• Entities
• Specially designated nationals/blocked
• Unverified firms
• Denied persons
• Debarred parties
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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 7 of 12)

• Licensing Review Process

• Issued by the Bureau of Industry and
Security, which coordinates with many
other agencies
• Issues special comprehensive licenses
• Validates shipments to preapproved end
users
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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 8 of 12)

• EAR administered by Bureau of

Industry and Standards
• Automated Export System
• Online system for collecting export info
• Based on Electronic Export Information
(EEI) filings
• Covers licensed goods and goods over
$2,500 in value (with exceptions)
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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 9 of 12)

• Extraterritorial Jurisdiction of
Export Control Laws
• Should a nation be able to extend the power
of its export control laws (jurisdiction) over its
goods and technology once they have left its
territory?
• Crisis over Soviet Natural Gas Pipeline to
Europe
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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 10 of 12)

• Antiboycott Provisions
• Illegal to comply with boycott imposed by a
foreign country against a country that is
friendly to the U.S.
• See the Briggs and Stratton Corp. v. Baldridge
case: U.S. company thought by saying it had no
business with Israel, it would not be violating
the law; the court found the company had
violated the law
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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 11 of 12)

• Compliance and Enforcement

• Export Management and Compliance
Programs
• Record-Keeping Requirements
• Investigation and Enforcement
• BIS Office of Export Enforcement may bring civil
action before administrative law judge 2010:
Obama administration proposed moving criminal
enforcement to ICE
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Export Controls On Commercial and Dual-Use
Goods and Technologies (Slide 12 of 12)

• Compliance and Enforcement (cont’d)

• Penalties for Export Violations
• Civil violation: $250,000 fine or twice
amount of the transaction
• Willful violation: $1 million fine and up to 20
years in prison
• See United States v. Zhi Yong Guo (2011) case
• Denial of Export Privileges

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 Economic and Financial Sanctions
(Slide 1 of 5)

• Financial sanction: a regulation that

restricts or prohibits relationships with
“targeted” foreign countries, entities, or
named individuals
• Effectiveness of Economic and Financial
Sanctions
• U.N. approved sanctions
• U.S. agricultural exports and Afghanistan
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 Economic and Financial Sanctions
(Slide 2 of 5)

• Authority for U.S. Sanctions

• Trading With The Enemy Act (1917)
• International Emergency Economic
Powers Act

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 Economic and Financial Sanctions
(Slide 3 of 5)

• Authority for U.S. Sanctions (cont’d.)

• USA PATRIOT Act
• Made significant changes to IEEPA and
other U.S. criminal statutes
• Created new federal crimes and penalties
• Allowed assets to be frozen
• Amended U.S. laws on financial transactions
and bank secrecy
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 Economic and Financial Sanctions
(Slide 4 of 5)

• Authority for U.S. Sanctions (cont’d.)

• Court Challenges to IEEPA
• 1979 Iranian Revolution: frozen assets
and claims by American companies doing
business in Iran
See case United States v. Mousavi (2010)

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 Economic and Financial Sanctions
(Slide 5 of 5)

• U.S. Sanctions on Trade with Cuba

• 1962: Cuban Assets Control Regulations:
banned all trade and financial transactions
between Cuba and United States, and froze all
Cuban assets in U.S. Also prohibited almost all
travel to Cuba.
• Obama administration began easing
travel/other restrictions

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 Conclusion (Slide 1 of 2)

• Pursuit of free trade is a balance

between commerce and foreign policy
• How can the government best maintain
America’s security in a dangerous
world, while fostering an environment
for trade?

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 Conclusion (Slide 2 of 2)

• As of 2013, the Obama administration is

proposing reforms of U.S. export control
laws to restrict most critical technologies,
while increasing U.S. exports
• Removing less critical military items
• Streamlining
• More objective criteria

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