Legal Developments and Compliance Issues in Crowdfunding: International Trade Michelle Schulz,...
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Transcript of Legal Developments and Compliance Issues in Crowdfunding: International Trade Michelle Schulz,...
Legal Developments
and Compliance Issues in
Crowdfunding: International Trade
Michelle Schulz, PartnerGardere Wynne Sewell LLPThanksgiving Tower, Suite 3000Dallas, Texas 75201-4757214.999.3000 214.999.4667 fax
Agenda‒ Overview‒ What is an Export?‒ Due Diligence in Crowdfunding‒ Export Red Flags
Who Regulates Trade?
“DUAL USE” ITEMS
Bureau of Industry & Security
Export Administration Regulations
(EAR)
15 CFR
DEFENSE ITEMS
Directorate of Defense Trade Controls
International Traffic in Arms Regulations
(ITAR)
22 CFR
OTHER AGENCIES
OFAC, Census Bureau, EPA
U.S CUSTOMS AND BORDER PROTECTION
“Policemen” to Enforce Regulations
19 CFR
What is an “Export?”‒Tangible Exports
‒ Shipments through a US port via air, ocean, truck, rail, mail, etc.
‒ Intangible Exports‒ Electronic transfers (including
email, fax and Internet downloads)‒ Technical reports, drawings, data
or source code released to foreign nationals
‒ Also includes “deemed” exports
What is an “Export?” (cont’d)
‒Re-Exports‒ Shipments from one foreign country
to another of US-origin goods or foreign made goods containing certain US-origin parts, components or materials.
Export Due Diligence
‒ Crowdfunding is uniquely international‒ Online platform
‒ Many parties
‒ Money changing hands
‒ Who are you doing business with?
‒ What are you funding?
Export Due Diligence (cont’d)
‒ U.S. Government requires that U.S. parties know their end users and end uses
‒ Sanctions and Embargoes are broad and often apply to monetary transactions
‒ Example: Bank of Russia‒ Company could not receive payment
from that bank!
Export Due Diligence (cont’d)
‒ Sanctions and Embargoes can involve political support
‒ What are you funding? Who is receiving funds?
‒ Example: support for military group or person
‒ May be prohibited under the International Traffic in Arms Regulations (ITAR) and Office of Foreign Assets Control (OFAC) regulations
‒ Sanctions and Embargoes can involve receiving money‒ What are you funding? Who is receiving funds?
‒ Example: support for military group or person
‒ May be prohibited under the International Traffic in Arms Regulations (ITAR) and Office of Foreign Assets Control (OFAC) regulations
Export Due Diligence (cont’d)
‒ Denied Party Screening
‒ Example: Large telecom company
‒ Do they know their end users?
Export Due Diligence (cont’d)
‒ BIS Red Flags‒ Customer or purchasing agent reluctant
to offer information about end-use
‒ Product’s capabilities do not fit buyer’s line of business
‒ Customer willing to pay cash for an expensive items when terms of sale would normally call for financing
‒ Customer has little or no business background
Export Due Diligence (cont’d)
‒ BIS Red Flags (cont’d)
‒ Customer is unfamiliar with product’s performance characteristics but still wants product
‒ Freight forwarding firm is listed as the product’s final destination
‒ Shipping route is abnormal for the product and destination
Export Due Diligence (cont’d)
Pop Quiz!
If I receive a minimal amount of funding from Kim Jong-un, I could get a monetary penalty.
‒ Antiboycott
‒ Covered under the EAR
‒ Red Flag Countries: UAE, Iraq, Bangladesh
‒ Language appears in Letters of Credit, contracts, etc.
‒ Prohibited language may seem harmless…
Export Due Diligence (cont’d)
‒ What if you are not the exporter of record?
‒ You STILL have an obligation to conduct “due diligence” for products subject to export controls
‒ You and your company can be penalized for proceeding with a transaction with knowledge that a violation of the EAR is occurring or is about to occur
Export Due Diligence (cont’d)
‒ “Knowledge” does not always mean “you knew”‒ It also means “you should have known”
‒ Cannot “self blind”
‒ So, when should you know?
Export Due Diligence (cont’d)
Implementation
‒ All departments play a role:‒ Engineering‒ Finance‒ Human Resources‒ Sales & Marketing‒ IT‒ Operations‒ Supply Chain
Questions?
So you’ve tackled the tariff code!
‒ Key Concepts – tariff classification‒ Duty Rates‒ Nuts and Bolts of Tariff
Classification‒ Schedule B‒ Binding Rulings
Michelle Schulz, [email protected]