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Oft-overlooked trade control regulations rising to the forefront

The increasing complexity of trade control laws and regulations requires an in-house counsel’s full attention

Kimberly A. Strosnider, partner at Covington & Burling

Sanctions in Russia. Sanctions in Iran, in Sudan and in Cuba. Regulations that govern materials mined in Democratic Republic of Congo and surrounding countries. For in-house counsel, monitoring trade controls may seem like a never-ending headache amid ever-changing laws and regulations.

Kimberly A. Strosnider, partner at Covington & Burling, deals with these trade control issues on a daily basis. She says that all companies — not just those implicated in sanctions scandals — are beginning to wake up to the regulatory issues that trade controls impose.

“Certainly, companies that have come within the sights of the regulators are busy ramping up and improving their compliance programs,” Strosnider says, “but other companies observing those trends also are wanting to prevent being in the shoes of the companies being penalized and are paying more attention and trying to expand compliance programs.”

The laws and regulations governing trade controls, she says, are becoming more complex. And with the institution of additional large-scale sanctions such as those in Russia, companies that do not have trade controls as a part of their internal compliance programs are beginning to be left behind.

“We have lots of complex sanctions against Russia, for example, that have been occupying my time and the time of my colleagues here,” Strosnider says. “We also have, at the same time, an export control reform movement here in the U.S. that’s changing and rewriting a lot of the export control regulations more generally. There’s a lot of complexity that people are trying to manage through compliance programs that will bring those things together for their business in a way they can understand and implement.”

There is one issue with instituting these compliance programs, however: the danger of running afoul of U.S. sanctions by advising exactly how to act in sanctioned areas. Strosnider says that she, as outside counsel, instead prefers to counsel on how to best follow U.S. regulations instead of suggesting direct courses of action in sanctioned countries.

“We may explain how the Burma sanctions have been eased by the U.S., and how that permits certain activities but other things may remain off-limits or problematic. ... It’s usually very case-by-case, and there’s a lot of challenge in applying these laws and regulations to people’s particular facts, because some of the law in this area is fairly ambiguous,” Strosnider says.

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She counsels that companies expanding their internal trade control regulations should work closely with three particular governmental agencies: the State Department, the Treasury Department and the Commerce Department. By receiving guidance from these regulators, in-house counsel can better understand an area of regulation that is often not black-and-white.

If a company does run afoul of trade control regulations, Strosnider says, “it’s not fatal.” The key, in that case, is to demonstrate a true commitment to compliance.

“The agencies generally recognize that it’s a complex area, and if companies are trying to be compliant – if they have a management commitment to compliance– the agencies do take that into serious account when they review cases,” she says.

Even as companies implement stronger compliance controls, many compliance officers are focused on industry-specific regulations. But Strosnider says that trade controls is an area that should no longer fly under the radar.

“Within the trade controls space, there’s rapid evolution in the laws and regulations,” she says. “They’re becoming increasingly complex, and it’s an important area for compliance programs. Sometimes, trade controls as an area may be overlooked, but increasingly these trade control regulations really impact many companies because our economy is so globalized. It’s the time to give them due attention.”

Kimberly A. Strosnider is one of four women attorneys speaking on the “Global Compliance Challenges & Tactics” panel at the upcoming Women, Influence & Power in Law Conference in Washington, D.C., on September 19. She will be joined by Victoria McKenney, associate general counsel and deputy chief compliance officer of United States Steel Corporation; Jodi Golinsky, general counsel and chief compliance officer of FS Card Inc.; and Kimberly Shur, vice president and senior counsel, global compliance of Marriott International, Inc.

The Women, Influence & Power in Law conference offers an opportunity for to further this conversation with women inside and outside counsel. The event runs from Sept. 17-19 and is being held at the Capital Hilton in Washington, D.C.

 

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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