Government Contracts

The United States sanctions and export control response to the Russian invasion of Ukraine is expected to be immense and immediate. The team of Russ Randle, Karl Means, and Jim Doub, assisted by Tara Hopkins and Ashley Triplett, are prepared to help you evaluate the recent and likely significant anticipated changes to these rules, and how they may impact your business. 

These rule changes will require rapid adjustments by U.S. companies and their foreign sister companies to stay in compliance with U.S. law as well as with similar legal changes that are anticipated by NATO and other allied countries. 

While some of these changes will be obvious, if the U.S. government uses legal templates from the past, many of the changes could result in costly surprises and legal jeopardy for inattentive businesses.

Our team recommends all companies take the following steps to assess your commercial exposure and manage any legal jeopardy in this fast-changing situation:

1. Review current sales and purchases from Russia, Belarus, and Ukraine, as well as pending proposals to determine exposure in the event of an embargo.  The sanctions rules already treat Crimea and occupied parts of Ukraine the same as Iran – essentially embargoed.  Depending on the harshness of the U.S. response, there may be some form of embargo not only against occupied parts of Ukraine, but also against Russia and Belarus, from which Russia mounted part of its attack.  Keep in mind that these restrictions may also bar imports from these countries, and review your supply chain accordingly.
    
2. Review current financing to determine any Russian financing in transactions and in development projects.  Russian banks and financial institutions may be shut out of the world financial system shortly, disrupting payments and potentially resulting in requirements to block Russian accounts involved.
    
3. Review current personnel to determine if there are any Russian or Belarussian nationals working for the company who are not permanent residents of the United States or of the foreign country where they are working.  Disclosing proprietary technical information to them is considered an export. If export control rules change to impose more restrictions on exports – including software and technology (Know-how) to Russia -- such disclosure may require an export license where such disclosure did not previously require such a license.  Make sure that any such check complies fully with anti-discrimination and applicable privacy laws.
    
4. Review current procedures used to screen parties to transactions, not only customers or suppliers, but also including banks, insurers, and carriers to assure that these procedures will stop transactions with forbidden parties and destinations, including parties and destinations recently added.  Also review procedures to document that this screening was done, by whom, and when. We expect a long list of parties will soon be added to the various lists of proscribed parties, including the Specially Designated Nationals (SDN) list compiled by the Office of Foreign Assets Control (OFAC) at the Department of the Treasury and the Entity List of proscribed parties compiled by the Bureau of Industry and Security (BIS) at the Commerce Department.  For practical purposes, until shown otherwise, no unlicensed transactions should be conducted with any party on these lists.  We expect these lists to expand rapidly and change often, sometimes daily, for the next month or more. 
    
5. Review current force majeure contractual language both for sales contracts and for purchases to determine whether there is explicit language making embargoes and licensing difficulties an event of force majeure.
    
6. Review current sales contract language to assure that there is express language barring the unlicensed resale to denied parties, destinations, or uses forbidden by U.S. law.  U.S. parties cannot rely on contractual language such as F.O.B. or ex works to avoid their duty to prevent diversion of their product contrary to U.S. export controls and sanctions rules.  These rules address not only tangible products, but also software, technology, and services, including services done in the United States but which benefit a proscribed party or country.
    
7. Review export shipping and sales documentation to assure that these contain “destination control” statements making clear that exports contrary to U.S. law are forbidden, and that unlicensed resale to denied parties, forbidden uses, and proscribed destinations are not permitted.
    
8. Review sales and marketing procedures to assure that the company does NOT refer transactions that it cannot lawfully perform to parties in other countries who might be able to do so. Under current sanctions rules, such referrals are considered “facilitation” of illegal activity and are themselves a violation.

If you believe you have commercial exposure under one or more of these areas, or if you wish to discuss navigating these rules and the likely changes to them over the coming weeks and months, please contact a member of our team.