Is Your Company Website Revealing International Trade Law Violations?
If, according to an ancient proverb, the eyes are the window to the soul, then in the parlance of 21st-century commerce, the website is the window with a clear view into a company. Regrettably, many company sites may be revealing international trade law violations that can result in significant civil and/or criminal penalties.
All too commonplace are stories of U.S. government enforcement actions launched or fueled by information companies inadvertently provided on their websites. Just ask The Home Depot Inc., now targeted in a U.S. Department of Justice investigation and a whistleblower suit regarding alleged Buy American Act violations. Both legal actions were abetted by statements on the company's site that certain products available for U.S. government customers to purchase under federal contracts were U.S.-made, when allegedly they were not. To avoid this embarrassment and potential liabilityand reduce your own company's overall exposurea website audit is recommended to identify possible violations.
When Websites Wreak Havoc
A company's site can harbor a wide range of potential international trade law violations. Particularly vulnerable is a company using its website (1) to conduct e-commerce or cross-border transactions that involve the import or export of goods, technology, or services; or (2) to provide controlled information over the Internet or its own intranet. Such a website can reveal any or all of these possible violations:
- A list of products available for export that may require U.S. government licensing as dual-use or defense/military items.
- A list of locations where the company conducts business, which may include any of the following:
- Countries subject to U.S. economic sanctions.
- Countries subject to significant U.S. licensing requirements for dual-use or defense/military items.
- Countries notorious for transshipping products to countries subject to U.S. economic sanctions and/or such licensing requirements.
- Countries the U.S. government has identified as actively promoting violations of the anti-boycott laws.
- Countries identified among the worst for corrupt public sector practices, such as bribery.
- Reports of research and development activities with non-U.S. parties, including the company's own subsidiaries, that might involve controlled goods, technology, or services subject to U.S. deemed export licensing requirements for dual-use or defense/military items.
- Technology on the companys intranet accessible by non-U.S. employees subject to U.S.-deemed export licensing requirements, or by U.S. employees located in countries subject to U.S. dual-use or defense/military licensing requirements.
- Information about imports from countries known for intellectual property infringement, in certain industries.
- "Made in America" product claims that are undermined by other site information indicating that the company imports its inputs or non-U.S.-origin product.
- Press release of the company's merger with or acquisition of a non-U.S. company with business ties to countries that require U.S. licensing for certain exports or that face U.S. economic sanctions.
- Press release of the company's merger with or acquisition of any companyU.S.-based or notalready subject to U.S. export restrictions.
- Evidence of e-commerce activity or downloading between the company and parties with Internet protocol addresses in countries subject to U.S. economic sanctions.
- Encrypted software available for downloading by parties in non-U.S. countries that may be subject to U.S. licensing for dual-use exports.
By no means exhaustive, this list illustrates how easily a business, regardless of its size or sophistication, can expose itself to international trade-law liability and U.S. government scrutiny. While companies without existing international trade compliance programs are more vulnerable to these risks, even businesses boasting of comprehensive programs can fail to vet the information on their websites to ensure complianceand face the same dire consequences.
If your company fits either of these descriptions, a website audit for international trade law compliance is critical.
Identifying and Resolving Potential Problems
An effective website audit should cover the following international trade-law areas:
- Export controls regulations, as administered by the U.S. Department of Commerce's Bureau of Industry and Security (BIS) and the U.S. Department of State's Directorate of Defense Trade Controls.
- Economic sanctions, as administered by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC).
- Customs laws, as administered by U.S. Customs and Border Protection.
- Import laws specific to a company's particular industry, such as those administered by the U.S. Food and Drug Administration or the U.S. Department of Agriculture.
- The Foreign Corrupt Practices Actas prosecuted by the DOJ and the U.S. Securities and Exchange Commissionand other antibribery laws, such as the U.K. Bribery Act.
- The anti-boycott laws, as administered by the BIS and the U.S. Internal Revenue Service.
- The Buy American Act and Made in America regulations, subject to the U.S. Federal Trade Commission, the General Services Administration, and/or the DOJ.
An audit to identify website information or resources that place the company at risk can be conducted by a company official who handles compliance issues, in-house counsel, or outside counsel. Some of these risks may be limited to the site itself and how information is presented, while others may reveal significant gaps in the companys compliance program that must be addressed substantively.
Preventing Government/Whistleblower Inquiries
U.S. government officials or knowledgeable company whistleblowers can easily identify potential international trade violations on a company website. Before these revelations become fodder for an investigation, companies should take the appropriate steps to protect themselves. A company without an international trade compliance program should have one customized to its particular needs and ensure its website complies with it. A company with a program already in place should constantly and carefully vet the information posted on its site. To get this process started, a website audit should be conducted.
David Schwartz is counsel in the international trade and customs practice group at Thompson Hine in Washington, D.C. For more information, contact him at David.Schwartz@ThompsonHine.com, or 202.263.4170.