US Sectoral Sanctions

US Sectoral Sanctions - BIS (cont'd) Export / Reexport Restrictions (cont'd) Related notes on transshipment etc.: - Be wary of relying on a "we only shipped to a third-country distributor / warehouse" defense (generally for Russia, and for Crimea in particular - see slide 42 below) The prevailing "knowledge or reason to know" standard (developed for Iran, but applies generally) Various pronouncements / cases to date (see the Epsilon Electronics case decision in particular) And another OFAC similar enforcement action in 2018: a US company was fined for knowingly shipping controlled hi-tech goods to like-named sub. of known Russian defense industry SDN Almaz-Antey through Canadian and Russian distributors (and the purchaser end-user evidently was known to the seller) i.e., this was not a case of selling through distributor to unlimited/unknown buyers in Russia provides vivid reconfirmation of the importance of a company's having meaningful, not just facial, screening program and due diligence in all proposed Russian-related dealings And similar 2019 OFAC announced Settlement Agreement with US/Dutch co. (PACCAR/DAF) involving trucks diverted through Russian front buyer to Iran - Also another OFAC 2019 enforcement action involving a prominent US company – direct payments to it from Cuban SDN end-user of product, per sales through Canadian customer (and various others since then) And latest such OFAC case announcement 20 Oct. 2020 Settlement Agreement with a prominent US private equity firm for its Turkish subsidiary's repeated evasive product sales through Turkish third-party distributors to end-customers in Iran in violation of US trade sanctions Possible penalties Essentially same as for OFAC, and now CAATSA too, sanctions violations (see slides 26 and 61) Plus denial of US export privileges (incl. that no one can export US items to the penalized co.) Note again: BIS and OFAC licensing / enforcement authority often overlaps - and thus thorough analysis of both sets of rules, and perhaps authorizations from both agencies, may sometimes be needed for one and the same proposed transaction Morgan Lewis 32

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