Sanctions and Export Controls: Focus on Medical Devices Presented by: Staci Yablon Francesca Guerrero May 3, 2018
The Impact of Sanctions • Sanctions are politically motivated and therefore constantly in flux. • Companies must maintain an awareness of trade sanctions and export controls to reduce risk of costly penalties and other adverse action. • Risk-based compliance programs and targeted due diligence are key to avoid sanctions violations. • Information is intended as an overview of the landscape. These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 2
The Legal Landscape
U.S. Regulation of Exports • Several government agencies regulate exports of goods and services from the United States, including: • Office of Foreign Asset Control (“OFAC”) – a division of the Department of the Treasury, enforces economic and trade sanctions • Bureau of Industry and Security (“BIS”) – a division of the Department of Commerce, oversees export controls of commercial and dual-use items • Directorate of Defense Trade Control (“DDTC”) – a division of the Department of State, oversees the export of defense articles and services These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 4
Office of Foreign Asset Control (“OFAC”): Promulgates and Enforces Sanctions • U.S. sanctions prohibit U.S. persons , wherever located , all persons and entities within the U.S. , and all U.S. companies and their foreign branches from engaging in certain transactions with sanctioned countries, individuals and entities. Sanctions also regulate activities with a U.S. nexus. • Secondary sanctions impose sanctions on foreign persons for engaging in certain transactions with persons already sanctioned by the U.S. These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 5
Office of Foreign Asset Control (“OFAC”): Promulgates and Enforces Sanctions • Primary Sanctions Vary • Blocking – SDNs and certain countries and persons therein are blocked, meaning their property and assets are frozen by U.S. persons • Comprehensive sanctions prohibit nearly all transactions with the sanctioned party, including the provision of services and exports/imports • Sectoral sanctions target particular industries in certain countries (e.g., Russia) by prohibiting certain transactions with companies identified in that sector • Restrictions on dealing in debt or equity of a listed entity (e.g., Russia, Venezuela) These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 6
Bureau of Industry and Security (“BIS”): Promulgates and Enforces Export Controls • BIS administers the Export Administration Regulations governing commercial and dual-use items • An item is subject to the EAR export controls if: • It is located in the United States • It is a product of U.S. origin wherever located • It is a re-export (U.S. good shipped between non-U.S. countries) of an item subject to U.S. export controls • It might be subject to EAR export control laws if: • It is a non-U.S. origin product wherever located made with significant levels of U.S. origin parts , components, and materials (% components threshold varies based on destination) • It is a product of certain U.S. origin technology wherever located These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 7
Export Administration Regulations (“EAR”) • The EAR explicitly cover commodities, software (source or object code), and technology • Certain items are listed on the “Commerce Control List” and will have an Export Commodity Classification Number (ECCN); such items will have specific licensing requirements based on destination • All other items are considered EAR99 and subject to general prohibitions on end-use and end-user (but not item-specific) controls • Most medical devices are EAR99 These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 8
Export Controls on EAR99 Items • Export to embargoed countries requires a license even for EAR99 items • Syria, Iran, Cuba, North Korea, Sudan • Certain end-users are listed on a restricted list (Entity List, Unverified List, Specially Designated Nationals, etc.) and require additional licensing requirements for export (often with a presumption of denial) • BIS requires a license for export to some end-users and end- uses (generally related to military and weapons) • Diligence is required even for generally non-sensitive items such as medical devices These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 9
General Licenses and License Exceptions • OFAC issues general licenses on BIS issue license exceptions that authorize transactions that would otherwise violate sanctions. • General licenses and license exceptions are available to any person for use without application to OFAC or BIS respectively • Reporting or other requirements may apply • If a General License or License Exception does not cover your export, you may apply to OFAC and BIS for a license. • We will discuss the licenses for medical devices in detail in the next section These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 10
Sanction Laws Covering Medical Devices
What Is a Medical Device? • Varies across programs, but for Iran is: • A “device” under the Federal Food, Drug, and Cosmetic Act AND • Designated as EAR99 These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 12
Medical Devices Are Given Special Treatment • Under certain country-based sanctions, exports of medical devices are authorized or subject to favorable policies that other products are not. These rules change frequently. • Both BIS and OFAC restrictions must be considered for embargoed countries. These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 13
Regions of Concern for Medical Devices These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 14
OFAC and BIS Divergence • Each country is different with respect to the coordination between OFAC and BIS • For some, either BIS or OFAC will issue an authorization that automatically permits exports authorized by the other agency • Countries that require applying to both BIS and OFAC are: • Sudan • North Korea • Crimea These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 15
The Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) • The TSRA provides that the President shall terminate any unilateral medical sanction in effect as of the date of enactment of the TSRA. It does not include items subject to export controls. • Certain embargoes are covered by the TSRA (Iran, Sudan, Cuba) while others (Syria) are not because of timing of the start of the embargo. These materials have been prepared by Winston & Strawn LLP for informational purposes only, and these materials do not constitute legal advice. Receipt of this information does not create an attorney-client relationship. 16
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