Week three of the U.S. Government shutdown has begun, and agencies responsible for administering export controls, sanctions, and other trade-related functions have been affected by the lapse in federal appropriations.  This means that companies need to be prepared for extended licensing and processing wait times, along with increased wait times for any communications with the agencies, including advisory opinions. Accordingly, companies must operate — and continue to operate — in accordance with law and regulation. The shutdown requires increased vigilance on the part of those regulated by or working with the government (see here for advice for federal contractors). With that in mind, see below for the key international trade-related agencies impacted by the shutdown and suggestions on how industry should properly respond.

U.S. Department of the Treasury

OFAC

The Office of Foreign Assets Control (“OFAC”), which administers a number of U.S. sanctions programs, is currently open but functioning with limited capacity. Industry ought to anticipate increased wait times for responses to license applications, voluntary disclosures, advisory opinions, and other communications.

  • For now, OFAC will continue to administer the Specially Designated Nationals and Blocked Persons List, and it will enforce U.S. sanctions and administer newly authorized sanctions should the need arise.
  • All national security-related functions will continue to be performed.
  • OFAC has reported that it will have limited capacity to communicate with financial institutions and other affected industries.

CFIUS

The Committee on Foreign Investment in the United States (“CFIUS”), the interagency committee tasked with reviewing foreign investment in the United States, is operating at reduced capacity.

  • This will be of particular concern to those impacted by the CFIUS pilot program related to critical technologies that provides for certain mandatory filings. For more on the CFIUS pilot program, click here.
  • CFIUS will be able to perform “caretaker functions” related to existing reviews or investigations of inbound investment initiated before the recently enacted Foreign Investment Risk Review Modernization Act (“FIRRMA”), but ongoing cases will be tolled. For more on the FIRRMA, click here.
  • CFIUS will continue to perform certain national security functions. However, other CFIUS activities are suspended.

U.S. Department of Commerce

BIS

The Bureau of Industry and Security (“BIS”), which has jurisdiction over the administration of dual-use exports, will remain open and staffed despite the Department of Commerce being shut down.

  • Ongoing export enforcement activities will continue during the lapse in appropriations, as enforcement, unlike licensing, is viewed as a national security function.

USTR, ITA, BEA, and ITC

While the Office of the U.S. Trade Representative (“USTR”) remains open and continues to administer all manner of new import tariffs, that is not true of similarly situated offices.

The International Trade Administration (“ITA”) and the Bureau of Economic Analysis (“BEA”) are operating with a skeletal staff. Therefore, calls or inquiries to the ITA or BEA are unlikely to be answered.

The International Trade Commission (“ITC”) is closed, which affects the release of all ITC economic impact reports.

U.S. Department of State

DDTC

The Directorate of Defense Trade Controls (“DDTC”) has notified the public that due to the Department of State’s lapse in funding, services are significantly curtailed, including:

  • Requests for licenses, advisory opinions, and retransfers, except for those that provide direct support to the military, humanitarian aid, or other similar emergencies.

  • The 3:00 PM ET daily pickup and drop-off service is canceled.
  • D-Trade electronic submissions, the DDTC’s defense export licensing system, will be rejected by the system and returned to the applicant. Requests that were in process at DDTC as of December 21, 2018, will remain in that status; however, further review actions will be delayed until after restoration of funding.
  • NOTE: If industry applicants believe a case (either in review or new submission required) involves direct support to the military, humanitarian aid, or other similar emergencies, they must email the DDTC Response Team using the subject line Request for Emergency License. The email message must include:
    1. The license number (if already pending with DDTC),
    2. The applicant name and registration code,
    3. The end use/end user,
    4. Justification for needing an emergency license, and
    5. A point of contact.

The DDTC ought to respond with guidance on how to proceed.

Industry Steps

The government is shut down, but industry remains open, and as you all know, companies are quite concerned about the effects of the shutdown. Immediate steps that should be taken include a review of any agreement (term sheets) and your obligations thereunder. If any transactions, deliveries, or other deadlines are impacted, you should immediately contact your counsel to discuss or negotiate the impact with the relevant counterparty. Keep in mind that the shutdown may impact ongoing ventures if any require extensions of or amendments to export authorization.  Of course, the inability to obtain advisory opinions or file declarations with CFIUS may significantly hinder your existing contract obligations. As early as possible, communicate with affected subcontractors, suppliers, and vendors throughout the supply chain and inform them of the potential gaps. If you have questions, reach out to the government — in writing — in order to document any responses or non-responses. At some point the government will reopen, and companies should ensure that they have a detailed accounting of all interactions with the government that transpired during the shutdown.

Photo of Zack Hadzismajlovic Zack Hadzismajlovic

Zack Hadzismajlovic focuses his practice on international trade, export controls and customs matters as well as U.S. and U.K. immigration and global mobility issues.

Committee on Foreign Investment in the United States (CFIUS) and Export Controls

Zack represents clients in a wide spectrum…

Zack Hadzismajlovic focuses his practice on international trade, export controls and customs matters as well as U.S. and U.K. immigration and global mobility issues.

Committee on Foreign Investment in the United States (CFIUS) and Export Controls

Zack represents clients in a wide spectrum of controlled defense, dual-use (ITAR, EAR, OFAC) and purely commercial domestic and international trade matters.  He has eighteen years of experience counseling clients in a range of industries, including the defense and high-technology sectors, in all manner of national security and export controls issues, including  investigations, compliance, investments, technology transfers, and other manner of cross-border transactions. Zack represents clients in CFIUS matters, as well as other foreign control, ownership and influence matters related to foreign investments, including the pre-transaction planning and diligence and post-transaction implementation of mitigation instruments. Specific areas of coverage include:

  • representation in matters before a number of federal administrative agencies and tribunals, including OFAC, DDTC, BIS, DCSA, DOHA and CBP
  • compliance planning and implementation
  • internal and government-directed audits
  • risk assessment, due diligence and compliance reviews of entities related to corporate reorganizations, mergers, acquisitions and asset purchases
  • FOCI and CFIUS diligence, filing, mitigation planning and implementation
  • preparation of WDA/TAAs, licenses, commodity jurisdiction assessments, and directed and voluntary disclosures
  • implementation of, and training on, security protocols, export control policies and procedures
  • reinstatement and removal from debarred/denied parties’ lists

Customs and Global Trade

Zack advises clients in connection with a wide spectrum of classification, valuation, country-of-origin marking, special duty exemptions, drawback, regulatory audits and compliance assessments, prior disclosure and mitigation of penalty matters. In addition, Zack represents clients before the Court of International Trade, as well as in Made-in-USA claims before the FTC.

U.S. and U.K. Immigration and Global Mobility Counseling

Zack represents employers and entrepreneurs in connection with all aspects of U.S. and U.K. immigration and nationality laws and in investigations and hearings before EOIR, AAO, BIA, federal district courts, and circuit courts of appeals, as well as in investigations conducted by Homeland Security and the U.S. Department of Labor. Specific areas of coverage include matters covering preparation and implementation of corporate policies; employment and independent contractor agreements; and pre-employment, employment, transfer and termination advice. He has extensive experience in preparing a range of nonimmigrant and immigrant petitions, including criminal waivers of inadmissibility; national interest waivers; citizenship and nationality matters, including analyzing dual citizenship, relinquishment of citizenship, derivative acquisition of citizenship, and naturalization under special eligibility provisions; and applications for inclusion on the list of American Institutions of Research.

Read more about Zack HadzismajlovicEmail
Show more Show less