The US Bureau of Industry and Security (BIS) recently announced that the “Five Eyes” countries – Australia, Canada, New Zealand, the United Kingdom, and the United States – have formalized their coordination efforts on export control enforcement. This collaboration, with a focus on export controls related to Russia and Belarus, holds significance for multinational companies operating in these nations. Baker McKenzie, with export controls expertise across four of the Five Eyes countries, delves into the implications of this development and its potential impact on companies.
Key Objectives of the Collaboration:
The Five Eyes coordination aims to achieve several objectives:
- Facilitate the exchange of information related to export control violations.
- Pool enforcement resources to enhance the capacity to prevent and deter evasion of export controls.
- Minimize enforcement gaps, foster joint investigations, and coordinate enforcement actions.
- Strengthen partnerships with the private sector to bolster the resilience of global supply chains and prevent unauthorized diversion of controlled items.
Impact on Multinational Companies:
This initiative is expected to have a significant impact on compliance and enforcement risks for companies operating within the Five Eyes countries. The close security relationship between these nations suggests a potentially greater impact compared to the G7 Enforcement Coordination Mechanism. The latter has already demonstrated its impact on sanctions enforcement, as discussed in the “Sanctions Enforcement Around the G7” blog series.
It is anticipated that the Five Eyes collaboration may borrow elements from the US-UK sanctions authorities’ collaboration announced in October, potentially including personnel exchanges for capacity-building.
US BIS, known for its robust enforcement history, may deploy officials to other Five Eyes countries, following the blueprint set by Canada, where BIS embedded a full-time analyst for the first time outside the United States in January 2023.
While the initial focus is on export controls targeting Russia and Belarus, this collaboration is expected to extend beyond these countries.
Preparation Steps for Companies:
To prepare for the impacts of this development, companies should consider the following actions:
- Assess whether their export compliance programs adequately address compliance and enforcement risks in each of the Five Eyes countries.
- In the context of investigations, account for the need for local expertise in each country when dealing with export controls compliance issues spanning multiple countries.
- Anticipate heightened enforcement activities by local regulators in the Five Eyes countries. Some governments may explore more flexible enforcement options, such as civil pecuniary penalties.
- Be aware that exports may undergo verification of control status by local customs and export control authorities. Ensure export classifications align with local control identifiers and that export declarations are accurate and complete.
- If a local regulator initiates a verification of control status, ensure that supporting documentation, such as country of origin certificates and technical specifications, is readily accessible.
- Establish internal communication protocols among different jurisdictions in which a company operates, triggered by verification of control status in one jurisdiction.
Conclusion:
The Five Eyes coordination on export control enforcement signifies an enhanced focus on compliance and enforcement measures. Multinational companies should proactively assess their export compliance programs and be prepared for increased scrutiny and cooperation among regulatory authorities across the Five Eyes countries.
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