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RTX compliance fines now top $1 Billion.

Compliance-challenged defense contracting giant RTX has agreed to pay nearly $1 billion to settle charges of government contract fraud, foreign bribery, and export control violations. The settlement comes on the heels of a $200 million settlement in August with the State Department [12717] for a raft of export control violations. Raytheon will enter into a three-year deferred prosecution agreement (DPA) in connection with a criminal information filed today in the District of Massachusetts charging the firm with two counts of major fraud against the United States. As part of that resolution, Raytheon admitted to engaging in two separate schemes to defraud the Department of Defense (DOD) in connection with the provision of defense articles and services, including PATRIOT missile systems and a radar system. Separately, Raytheon entered into a three-year DPA in connection with a criminal information unsealed today in the Eastern District of New York charging Raytheon with two counts: conspiracy to violate the anti-bribery provision of the FCPA for a scheme to bribe a government official in Qatar and conspiracy to violate the AECA for willfully failing to disclose the bribes in export licensing applications with the Department of State as required by part 130 of ITAR.

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October 2024 Export Practitioner

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Canadian Firm Gets Reprieve for Reforms; BIS adds 26 to Entity List

Bureau of Industry and Security (BIS) added 26 entities to the Entity List, while giving relief to one Canadian firm for substantive reforms to its business practices. Under the destinations of the People’s Republic of China (PRC) (6), Egypt (1), Pakistan (16), and the United Arab Emirates (UAE) (3), the additions are related to alleged violations of export controls, involvement in weapons programs of concern, and evasion of U.S. sanctions and export controls on Russia and Iran. Sandvine Incorporated, an entity listed under the destinations of Canada, India, Japan, Malaysia, Sweden, and the UAE, has been removed following significant reforms to address and prevent the misuse of its technology in ways that undermine democracy and abuse human rights

Oil Price Cap Update

Treasury's Office of Foreign Assets Control (OFAC) has issued an updated Maritime Oil Industry Advisory for both government and private sector actors involved in the global maritime industry. Prepared by the Price Cap Coalition, (G7, the European Union, Australia, and New Zealand, the Advisory makes ":reccomendations" which are routinely ignored by the relevant players, notably buyers China and India, Convenience Registries (Liberia, Maldives, Eswatini and the like), as well as firms located in G-7, EU or other third countries who disregard "advisories" when there is money to be made. Until the Coalition is willing to take concrete action to halt the shipping in unsafe and underinsured vessels, likely after a catastrophic spill, these exercises are having little to no effect on the flow of Russian Oil into the world market.

RAPTAC / Regulations and Procedures Roundup

The Commerce Department’s Bureau of Industry and Security Regulations and Procedures Technical Advisory Committee held their quarterly meeting Tuesday, with a wary eye towards the year end and potential for a change of regime.

"Multilateral" DPRK Sanctions Monitor Planned

The United States, South Korea and Japan announced the formation of a Multilateral Sanctions Monitoring Team (MSMT) on North Korea as an alternative to the dissolved U.N. panel of experts that had monitored sanctions enforcement until April. VOA reports that members of the former U.N. panel of experts said the new mechanism could function effectively but might be hurt by the lack of a United Nations mandate. China and Russia, two of the five veto-wielding Security Council permanent members, will not participate in the newly formed team.

More Houthi Shipping Sanctions

Thursday OFAC sanctioned eighteen companies, individuals, and vessels for their ties to Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF)-backed Houthi financial official Sa’id al-Jamal (al-Jamal) and his network. Included in this action are the captains of vessels transporting illicit oil as well as the companies that managed and operated these ships.

PRC Combat Drone Builders Sanctioned

Thursday OFAC announced it is targeting three entities and one individual for their involvement in the development and production of Russia’s Garpiya series long-range attack unmanned aerial vehicle (UAV). While the United States previously imposed sanctions on PRC entities providing critical inputs to Russia’s military-industrial base, these are the first U.S. sanctions imposed on PRC entities directly developing and producing complete weapons systems in partnership with Russian firms.

McCaul calls for more sanctions, "The World is on fire"

House Foreign Affairs Committee Chairman Michael McCaul sent a letter to President Biden urging him to implement mandatory sanctions against U.S. adversaries under McCaul’s 21st Century Peace Through Strength Act. (Public Law (118-50) “I call on you to provide additional resources, including detailed staff, to the Departments of Treasury and State for the specific purpose of immediate and robust implementation of the 21st Century Peace Through Strength Act to counter Iran, Russia, and China. The world is on fire; we cannot lose another day to hesitation, appeasement, and weakness.”

New UK Sanctions Office Opens

The UK's Office of Trade Sanctions Implementation (OTSI), within the Department for Business and Trade, opened last week. This new sanctions body has been established to strengthen the enforcement of trade sanctions and support businesses with compliance.. Complementing HMRC’s trade sanctions enforcement role at the UK border, OTSI has new civil enforcement powers in relation to services as well as movement of goods across third country borders, where there is a UK nexus.

Read more of our coverage of Sanctions

Policy Briefs

China Hawks take on McKinsey & Co.

McKinsey & Company's has failed to disclose consulting work for the Chinese government, and appeared to misrepresent the firm’s work for the Chinese government under oath, all while receiving over $480 million to consult for the U.S. military since 2008, according to a report from congressional investigators. In a detailed report, House Select Committee on the Chinese Communist Party "outline the details of McKinsey’s work to advance the Chinese Communist Party and Chinese military, its work to shape the Chinese Communist Party’s five-year plans to surpass the United States, and its failure to report its China work as required by U.S. law. "

USX Deal Payouts Slammed

Determinedly beating the drum for steelworker votes and economic populism, two of the leading Senate opponents of the purchase of US Steel by a Japanese rival drew attention to the executive compensation of the Pittsburgh steelmaker. Elizabeth Warren (D-Mass) sent a letter to US Steel CEO David Burritt outlining their concerns. with plans for the firm's current and former top executives to receive payments totaling over $156 million – not including $40.8 million in payments to non-employee board members.

EU Delays Deforestation Rules

Developing and developed members applauded the EU decision to postpone the implementation of its new Regulation on Deforestation-Free Products (EUDR) for twelve months. This regulation, which was set to take effect on 30 December 2024, will require a variety of agricultural products sold in the EU market to be "deforestation-free," meaning they must not result from recent (post-31 December 2020) deforestation, forest degradation, or breaches of local environmental and social laws.

Supply Chain

Customs Slows DJI Drone Imports

A "customs-related misunderstanding" is currently affecting the world's largest dronemaker's ability to import select drones into the United States, Da-Jiang Innovation (DJI) calls the action "part of a broader initiative by the Department of Homeland Security to scrutinize the origins of products, particularly in the case of Chinese made drones." U.S. Customs and Border Protection (CBP) has cited the Uyghur Forced Labor Prevention Act (UFLPA), as the reason for the current holdups.

CFIUS Slammed for Battery Plant

Republican lawmakers continued their campaign to derail Chinese battery firm Gotion's plans to build a factory in Michigan, calling for a retroactive review by the Committee on Foreign Investment in the United States (CFIUS). In a letter to Treasury Secretary Janet Yellen, Congressman John Moolenar (R-MI), Senator Marco Rubio (R-FL) and colleagues cite the facility's location, 60 miles from a National Guard training facility Camp Grayling.

Mexico Seeks to Dampen China Import Explosion

Mexico wants to reduce its dependence on imports from China and is asking some of the world’s biggest manufacturers and tech firms operating in the country to identify Chinese products and parts that could be made locally. The country’s deputy trade minister, Luis Rosendo Gutiérrez, told the Wall Street Journal that Mexico wants U.S. carmakers and semiconductor manufacturers as well as global giants in the aerospace and electronics sectors to substitute some goods and components manufactured in China, Malaysia, Vietnam and Taiwan.