New Administration Ramps up Enforcement Efforts

27 February 2017 Dashboard Insights Blog
Authors: Christopher Swift Gregory Husisian

The Trump administration has vowed to bring jobs back to the states. One of the methods it appears it’ll take advantage of is continued, aggressive enforcement of U.S. laws governing exports and international conduct.

Up to now, the U.S. government has undertaken a strategy of aggressively enforcing U.S. laws governing extraterritorial conduct. These include the Foreign Corrupt Practices Act (FCPA), economic sanctions largely administered by the Office of Foreign Assets Control (OFAC), and export controls on U.S. goods. These laws underscore the premium that all multinational companies need to place on aggressively identifying and managing regulatory risk, particularly for their international operations.

The automotive sector is a high-profile industry, resulting in amplified risks and a higher level of special enforcement and regulatory attention. High-profile FCPA investigations involving prominent original equipment manufacturers (OEM), and special OFAC sanctions that target the automotive sector and any such operations in Iran, underscore the risks that automotive suppliers incur when selling or operating overseas. Similar developments are evident in the domestic domain as well, where the growing frequency and intensity of antitrust, False Claims Act, and government contract investigations present new challenges for manufacturers, suppliers, and service providers of all kinds.

U.S. laws governing exports and international conduct pose unique risks for the automotive sector. From the FCPA to ever-changing sanctions and export controls, companies involved in the automotive supply chain face an increasingly complex universe of requirements governing how and where they conduct business overseas. These regimes also shape business decisions at home, with the so-called “deemed export” rule compelling exclusively domestic companies to seek export licenses before disclosing controlled articles, data, software, and technology to their non-U.S. employees. Combined with disclosure requirements for listed companies and government contractors, the regulatory environment grows more complicated with each passing day.

Enforcement trends amplify these risks. In recent years, U.S. government agencies have targeted automotive and automotive supply chain companies under a number of different regulatory regimes. Notable examples include FCPA enforcement actions against AB Volvo, Daimler AG, Fiat, Iveco, Ingersoll-Rand, and Renault. The revelation of ongoing FCPA investigations within the industry, such as the disclosure by Delphi Corporation in its SEC filings that it is investigating potential FCPA violations in China, underscores that the regulatory risks posed by foreign operations are real and not going away any time soon. Sanctions enforcement is also on the rise, with Toyota Motor Credit Corporation and Volvo Construction Equipment North America both targeted by the U.S. Treasury Department’s Office of Foreign Assets Control. Automotive companies like GM-Daewoo have even faced government enforcement actions in relatively obscure areas like anti-boycott violations — a little-known legal regime that has both export and tax implications.

Faced with these challenges, leading companies make sure to get ahead of the curve and be proactive. This means identifying and addressing the risks that are likely to arise based on the nature of their business, the places where they conduct business, and the customers they serve. It also means evaluating the degree to which foreign parties — whether subsidiaries, joint ventures, or even contractors — engage in activities that expose their U.S. counterparts to civil and criminal liability. The same principles apply in the domestic compliance context. Suppliers need to understand their areas of risk and rigorously monitor and enforce their compliance policies, procedures, and codes of conduct. Conducting periodic internal reviews, reviewing and updating written policies and procedures, and updating and enhancing training programs are all components of a robust compliance program. Encouraging your employees to report any improper, unethical, or illegal conduct is critical to uncovering any potential fraud within your organization. Clearly delineating responsibility for compliance with various policies and internal controls ensures accountability.

For Additional Information About These Developments and More

Foley’s experienced Automotive Industry Team has prepared a full report, entitled Top Legal Issues Facing the Automotive Industry in 2017, that examines the road ahead regarding antitrust, security, labor and employment, M&A, and more. Download it today.

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