*Originally published in the Air Cargo Newsletter (October - November 2014 Issue)

Us international trade and customs lawyers (nerdy but necessary) subscribe to news services which refer to legal developments in many jurisdictions.  In particular, the news services out of the US carry stories on US developments which often act as a precursor to similar actions here on specific issues (such as anti – dumping) or which indicate a trend in policy which is likely to affect us here.

Sanctions prosecutions overseas

In the latter case, there has been a significant increase in reported actions and penalties imposed on those involved in breaches of export restrictions, including those associated with UN and autonomous sanctions.

By way of example, in the course of the last 2 weeks in the US:  

  • A freight forwarder was fined US $30,000 for facilitating an unlicensed shipment to China.
  • An order was issued against a company and its President suspending export privileges after the President was convicted of "knowingly and wilfully" exporting certain goods subject to export regulation to China without licence or other authorisation.
  • A Belgian subsidiary of a US company agreed to pay US $1M in criminal fines and serve a term of corporate probation after pleading guilty to causing 4 illegal exports to Syria.  That was in addition to a settlement requiring payment of US$600,000 in civil penalties.  

These are only US examples.  Given the status of world affairs at the moment, then the issues of sanctions and other trade controls become a more significant issue.

The Australian sanctions regime

As a result, it is worthwhile to consider the Australian sanction regime, as well as steps to address that regime.  In this context I will look at restraints on trade in goods although there are also restraints on trade in services and investment.  These issues have been the focus of 2 recent CBFCA on – line CPD sessions including one by myself and one by DFAT.

In Australia, the main sources of controls of trade associated with sanctions arise from:  

  • Exports and imports which are contrary to UN Sanctions which have force of law in Australia pursuant to enabling Australian legislation
  • Exports and imports which are contrary to Australia's own autonomous sanctions pursuant to the Autonomous Sanctions Act 2011 and associated regulations.

In addition there are other specific controls of trade in defence goods including the Defence Trade Controls Act 2012 and the Customs Amendment (Military End – Use) Act 2012.

As with legislation overseas, our legislation has "extraterritorial" effect on any person in Australia, any Australian anywhere in the world, companies incorporated overseas that are owned or controlled by Australians or persons in Australia and any person using an Australian vessel or aircraft to breach sanctions.

Importantly for those in industry there are also "accessory" provisions for those engaged in false or misleading conduct in relation to our sanctions including those arranging for import and export of goods subject to prohibition regulations or those relying on permits they know or should have known to be false.

Liabilities include financial penalties or imprisonment. Are defences available? There are defences available for a body corporate if it proves that it took reasonable precautions and exercised due diligence, to avoid contravening a sanctions measure, or a condition of a sanctions permit.

In its CPD for the CBFCA, DFAT indicated that for these defences:  

  • What constitutes "reasonable precaution" and "due diligence" depends on the circumstances.  
  • A party would have to demonstrate that it thoroughly considered sanctions before undertaking an activity.
  • A party would need to consider including terms related to sanctions in any contract related to an activity.
  • A party would need to inform DFAT immediately of any changes to an activity that could raise sanctions issues.  

In addition to the specific defence above, there are other defences available under the Commonwealth Criminal Code.

So – what to do?

The first thing is to be mindful of the existence of the sanctions regime and that it applies to prohibit dealing with certain parties as well as dealing with certain goods.

DFAT recommends the following actions:  

  • Regularly review the DFAT website www.dfat.gov.au/sanctions
  • Find details of all UN and Australian sanctions.
  • Check the Consolidated List of all designated persons and entities subject to sanctions.
  • Download LinkMatchLite data – matching software to assist in checking.
  • Access the DFAT Online Sanctions Administration System (OSAS) to make an informal inquiry or formal application for a permit.
  • Subscribe to the DFAT sanctions e –mail list.
  • Report any suspected breach of a sanctions law.  

Those in industry also need to: 

  • Be aware that there are overseas sanctions and laws which may apply.
  • Ensure any contracts provide assurances on sanction activity, provide indemnity for liability and allow contracts to be terminated if sanctions issues arise.
  • Develop policies to be aware of and deal with sanctions issues.
  • Be prepared to actively address any concerns.