Embargo Laws Can Ruin Your Whole Day

Don't try to circumvent the U.S. embargo laws.

You would think such advice would be unnecessary, but I'm aware of at least two intentional instances where employees did just that, and another one where it was (probably) accidental.  I'll describe those incidents in a moment, but first here are the five things you need to know about U.S. embargo laws:

1.  They're complex.  There are prohibited countries, prohibited entities, and prohibitied individuals.  If you're doing international business, there is no way you'll stay in compliance without some kind of system which makes sure you're not inadvertently making mistakes.

2.  Trying to stay in compliance does count for something -- regular training, reporting procedures, and other mitigating actions will help, if your company is found to be in violation at some point.  These are reasonable and prudent precautions.

3.  Self-reporting a violation will be painful.  Covering up the incident and hoping no one finds out would, however, be infinitely worse.  If you find something, I recommend you consult an expert attorney, and if they recommend it, self-report.

4.  The rules vary from country to country, product to product, and instance to instance.  Your best bet is to stay well away from any perceived grey area.  There isn't enough potential gain available if you accidentally cross the line of legality and are caught.

5.  The U.S. Government is serious about violations.  There are lots of individual penalties, as well as corporate penalties.  When in doubt, consult an attorney.  When in doubt, don't let an investigation stall at your desk.  Protect yourself first, then worry about the company.

Now for the examples:

In one instance, my employer's Canadian subsidiary was selling to a company on one of the restricted lists (blacklists).  The company was on this list because they had holdings in Cuba, and had a history of trans-shipping products from the U.S. to Canada and then on to Cuba.  The shipments were a violation of the U.S. Embargo.  Additionally, I learned that our Canadian employees could be arrested for violation of Canadian law if they denied sales to this same entity as a result of the U.S. embargo.  It was a "Catch 22."  In order to resolve the situation, we put in a U.S. based "approval process" for all sales orders, so our U.S. employees could actually issue the "no" determinations, thus protecting the Canadians.  It was a Kludge, but at least it worked.

In a second instance, a European subsidiary of my employer's was knowingly selling to a distributor, who was then selling product to Cuba.  When we discovered this violation, it had been going on for six years, and millions of dollars were involved.  As a result, we failed to collect open receivables from the distributor, had to put recent receipts in a suspense account, fired the distributor (yes, they sued us for improper termination in a European court), fired all the employees involved (one of them also sued us), did a year-long investigation, and self-reported to the U.S. government.  Fortunately, no U.S. employees were involved, or they would have probably been criminally charged.  All in, the incident probably cost us between $2-3 million, much more than we ever earned from the sales.

In the third incident, an innocent email received by one of our employees from a potential client in Libya (back when they were under embargo) was answered.  In the answer, the employee correctly stated that he couldn't do business with them due to the U.S. embargo, but then he went on to refer the potential customer to one of our European competitors.  That last part was a violation.  While we were not required to self-report, this was discovered as a part of an investigation of accusations made by a third party, and it's discovery caused us to back down in a dispute we had with them.  The larger ramifications were quite painful.

Messing around with these laws, in my experience, always costs you.  So my advice is to stay as far away from them as you possibly can.  That will keep you and your employer out of trouble.


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Corporate Thriller novels: LEVERAGEINCENTIVIZE, and DELIVERABLES.  These are all based on extensions of my basic experiences in the world of corporate management.