Export Controls Drive Business for Trade Firms Due to Administrative Reform, Globalization, Survey Finds

Customs brokers and international trade lawyers expect increased activity in export controls and sanctions compliance in coming years due to administrative enforcement and a more globalized economy, an International Trade Today survey of eight trade law practices found. Most firms surveyed said customs litigation and regulatory work, as well as revenue, remained steady over the past year, even though many did add clients in the areas of export controls and sanctions compliance programs. Participants said the additions are attributed to the Administration’s recent emphasis on U.S. export controls and changes in the global economy.

Seven of the firms named export controls as the most prominent area in which they added clients, with other notable areas being compliance programs, trade policies like the Transatlantic Trade and Investment Partnership (TTIP), trade remedy laws, and free trade agreements. Baker Hostetler said it has seen particular emphasis on export control and comprehensive sanctions programs, related closely to their clients in the oil and gas or petrochemical industries. Mel Schwechter, national leader of the firm’s international trade compliance practice, said some of their clients exported product parts listed under the Commerce Control List for use in oil field applications. Schwechter said many clients have sought advice because other companies have failed to “get the required licenses and have been pursued by Commerce for settlements, some of which were pretty significant.”

In addition, the Administration’s Export Control Reform Initiative has brought in more business from existing clients as they “seek to understand the effect that the reforms will have on their businesses. ... The first changes don’t take effect until Oct. 15, and clients are preparing for it but there’s been a learning curve,” Schwechter said.

Jamie Joiner from Joiner Burton said that firm has also been working with clients to prepare for the changes, especially for specific products moving from International Traffic in Arms Regulations to Export Administration Regulations. However, they saw no significant increase in export legal work in general.

In its survey response, Kelley Drye said government reforms meant businesses must “revisit the classifications and agency jurisdictions governing their products.” Partner Kathleen Cannon said she believes the reforms are a response to foreign countries enhancing their controls and increasing enforcement. “The web of interlocking export and import controls on goods that can affect national security is growing,” she said. She also attributed the increased export control activity to “increased trade in sophisticated products, software and services.”

Matthew McGrath from Barnes Richardson said administrative reform was not the only thing driving business and “continuing globalization reaching down to the mid-market” also played a role. McGrath attributed the increase in both export control and trade remedies work to an increasingly narrowed focus on China over the past decade. Kelley Drye partner Cannon agreed, saying the U.S. faced big competition with Chinese exports in the trade remedy world because “their government subsidizes Chinese goods and sends them to the U.S. at unfair prices.”

Elizabeth Hein, partner at Alston & Bird, said that firm has seen a spike in export controls work relating to China over the past year, from steel pipes to solar cells. “Anything related to alternative energy has been a very hot issue in the trade world, and there’s been a trade war between the China and the U.S., as well as the European Union,” Hein said.

In regards to sequestration, most respondents said the spending cuts had little to no effect on their firm’s work. However, Kelley Drye cited U.S. Trade Representative Mike Froman’s announcement that the lack of adequate funding at USTR “due to sequestration was the biggest challenge facing his agency” and was “limiting USTR’s ability to enforce cases or bring new cases that have merit.” Cannon said USTR had recently been more active in bringing new cases, especially against China, or had been putting more resources into defending cases to assist U.S. producers. She said limiting these resources could be “problematic” for clients in the future because they're not being allocated toward policy enforcement.

According to Kelley Drye, the budget constraints may also affect other agencies like the International Trade Administration by “limiting the ability to devote sufficient resources administration of the trade remedy laws.” “It’s a question of how the International Trade Administration will enforce and take care of its statutory duties when its budget is being taken away,” Cannon said.

However, Alston & Bird believes “there have always been delays when dealing with the government” and sequestration has “not resulted in any further delays.” “There are budget constraints, and they may have caused businesses to push the administration to move forward with agreements like TTIP and TPP,” Hein said. “But they haven’t affected our clients.” Both Baker Hostetler and Joiner Burton said sequestration has only made it harder to contact D.C. people in their offices, while Alston & Bird said it has always been somewhat difficult contacting people in various departments and the firm has seen “no further issues at other agencies.” All firms did agree that their clients had seen no significant direct impacts.

Firms and practitioners who participated in the survey include Baker Hostetler, Alston & Bird, Joiner Burton, Kelley Drye, Barnes Richardson, Gray Robinson, Arent Fox and Paula Connelly. None of the participants decreased the number of attorneys working primarily on international trade regulation over the past year. Six said there was no change in staffing, while two firms, Gray Robinson and Joiner Burton, said they added two and four more attorneys, respectively. Arent Fox said they lost one attorney but made up for it by adding two. All respondents except Arent Fox had at least one licensed customs broker at their practice. -- Claire Yan