The below sections detail international business and economic/trade sanctions considerations of which USC faculty, staff and students should be aware.
The Office of the Vice President for Strategic and Global Initiatives must approve all initiatives that involve establishment of an overseas presence or international collaboration with any overseas university, institution, or governmental entity, excluding sponsored research agreements and technology licenses.
The Treasury Department’s Office of Foreign Assets Control (“OFAC”) administers and enforces economic and trade sanctions against targeted countries on the basis of foreign policy and national security reasons. Under these laws, certain entities and individuals (both foreign and domestic) may be subject to trade sanctions, embargoes, and other restrictions on exports, re-exports, or transfers of U.S.-origin items. In addition, certain countries may be subject to either comprehensive or targeted sanctions or export restrictions.
International Business (FCPA)
The Foreign Corrupt Practices Act (FCPA) prohibits USC employees and third-party subcontractors from directly or indirectly giving or receiving improper payments or other benefits to a foreign official to gain a commercial or other advantage in violation of the Foreign Corrupt Practices Act (FCPA). The types of payments covered by the FCPA are broad and cover anything that may confer a benefit on someone in a position to provide a commercial or other advantage to USC. FCPA issues may arise in one or more of the following areas of activity:
- Obtaining building permits
- Constructing facilities
- Maintaining premises in accordance with local laws
- Obtaining and maintaining work visas
- Maintaining health and safety regulations
- Routine law enforcement
Overview of the FCPA
In general, there are six elements that must be present in order to show an FCPA violation:
- The company must be based in the United States or traded on a United States stock exchange.
- The payment in question must be made to a foreign official (including any employee or a foreign government regardless of level), a foreign political party or party official, or any candidate for foreign office; or executives and other employees of state-owned or controlled businesses (including, for example, a professor at a state-run university).
- A payment or offer of payment of money or anything else of value, including gifts and excessive meals, hospitality, entertainment, travel expenses, or favors (i.e. an internship for a family member outside the normal hiring process or admittance to an educational program outside the normal admission process because of the student’s relationship to a foreign official).
- The payment must be for the purpose of obtaining or retaining business, even if the business relationship is not with a foreign government or foreign government-controlled entity.
- The person making the payment must intend to induce the recipient to misuse his or her official position to direct business to the business on whose behalf the payment is made.
- The company must know or be aware of a high probability that an improper payment was made.
The FCPA applies to all university employees as well as all USC partners and other third parties that may be engaged to represent USC’s interests in a foreign business transaction.
USC faculty, staff, and student employees are expected to exercise care and take all necessary precautions to ensure they are conducting business with reputable and qualified business collaborators (e.g., partners, representatives, recruiters, distributors and any other representatives collaborating with or on behalf of USC). This can include determining whether potential foreign representatives and joint venture partners are qualified to do business with USC, whether the foreign entity or person has personal or professional ties to a foreign government, the number and reputation of a company or person’s other clientele, and the person or company’s reputation with the U.S. embassy or consulate and with local bankers, clients, and other business associates.
There are certain so-called “red flags” to be aware of, including:
- Unusual payment patterns or financial arrangements
- A history of corruption in the country
- Refusal by a foreign company or person to accept contractual FCPA language
- Unusually high commissions
- Lack of transparency in expenses and accounting records
- Apparent lack of qualifications or resources on the part of a foreign company or person to perform the services offered
- Whether a foreign company or person has been recommended by an official of the potential governmental customer.
If a foreign company or person exhibits any red flags, contact the Office of Culture, Ethics and Compliance at your earliest opportunity.
The following types of payments are prohibited under the FCPA:
- Any gift of cash or a cash substitute;
- Anything that is offered as a quid pro quo (a payment in exchange for favor or advantage);
- Any gift or entertainment that is illegal under the foreign country’s laws, or known to be prohibited by the foreign official’s department, agency, or organization;
- Anything that may have, or may be perceived as influencing the decision of anyone considered to be a foreign official;
- Anything given to foreign officials associated with a tender or competitive bidding process where the University is involved;
- Any inappropriate entertainment (such as entertainment that is illegal under local law or U.S. law);
- Any travel, entertainment, or gifts to family members of foreign officials.
Reach out to the Office of Culture, Ethics and Compliance for assistance in this area.
What types of businesses does the FCPA cover?
The FCPA covers all “domestic concerns”, which includes for-profit and non-profits, including universities, and non-governmental organizations (NGO’s).
As long as I don’t put money in an envelope and hand it to someone, I have nothing to worry about, right?
Wrong. Although cash payments certainly violate the FCPA, the law applies broadly to anything of value, including gifts and entertainment as well as anything else designed to influence the behavior of a foreign government or official in a way that benefits USC.
I only deal with foreign professors and university administrators. Are they foreign officials as well?
They may be. A foreign official includes employees of government-controlled or government-owned entities, including state-owned or run universities. Therefore, a professor or administrator who works for a state-run university is considered a “foreign official” for FCPA purposes.
I travel to a country where it is customary to exchange gifts of nominal value, and it would be rude not to. What do I do?
The FCPA applies to and prohibits the transfer of any and all things of value, including gifts. There is no dollar threshold beneath which a payment or gift is permitted. There are certain exceptions, however, if the payment or gift is modest and isolated and is not designed to influence the recipient’s objectivity. This area is murky, however, and you should seek approval from the Office of Culture, Ethics and Compliance or the Office of General Counsel before giving any gift, regardless of value.
Can I give gifts to family members of foreign officials?
Although the FCPA does not explicitly cover family members, a gift or payment to a close family member could be considered so close to the foreign official that it is effectively a payment directly to that official. You should never attempt to circumvent FCPA’s limitations by transferring anything of value to a family member of a foreign official.
Office of Foreign Assets Control (OFAC)
Sanctions and Export Control Restrictions for Entities and Individuals
Under U.S. sanctions laws and export control regulations, certain entities and individuals (both foreign and domestic) may be subject to trade sanctions, embargoes, and other restrictions on exports, re-exports, or transfers of U.S.-origin items. In addition, certain countries may be subject to either comprehensive or targeted sanctions or export restrictions.
- Comprehensive sanctions prohibit nearly all exports and other business transactions without specific government authorization. (e.g., Cuba, Iran, North Korea).
- Targeted sanctions prohibit transactions related to specific goods, technologies, and services with specific sanctioned entities or individuals, or apply to certain industries or sectors of a country’s economy (e.g., the financial services, energy, mining, and defense and related material sectors of the Russian economy).
If you are unclear whether a transaction with a particular entity or individual may be subject to restrictions, please consult with the USC Office of Culture, Ethics and Compliance, who maintains a screening tool allowing for prompt identification of any sanctions or export controls that may apply.
Who Must Comply?
All “U.S. Persons” are required to comply with the sanctions. For purposes of these sanctions programs, the term “U.S. Persons” in most cases means (i) U.S. citizens; (ii) U.S. permanent residents; (iii) entities incorporated in the U.S. and their foreign branch offices; and (iv) persons physically located in the U.S.
Even wholly non-U.S. Persons must also be aware of and confirm compliance with U.S. economic sanctions programs because the U.S. Government applies and enforces many aspects of its sanctions programs extraterritorial. For example, these sanctions programs can be triggered if a transaction that otherwise takes place outside of the United States involves: (i) participation, approval or facilitation by individual U.S. Persons (e.g., as senior executive or board member); (ii) goods subject to U.S. law; or (iii) U.S. dollar-denominated transactions.
Comprehensively Sanctioned Countries
U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) maintains comprehensive economic sanctions programs that prohibit U.S. Persons from engaging in virtually all trade and financial transactions involving the following countries and regions:
- Crimea Region of Ukraine
- North Korea
In addition to the sanctions regulations administered by OFAC, the U.S. government maintains separate and overlapping export control regulations that prohibit virtually all exports and re-exports of U.S.-origin items (goods, software, and technology) to these comprehensively sanctioned countries/regions.
Limited Sanctions Programs
OFAC maintains more limited sanctions against a number of additional countries where sanctions may apply depending on entity/individual/organization/item/ or industry (i.e., sectoral sanctions). These countries are:
- Central African Republic
- Democratic Republic of Congo
- South Sudan
Restricted Parties Lists
In addition to countries, the U.S. government also maintains certain sanctions and other trade restrictions against lists of individuals, entities, and organizations that have violated U.S. export control laws, have participated in proliferation activities, or have been determined to be terrorists, terrorist organizations affiliated with certain sanctioned governments, and for other reasons. These lists are collectively known as “Restricted Parties Lists.” The most significant of these are OFAC’s lists of sanctioned entities and individuals, including the Specially Designated Nationals and Blocked Persons (SDN) List, Foreign Sanctions Evaders (FSE) List, and the Sectoral Sanctions Identification (SSI) List.
U.S. “Secondary” Sanctions
In addition, the U.S. government implements “secondary” sanctions, which specifically are intended to broaden the reach of U.S. sanctions programs extraterritorially to impact foreign persons that provide material support to certain sanctioned countries, entities and individuals. These secondary sanctions vary widely by sanctions program and activity.
Arms Embargoes for Defense Articles, Technical Data, and Defense Services
The U.S. Department of State Directorate of Defense Trade Controls (DDTC) administers the International Traffic in Arms Regulations (ITAR). The ITAR regulate the export, re-export, transfer, temporary import and brokering of defense articles, as well as technical data and defense services classified on the U.S. Munitions List (USML). DDTC maintains arms embargoes for ITAR items against certain foreign countries (Proscribed Countries).
The Proscribed Countries are:
- Burma (Myanmar)
- Central African Republic
- Democratic Republic of Congo
- North Korea
- South Sudan
*Note: Current U.S. national security policy is to deny licenses and other approval for any ITAR-controlled exports, reexports, or transfers to (and imports from) China of defense articles, defense services, and technical data. It is prohibited to obtain an export license from DDTC for the export of U.S. defense articles, defense services, or technical data to China.
Other Agencies and Regulations
There are various export controls and sanctions laws and regulations that may be enacted by Congress or might implicate companies in other regulated areas. For example, the Department of Energy and the Nuclear Regulatory Commission regulate, among other things, the transfer of nuclear-related U.S. technology between companies, countries, and individuals. In addition, Congress has separate authority to pass laws that could impose an export control or sanctions restriction separate from existing statutory authorities.