October 25, 2018 • Brussels, Belgium

Starts: 2:30 PM
Ends: 3:50 PM

Location: Radisson Red Hotel, Rue d´Idalie, 35, 1050, Brussels, Belgium

Register

The free flow of data across borders is critical for trade, economic growth and social progress. Governments in APEC and ASEAN have made great strides in creating privacy frameworks which encourage convergence across the region, enabling data to flow while maintaining a similar level of protection for citizens. Yet gaps remain. More needs to be done at both the regional and national levels to support greater alignment of these frameworks, and to work with other regions – including the EU – to facilitate interoperability. With data increasingly fueling growth and innovation in today’s digital economy, the time to get this right is now.

The International Conference of Data Protection & Privacy Commissioners (ICDPPC) is the annual, high-level gathering of international data protection authorities, public officials and private sector representatives that convenes to discuss the future of privacy regulation, data flows, and related issues brought about by technological innovation in the modern digital economy. Registration for the ICDPPC is not required to attend this event, and we invite data protection officers, policy and government affairs professionals, and others with a stake in the global privacy and data protection environment to join this discussion.

Privacy perspectives from the Asia-Pacific will include data protection authorities, industry innovators and trade associations. It will examine recent initiatives and emerging views from the region. The discussion will also delve into the latest efforts to enable seamless global data transfers, including trust marks, certification mechanisms and the APEC Cross-Border Privacy Rules. Stakeholders will discuss best practices in this arena, the path forward for policy in the Asia-Pacific, and how APEC, ASEAN and EU officials can lead the way in facilitating global interoperability.

Speakers will include:

  • Ambassador Robert Holleyman, President & CEO, C&M International and former Deputy U.S. Trade Representative
  • Boris Wojtan, Director of Privacy, GSMA
  • Hilary Wandall, GC and Chief Data Governance Officer, TrustArc
  • Huey Tan, President, AsiaDPO
  • Representatives from the Personal Information Protection Commission (PPC) of Japan and the Japan Institute for Promotion of Digital Economy and Community (JIPDEC)

Contact: Clark Jennings (202.624.2652 , cjennings@crowell.com)

The Directorate of Defense Trade Controls (DDTC) announced this week that it will post test versions of its new Registration and Advisory Opinion (AO) applications on the cloud-based Defense Export Control and Compliance System (DECCS) for industry testing and feedback starting October 16th through mid-November 2018.

If a company is interested in participating in this testing, DDTC asks to please contact the DDTC Test Support Team at the number or email below to sign up and receive further guidance.

Each individual tester will be required to sign a DECCS UAT Terms of Use document to ensure users understand the testing process and guidelines.

DDTC is encouraging companies to begin the testing process as early in the test period as possible. Additional applications will be available for testing in the coming weeks and will require a test account and a complete test registration in order to access them.

DDTC Test Support Team:

Email: PM-DDTC-DECCS@state.gov

Phone: (202) 663-1282 / (202) 663-2838

The DDTC Test Support Team will be available during the week from 10am to 4pm EST

On October 3, 2018, the Financial Crimes Enforcement Network (FinCEN), the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC) (collectively, “the Agencies”) issued a statement addressing instances in which banks can collaborate with each other and share resources to manage their Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations more efficiently and effectively. This may involve pooling human, technology, or other resources to reduce costs, increase efficiency, and leverage specialized expertise. The statement indicates that such collaborative arrangements are generally are most suitable for community banks with simple operations and lower risk for money laundering and terrorist financing. The statement does not apply to collaborative arrangements for the purpose of sharing information under Section 314(b) of the USA PATRIOT Act.

The statement provides several non-exhaustive examples of how banks may collaborate:

Internal Controls

Two or more banks may share resources to conduct internal control functions such as: (1) reviewing, updating, and drafting BSA/AML policies and procedures; (2) reviewing and developing risk-based customer identification and account monitoring processes; and (3) tailoring monitoring systems and reports for the risks posed.

Independent Testing

Personnel at one bank may be used to conduct the BSA/AML independent test at another bank within a collaborative arrangement.

BSA/AML Training

A collaborative arrangement may allow for the hiring of a qualified instructor to conduct the BSA/AML training across multiple banks.

In certain instances it may not be appropriate to share resources under a collaborative arrangement. For instance, it may not be appropriate for banks to share a BSA officer due to the confidential nature of SARs filed and the potential impact on the ability of the BSA officer to effectively manage each bank’s daily BSA/AML compliance.  Further, banks should be careful when considering entering into arrangements due to potential privacy concerns, regulatory requirements specific to third parties, oversight issues, and more. Any arrangement should be documented with a contract and evaluated on a periodic basis. It is also important that banks tailor any agreements to meet their specific risk profile for money laundering and terrorist financing. Finally, each bank remains individually responsible for ensuring compliance with BSA requirements.

The statement appears to reflect an acknowledgement by regulators of the increasing amount of financial and human resources that banks are obligated to invest in AML compliance and the growing dichotomy in the ability of large versus smaller banks to maintain complex AML programs.

Practical Considerations

Banks considering such arrangements may wish to consider incorporating into these agreements other types of collaboration allowed by BSA rules. For example, although the statement does not govern sharing under Section 314(b) of the USA PATRIOT Act, such arrangements could be combined with section 314(b) relationships where appropriate to help banks improve the quality of their SAR reporting. Likewise, banks have the option under BSA rules to enter into agreements to rely on other banks to perform customer identification and collect beneficial ownership information on shared customers, which could be combined with the new collaborative arrangements.

Of course, banks should be careful when entering into such arrangements to ensure regulatory and other concerns are met. Any collaborative arrangement should be fully documented, reviewed periodically, and commensurate with the banks’ risk profiles.

 

Finally, the statement encourages banks to engage with their primary federal regulators when first considering collaborative arrangements to ensure that regulators understand the nature and extent of the proposed collaboration and have an opportunity to provide feedback.

Join Us For A Complimentary Webinar – Thursday, October 25, 2018 – 12:00 – 1:00 PM ET

Two years into the Trump Administration and:

  • The Consumer Product Safety Commission now has a Republican majority,
  • the Department of Transportation has released its 3.0 guidance on autonomous vehicles,
  • NIST has published a 375-page recommendation on medical device security,
  • the FTC is holding a series of hearings on the transformative nature of the digital transformation on markets.

What does all this activity in the United States mean for companies following the rapidly evolving regulations globally related to the safety and security of products?

This webinar will describe the current landscape at the federal agencies setting policy for product safety and security. With all the recent talk of regulatory humility in the face of great technological change, we’ll discuss whether regulators practice what they preach and if recent actions encourage or stifle innovation. Our session will compare and contrast activities across the federal government relevant to consumer products broadly defined with a particular focus on product safety and security.

Presenters:

Cheryl Falvey, Partner, Crowell & Moring, Washington, DC
John Fuson, Partner, Crowell & Moring, Washington, DC
Peter Miller, Senior CounselCrowell & Moring, Washington, DC

 

Please click here to register for this webinar.

 

Most textile and wool products have a label listing the fiber content, country of origin, and identity of the manufacturer. In view of recent concerns about ocean pollution, a few states have passed bills to require polyester clothing to have a label warning consumers about washing their garments to prevent fiber pollution.

Current Legislation

Connecticut recently passed The Act Concerning Clothing Fiber Pollution, House Bill 5360, making it the first state to implement a law aimed at combatting microfiber pollution. Based on the House Bill, a working group of representatives from the apparel industry and environmental community was convened to develop an awareness and education program about microfiber pollution. The bill’s text requires representatives of specific influential organizations in the apparel industry to be part of the working group. The consumer awareness and education program must include consumer-oriented information explaining the process by which microfibers are shed from clothes and enter the waterways, best practices for consumers to eliminate and reduce the shedding, and information on efforts that members of the apparel industry—including brand labels—are undertaking to reduce or eliminate microfibers in clothing.

In New York, A10599 has been referred to the Committee on Environmental Conservation and, if passed, would require an additional care label by January 1, 2020 on clothing made of more than 50% synthetic material. The required care label, on clothes for which (1) such label would not violate federal law and (2) hand washing is either recommended or required, must state that the garment sheds plastic microfibers when washed and that hand washing is recommended. For all other clothing, the care label must explain that the garment sheds plastic microfibers when washed.

California’s legislation (AB-2379), which is similar to the New York legislation but has been tabled for now, would require that new clothing made from at least 50% synthetic material include a care label that informs consumers that the clothing sheds plastic microfibers when washed. It would also require a visible label at the point of sale that says, “This garment sheds plastic microfibers when washed, which contributes to marine plastic pollution.”

Industry Response and Takeaways

Companies have reacted to the research on microfiber pollution in a variety of ways. For example, Patagonia has helped fund research studies into the issue. It sells a filter bag called the Guppy Friend that is intended to capture microfibers from clothes being washed in a washing machine. Tersus Solutions, a water-less textile processing platform, has made considerable efforts to develop a waterless washing machine that uses pressurized carbon dioxide to clean clothing. Some companies such as Eileen Fisher have donated to the research that first brought this issue to light. The Outdoor Industry Association’s Sustainability Working Group, which represents over 250 companies, has started to examine the issue along with marine-debris specialists at the Ocean Conservancy.

Critics of the current legislative efforts believe they are premature and that the existing research does not yet show what impact synthetic microfibers in clothing truly have on microfiber pollution, unfairly blaming the problem on the apparel industry. They also argue that there is not yet a viable solution to solve the problem and that washing clothes by hand is not necessarily going to reduce microfiber pollution.

It is nonetheless important for the fashion industry to keep an eye on the pending legislation in New York and California as well as programs the working group in Connecticut implements. For example, if New York or California, which both make up a large part of the United States apparel industry, pass any labeling laws related to synthetic microfibers, it’s likely that these labels will essentially be required nationally.

While labeling laws would impose much more immediate and strict requirements on the apparel industry than the working group in Connecticut’s potential programs, the working group’s recommendations could not only have impacts on future legislation but also on consumers’ perception of synthetic microfibers in clothing. These impacts would be in addition to the publicity generated by the pending legislation in New York and California and the working group’s proceedings in Connecticut have already garnered.

It is possible that more states could follow in the path of Connecticut, New York, and California, though a lot may depend on if the pending legislation in New York gains ground or if the California legislation is brought back for a vote. If either one passes, we could be seeing more legislation related to microfiber pollution in the next few years in other states, and with it the possibility of more requirements for apparel companies to follow.

 

Thanks to Suzanne Trivette who contributed to this article as a 2018 summer associate with Crowell & Moring’s New York Office.

On September 28, 2018, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency (collectively the Federal Banking Agencies or FBAs), with the concurrence of the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), issued an interagency order (the Order) exempting premium finance lenders from the requirements of the customer identification program (CIP) rules imposed by the Bank Secrecy Act (BSA). The exemption applies to banks and their subsidiaries subject to the FBAs’ jurisdiction who offer loans to commercial customers (i.e., corporations, partnerships, sole proprietorships, and trusts) to facilitate purchases of property and casualty insurance policies (herein referred to as premium finance loans or premium finance lending). The FBAs based their exemption on FinCEN’s conclusion that certain structural aspects of such loans make them a low risk for money laundering or terrorist financing, and also on their conclusion that such lending did not present a safety or soundness issue.

The structural aspects of these loans that make them low risk include (1) the fact that loan proceeds typically are remitted to the insurance company directly or through a broker or agent, and not to the borrower; (2) property and casualty insurance policies have no investment value; and (3) borrowers cannot use these accounts to purchase other merchandise, deposit or withdraw cash, write checks, or transfer funds.

The FBAs found no safety and soundness issue because: (1) in the event of default by the borrower, the insurance company is legally obligated to return unearned premiums to the lender; and (2) most bank-affiliated lenders will finance premiums only for insurance issued by creditworthy insurers.

The order builds on FinCEN’s previous determination, in its 2016 customer due diligence rule, to exempt premium finance accounts from the requirement to collect beneficial ownership information on legal entity customers based on the low money laundering risk associated with such lending. The continued application of CIP requirements to banks and bank-affiliated premium finance companies for such accounts despite FinCEN’s finding of negligible money laundering risk put these companies at a competitive disadvantage against non-bank affiliated premium finance lenders that are not subject to regulation under the BSA. In particular, such entities are not required to obtain and verify customer identifying information such as social security numbers, allowing them to process loan requests more quickly and less intrusively.  This led a consortium of bank-affiliated premium finance lenders to petition FinCEN for a change in the rules to harmonize its approach to this issue across both CIP and beneficial ownership rules. Although it took the FBAs more than two years to respond to this request with an exemption, it shows a welcome and thoughtful flexibility in the administration of the BSA and related AML rules that could provide a useful model in other contexts. It also appears to represent only the second time that a categorical exemption to CIP rules has been granted. (FinCEN previously granted an exemption for certain state address confidentiality programs).

Practical Considerations

The exemption applies only to CIP requirements, and banks must continue to comply with various other BSA requirements for such accounts, including the requirement to file suspicious activity reports (SARs). Accordingly, although their obligations will be easier than for typical accounts, banks should continue to provide in their AML programs for the collection of basic information as needed to establish a customer risk profile, to understand the nature and purpose of such accounts, and to update customer information on a risk-basis, so as to allow them to file SARs or take other action when necessary. Automated commercial diligence services likely will be helpful in this regard.

 

 

U.S. Iran Sanctions – All clear or are you confused about The EU Blocking Regulation?

Worried about orders to go to high risk or dangerous areas such as Yemen, Libya, West Africa or Venezuela?

Crowell & Moring Partner Michelle Linderman and Stephen Askins, Tatham Macinnes LLP, will look at the practical, legal and insurance implications of trading to these places.

Event Information

Date: October 18, 2018
Time: 11:30 AM – 1:00 PM EEST
Location: Piraeus Marine Club, Piraeus, Greece

Click here to register for this event.

In 2015, the European Union adopted its Fourth Anti-Money Laundering Directive, which imposed on Member States the obligation to establish a register containing the details of the ultimate beneficial owners (UBOs) of corporate and other legal entities within the European Union (the so-called UBO register). By way of the Act of September 18, 2017, the UBO register became part of Belgian law, and a Royal Decree of July 30, 2018 now provides the required details about the operation of the Belgian UBO register. The Royal Decree obliges all Belgian companies, foundations, (international) non-profit organizations, fiduciaries, and trusts to submit information about their ultimate beneficial owners to this UBO register, which is administered by the Belgian Ministry of Finance. The information must be submitted by March 31, 2019.

Introduction

The need for accurate and up-to-date information regarding beneficial ownership is key in tracing criminals who might otherwise hide their identity behind a corporate structure.

With this in mind, the Fourth Anti-Money Laundering Directive (Directive (EU) 2015/849 of May 20, 2015), implemented into Belgian law by the Act of September 18, 2017, introduced an obligation on Member States to ensure that:

  1. Corporate and other legal entities incorporated within their territory obtain and hold adequate, accurate, and current information on their beneficial ownership.
  2. This beneficial ownership information is submitted by the directors of the entities in question and held in a national Ultimate Beneficial Owner register (UBO register).

Among other things, the Act of September 18, 2017 (i) added to article 14/1 of the Belgian Companies Code an obligation to obtain and hold adequate, accurate, and current information concerning beneficial ownership and (ii) provided for the Belgian UBO register to be controlled by a service of the Ministry of Finance.

However, the terms of operation of the Belgian UBO register still needed to be determined. These terms have now finally been set out in a Royal Decree of July 30, 2018.

For more, please see Crowell’s Client Alert.

 

 

After more than a year of negotiation, the United States, Mexico and Canada reached an agreement to update the North American Free Trade Agreement (NAFTA), which governed trade among the three nations. The new agreement may not go into effect until 2020 because leaders from the three countries must sign it and then Congress and the legislatures of Canada and Mexico must approve it – a process that will take months.

The three NAFTA parties are expected to sign the agreement on November 30. After signing, for ratification in the United States, Trade Promotion Authority (TPA) procedures require the U.S. International Trade Commission (USITC) to perform an economic analysis of the agreement, for which it can take a maximum of 105 days. If USITC takes the maximum allotted time, Congress could vote on the agreement in March 2019 (though it is possible for this process to be accelerated). The November midterm elections in the United States could have an impact on whether and when the agreement will pass Congress.

Functionally, the proposed U.S.-Mexico-Canada Agreement (USMCA) picks up elements of the Trans-Pacific Partnership (TPP) and tightens others relative to what NAFTA provided.  Essentially, the major accomplishment of the USMCA is to keep the three-country agreement in place, despite Trump’s threats to withdraw from the NAFTA.  Some think that President Trump could still threaten to withdraw from NAFTA as a means of pressuring Congress to act on the USMCA.

The USMCA makes a number of significant upgrades to environmental and labor regulations regarding Mexico. It also requires additional Intellectual Property protections. U.S. pharmaceutical companies are provided 10 years of protection against generic brands in Canada.

Some of the other key industry points in the proposed USMCA are that Canada made concessions on dairy in exchange for being able to keep in place Chapter 19, the dispute settlement mechanism for reviewing Antidumping/Countervailing Duty determinations. Canada has used this provision to challenge softwood lumber provisions.

Investor-state dispute settlement (ISDS) will phase out for Canada and be limited to certain sectors in Mexico – oil and gas; power generation services; telecommunication services; transportation services; and ownership or management of infrastructure.

Below is a breakdown regarding how the various industries might be affected:

  • Steel and aluminum tariffs – remain in place, as do Mexico’s retaliatory tariffs.  These industries are subject to additional discussion.
  • Autos/auto parts – The goal of the new deal is to have more cars and trucks made in North America. The side agreements with Canada and Mexico spell out how much trade would be excluded from any future section 232 tariffs in this sector, if imposed.  The auto and auto parts sector will have new rules of origin (with the hourly wage component of $16/hour or “labor value content” required initially for 30% of the work accomplished, phasing up to 40% over three years) that could affect supply chain decisions.  For example in order to qualify, a car or truck must have 75% of its components manufactured in the United States, Mexico, or Canada (this is up from the current 62.5% requirement).
  • Textiles/apparel – More North American content is required.  Tariff Preference Levels (TPL) allowing use of non-originating fabric will be more restrictive.
  • Chemicals – a new approach to rules of origin for chemicals spells out a number of methodologies that could apply. This was an approach that industry wanted and is expected to make it easier for chemicals to qualify under the agreement.  The industry had done a study under the NAFTA and found that only about half of chemicals transactions received duty-free treatment under NAFTA because the paperwork discouraged claiming the treatment.
  • Dairy – Canada agreed to increase access under the USMCA to 3.59% (from the 3.25% that would have applied under TPP), and to eliminate Class 6 and 7 price mechanisms. But Canada will be required to establish safeguards (through specified price surcharges) to prevent surges in shipments of milk protein concentrates, skim milk powder and infant formula

The deal among the countries must be reviewed in six years before it goes into effect for the full 16 years. It will then be reviewed in another 16 years.

 

 

 

 

 

 

 

During discussions on the sidelines of the United Nations General Assembly in New York on 26 September, President Donald Trump and Japanese Prime Minister Shinzo Abe agreed to launch bilateral negotiations to reach what Abe termed a “Trade Agreement on Goods.”  The statement issued by the two leaders of the world’s first and third largest economies envisages negotiations proceeding in two phases, the first designed to achieve market-opening largely through concessions in the agriculture sector as well as in automobile-related tariffs and on regulatory issues.  A second phase of negotiations would extend to services and other issues of mutual interest, such as insurance, pharmaceuticals and digital trade.

The decision to proceed with the bilateral agreement shields Japan from possible tariffs on autos and auto parts by the U.S. under a possible section 232 action so long as both sides are engaged in market-opening discussions.  The negotiations may provide a pathway that could lead to the lifting of section 232 tariffs already in place on Japan’s steel and aluminum exports, although this is unclear.

The two leaders made clear that the bilateral agreement they foresee will be more limited in scope than the Trans-Pacific Partnership (TPP) from which President Trump withdrew the United States, and the other economic partnership agreements Japan has negotiated, including with the European Union.  An important element in Prime Minister Abe’s decision to agree to bilateral negotiations was a concession by the United States that Japan’s market-opening in agriculture would not have to exceed the tariff and non-tariff concessions Japan had already made in these previous agreements.

The negotiations can proceed after both sides complete their respective domestic consultation procedures.  For the United States, USTR Robert Lighthizer immediately began consultations with the relevant congressional committees, signaling that the negotiations themselves will proceed according to the President’s Trade Promotion Authority procedures and timelines.  Action by the White House to notify Congress of the intention to proceed with negotiations triggers the start of a 90-day consultation period to define negotiating objectives before bilateral discussions can officially begin (although the two sides can begin to exchange trade data and other documentation to prepare for negotiations).   The congressional consultations could identify additional issues and concerns that U.S. negotiators would need to take into account.  Also during this period, USTR typically calls for public comments from interested parties, and usually schedules public hearings to accept testimony and written views to help determine U.S. negotiating priorities.

Much attention in these negotiations is certain to focus on the auto sector.  The Trump-Abe statement specifically notes that an objective of the negotiations will be to “increase production and jobs in the United States in the motor vehicles industries.”  This perspective raises a number of questions:  Will the U.S. seek to restrain Japan’s motor vehicle exports?  Will the U.S.-Mexico Trade Agreement’s rules of origin offer a prototype for similar rules for vehicles and components imported from Japan?  Will Japan agree to accept fully the U.S. Federal Motor Vehicle Safety Standards?  Will the U.S.-Japan agreement advance possibilities for the two partners to be able to expand joint R&D efforts to take full advantage of innovation and strategic capabilities?  All these questions should be at the forefront of negotiators’ minds as they prepare to begin bilateral talks.

Other sectors that want to be part of an “early harvest” effort with Japan will also need to identify their priority interests and make these known to U.S. negotiators before U.S. objectives become set in stone.  Developing priorities for the U.S. pharmaceuticals sector and accelerating negotiating outcomes to the first phase offer a particular example:  What time period should industry seek for data exclusivity obligations for biopharmaceuticals?  What transparency and consultation procedures should be in place to cover marketing approval and government pricing and reimbursement determinations?   How should cross-border health data transfers be handled?