A merican Club Circular No . 09/24 1 MARCH 14, 2024 CIRCULAR NO. 09/24 TO MEMBERS OF THE ASSOCIATION Dear Member: OBLIGATIONS OF FOREIGN-BASED PERSONS TO COMPLY WITH US SANCTIONS AND EXPORT CONTROL LAWS On March 6, 2024, the US Department of Commerce, Department of the Treasury and Department of Justice issued a Tri-Seal Compliance Note (the “Compliance Note”) highlighting the need for foreign-based (non-US) persons to abide by the US sanctions and export control laws. Members are encouraged to review the Compliance Note, which is available at the following link: https://ofac.treasury.gov/media/932746/download?inline APPLICABILITY OF US SANCTIONS AND EXPORT CONTROL LAW TO FOREIGN PERSONS US Sanctions Laws The Compliance Note underlines that non-US persons are subject to prohibitions set out by OFAC, including the prohibitions against causing or conspiring to cause US persons to violate US sanctions wittingly or unwittingly, or engaging in conduct that evades US sanctions. In the recent past, OFAC has sanctioned foreign persons who have caused or conspired to cause US persons to violate sanctions. Such violative behavior includes cases where a non-US person: • obscures or omits reference to the involvement of a sanctioned party or jurisdiction in a financial transaction involving a US person; • misleads a US person into exporting goods ultimately destined for a sanctioned jurisdiction; and • routes a prohibited transaction through the US or US financial system. Export controls The Compliance Note also emphasizes that the US export controls apply not only to direct exports from the US but extend to items subject to the US Export Administration Regulations (EAR) anywhere in the world, as “the law follows the goods.” Specifically, apart from the initial export, the US export controls cover: • reexports (from one foreign country to another) and in-country transfers (transfer within a foreign country), of items subject to the EAR. A merican Club Circular No. 09/24 2 • Goods that incorporate a certain minimum percentage of controlled US content (de minimis thresholds); and • Exports from abroad, reexports, and in-country transfers of certain foreign-made items products produced using US software, technology, or production equipment (known as the foreign direct product rule). Natural and legal persons involved in the shipment of items subject to the EAR, cannot bypass the export controls and the respective requirements, by shipping, for example, items through a third country or by changing the end use and/or the end user of an item within a foreign country. The Compliance Note includes summaries of numerous enforcement actions taken against foreign companies, or involving foreign-produced items, for violations of US sanctions and export control laws. Compliance Considerations Due to the complexity of the sanctions regulations and the impact that such laws might have on the operations of foreign-based entities, the Compliance Note highlights the importance of implementing a robust compliance program by adopting, among others, the following measures: • Employ a risk-based approach to sanctions compliance by developing, implementing, and routinely updating a sanctions compliance program. • Establish strong internal controls and procedures for payments and the movement of goods involving affiliates, subsidiaries, agents, or other counterparties. • Ensure that KYC (know-your-client) information (i.e., passports, phone numbers, nationalities, countri