Gateway to trade: How does international compliance impact New Orleans?

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New Orleans is a city known for its diversity of cultures, foods, and people. Part of and perhaps a reflection of this diversity derives from our location as a gateway to trade, both domestically and internationally.

Today, an array of goods flow in and out of our ports from Mardi Gras throws and coffee to oil and gas and construction equipment.

In 2023, the greater New Orleans area exported $160 billion and imported $120 billion in goods, making it the fifth largest exporter and eighth largest importer out of 43 importers/exporters in the United States, according to the Observatory of Economic Council (OEC).

The OEC also reports that New Orleans’ top export destinations were China ($17.6B), Canada ($10.6B), United Kingdom ($8.72B), Germany ($8.71B), and Mexico ($8.6B). Its top import origins were China ($23B), Mexico ($9.25B), Vietnam ($6.14B), Canada ($5.77B), and Germany ($5.68B).

With the Port of New Orleans investing $1.8 billion in a container terminal project – The Louisiana International Terminal – the goods flowing in and out of Louisiana homes and businesses will continue to grow.

Impacts of International Trade Compliance

International trade touches economies all over the globe. And as such, the individuals in and around New Orleans who keep these goods flowing throughout the region are caught in a myriad of ever-evolving international trade compliance regulations.

Impacts of matters taking place in seemingly remote parts of the globe – the war in Ukraine, supply chain disruptions from Houthi rebels, forced labor concerns – are directly felt here at home for a lot of businesses.

In a presidential election season, a term like “tariffs” is typically what consumers think of when they hear international trade. While tariffs do play a role in trade restrictions – primarily through lowering demand by increasing the cost goods purchased in the U.S. – it is other international compliance concerns that keep procurement and supply chain specialists up at night.

For instance, does my foreign vendor or manufacturer also provide goods to Russia that can have a military purpose? Does that vendor source some of its materials from a supplier or area in China that uses forced labor?

As recently as June 12, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) issued new sanctions that target more than 300 individuals and entities both in Russia and outside its borders — including in Asia, the Middle East, Europe, Africa, Central Asia, and the Caribbean — whose products and services enable Russia to sustain its war effort and evade sanctions.

These designations touch a variety of industries including oil and gas, financial services, semiconductor manufacturing, military equipment production (including unmanned aerial vehicles), and others. This effectively prohibits the exchange of funds, goods, and services with these entities. In other words, a trusted supplier one month could be persona non grata the next.

The designations are part of OFAC’s list of Specially Designated Nationals and Blocked Persons (SDN list) which includes approximately 15,000 names of companies and individuals who are connected with the sanctions targets. Violations can result in civil and criminal penalties, sometimes exceeding several million dollars, as well as potential jail time.

Another top concern for international companies is forced labor.

In the last month, the U.S. Department of Homeland Security (DHS) added around 30 China-based entities to its Uyghur Forced Labor Protection Act (UFLPA) list. These include textile companies, seafood processors, shoemakers, and manufacturers of aluminum and carbon graphite.

Any products from a company on this blacklist are prohibited from entering the U.S. and will be blocked on the presumption they were produced with forced labor. Since the UFLPA was signed into law in December 2021, around 70 entities have been added to the list, touching on apparel, agriculture, polysilicon, plastics, chemicals, batteries, household appliances, electronics, and food additives sectors, among others.

Unwary companies can have their goods detained at the port, facing a heavy and costly burden of disproving the involvement of forced labor.

Trade Enforcement Calls for Businesses to Enact Robust Compliance Programs

Unfortunately, this recent uptick in trade enforcement is not a flash in the pan – it is the new normal as administrations continue using trade as a key tool in national security and public policy efforts.

Efforts of companies to keep up with these changing trade winds also proves more difficult as these enforcement efforts continue to increase. Supply chain due diligence continues to be a moving target as countries and companies look for ways to evade sanctions and other trade restrictions through shell companies, third party intermediaries, and transshipments.

It is more vital than ever for companies to have a robust compliance program tailored to their types of products and business risks.

A company’s program should involve thorough audits of its supply chain, and periodic review of existing and potential transactions, contracts, and relationships with persons or entities that may be subject to the new measures. Other proactive measures should include regular monitoring of developments and updates from DHS and OFAC. Companies also should take advantage of the tools available for screening vendors and other business partners through the UFLPA and SDN lists and databases.

In conclusion, sanctions, import/export control laws, and compliance rules can be complex and are constantly evolving. It is critical to stay atop these issues, particularly with the amount of goods flowing in and out of New Orleans as our city continues to be a “gateway to trade.”

Cole Callihan is a Partner in the Adams and Reese Intersection of Business and Government Practice and a leading member of the Global Trade, Transportation, and Logistics Team. He is the author of the International Compliance Digest, a monthly newsletter recapping compliance and enforcement updates, including issuances from the Department of Justice, Department of Commerce, and U.S. Customs and Border Protection, as well as notable enforcement actions.

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