Insights 2024
Enforcement Measures Safeguarding Human Rights Create New Compliance Challenges for Companies Operating Globally
National security threats are increasingly impacting the private sector, exposing companies to greater compliance and reputational risks. The Biden Administration is particularly focused on national security risks emerging from cross-border trade, and as those concerns expand, so too do the laws designed to mitigate those risks, creating new challenges for companies that operate globally. Moreover, as these laws gain prominence as a policy matter, the Biden Administration has stepped up enforcement significantly.
National security laws have traditionally focused on the diversion of critical technology and malign activity, such as cyberattacks and terrorism. They have also focused on governments of concern, such as Iran and Cuba, and more recently, Russia and China. Not so coincidentally, many of the regimes of concern to the United States are authoritarian, and along with concerns about military advancement, the United States has increased its focus on human rights. Violations of human rights, such as the suppression of free speech, forced labor, and arbitrary imprisonment, are viewed as wholly inconsistent with US policies of promoting democratic government and fair civil society and as such, are considered national security threats.
These human rights concerns have prompted new or expanded legal restrictions that impact a range of business activities and create additional compliance obligations. Restrictions that are the focus of increased enforcement are measures restricting outbound activity through economic sanctions and export controls, as well as in-bound activity in the form of supply chain requirements and import restrictions.
Human rights concerns have prompted new or expanded legal restrictions that impact a range of business activities and create additional compliance obligations.
Notable recent examples include:
Supply Chain Restrictions Related to Forced Labor. The Department of Homeland Security has stepped up its enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) and other measures that prohibit the importation of goods made (in whole or in part) from forced labor. The UFLPA and a parallel measure targeting the use of North Korean labor impose substantial compliance burdens, as they require importers to conduct due diligence throughout their supply chains. Government contractors face even greater compliance burdens since the Department of Defense’s issuance of a new rule prohibiting the procurement of goods that incorporate any materials derived from force labor in the Xinjiang region. There is broad bipartisan support for these forced labor rules, and Congress has been very active in its oversight role, urging increased enforcement and conducting its own investigations of companies caught in the crosshairs.
Economic Sanctions. In December 2023, the US Treasury Department’s Office of Foreign Assets Control (OFAC) marked the 75th anniversary of the Universal Declaration of Human Rights by imposing sanctions on more than 150 individuals or entities for various forms of human rights abuse. These persons are now on the Specially Designated Nationals and Blocked Persons List (SDN List), creating additional compliance obligations for US companies, which must be alert to forestalling any business with such persons.
Export Controls. In announcing the addition of several companies on the so called “Entity List” for human rights reasons in March 2023, the US Department of Commerce’s Bureau of Industry and Security (BIS) stated that those entities were acting contrary to US national security and explicitly confirmed that “protecting human rights worldwide is a basis for adding entities to the Entity List.” As with the recent OFAC measures, this action creates additional compliance obligations for US companies.
Failure to comply with laws driven by human rights concerns carries not only liability, but also significant reputational repercussions.
Enforcement
These new measures are being enforced by agencies armed with more robust resources, as the Biden Administration’s prioritization of national security enforcement has led to significantly increased resource allocation at the Department of Justice’s (DOJ) National Security Division’s Counterintelligence and Export Control Section, as well as BIS and OFAC.
Deputy Attorney General Lisa Monaco has repeatedly made clear that national security laws are among the DOJ’s highest enforcement priorities. Noting that the private sector stands on the “front lines” of emerging geopolitical realities, she has stated that DOJ’s criminal enforcement strategy “includes enlisting the private sector to help watch out for misconduct within companies.” These priorities are echoed at the agency level. In announcing the March 2023 human rights-driven export control measures, Assistant Secretary of Commerce for Export Enforcement Matthew S. Axelrod stated: “Export Enforcement will continue to work vigorously to identify those who use US technology to abuse human rights and will use all law enforcement tools at our disposal to hold them accountable.”
Implications for the Private Sector
These expanding prohibitions that are being increasingly enforced merit close scrutiny by corporate compliance departments. Failure to comply with laws driven by human rights concerns carries not only liability, but also significant reputational repercussions. Mindful compliance with laws designed to protect human rights is, therefore, ideally coordinated with a company’s ESG (environmental, social, and governance) strategy. A core strategy for addressing these parallel compliance and reputational risks is careful diligence of all business partners, from suppliers and customers to intermediaries and other counterparties.
Recognized as the “dean of the sanctions bar,” Greta is also highly regarded in the area of export controls, where she “combines experience with technical knowledge to provide extremely valuable counsel.”—Chambers USA
O’Melveny is a “vital resource” for “clients seeking to gain global competitiveness.”—The Legal 500 US, International Trade
