The Unicat settlement provides some important insights into the Trump Administration’s direction on trade enforcement. It underscores the importance of voluntary disclosure, cooperation and remediation, the tri-part foundation of seeking a favorable enforcement resolution. Also, it emphasizes the importance of securing disclosure credit with the Justice Department since Unicat’s parent received a declination because of its early disclosure and complete cooperation.
In stark contrast, the Unicat settlement demonstrated the benefits of disclosure and cooperation, while at the same time the GVA Capital OFAC enforcement action confirmed yet again that resistance and non-cooperation can be costly — over $200 million worth of costs.
Going back to the Unicat case, when White Deer discovered Unicat’s continuing business with Iran, White Deer acted with dispatch. This set of actions was consequential. Companies that uncover a sanctions violation should determine if there is any evidence of willful intent — if there is, then disclosure to DOJ should occur with the voluntary disclosure to OFAC. By doing so, a company can take full advantage of the National Security Division’s voluntary disclosure policy. This is an important part of any analysis of a potential violation and should guide your actions. On the other hand, when a company uncovers an unintentional or mistaken sanctions violation, DOJ disclosure is not necessarily required. This is a fine line and it is important to focus on intent evidence underlying a sanctions or export control violation.
The Unicat case is another reminder on the importance on merger and acquisition due diligence and post-acquisition integration. Interestingly, the pre-acquisition due diligence failed to uncover the Iran business operations despite review by a junior attorney of the distribution agreement with the UAE company responsible for distribution in Iran.
As part of post-acquisition visit and walk through, the White Deer official uncovered the Iran scheme fairly quickly. If not for a robust post-acquisition effort, White Deer would have been facing its own liability. Instead, White Deer shepherded a comprehensive resolution.
The Unicat settlement also included penalties for failure to pay required import duties to Customs and Border Protection. So, along with OFAC and BIS, Unicat had to pay for its failure to pay import duties.
The Unicat settlement was comprehensive covering import duties, sanctions, and export controls. DOJ organized the regulatory resolution and crowned the entire package with a non-prosecution agreement.
This is the new reality now of trade enforcement — every part of the trade equation: imports, exports and sanctions. DOJ has communicated an unmistakable message — disclose, cooperate and remediate, and the company will earn a declination. This is an important incentive in this new and vibrant area of trade compliance and enforcement.
