The ongoing U.S.-China trade war, recent hostilities in the
Middle East, and the continuing war in Ukraine all represent
matters implicating current national security concerns for
companies operating within the United States or with a U.S. nexus.
Accordingly, the United States and other nations will prioritize
policy decision-making surrounding these international conflicts
and situations that implicate foreign relations. Absent military
intervention, diplomacy, or foreign aid, nation-states are left
with few options to meaningfully influence the policies or actions
of other affected nations. One such strategy the United States and
other countries have utilized consistently is the regulation of the
export of goods, including software and technology, to other
sovereigns and entities. While such trade regulations can be used
to effectively implement international policy goals, companies
operating within the global economic landscape should be fully
aware of the disruptive effects such actions, including retaliatory
export restrictions, can have on business operations.
U.S. -China Trade War and Export Restrictions
One need not look any further than the addition of the Chinese
multinational corporation and technology company Huawei
Technologies Co., Ltd. (Huawei) to the United States Department of
Commerce’s Bureau of Industry and Security’s (BIS) Entity
List in May 20191 followed by a blanket ban on all
semiconductor sales by United States companies to Huawei in August
2020 absent a specific license.2 This action by BIS
specifically identified Huawei as an entity reasonably believed to
be involved, or to pose a significant risk of being or becoming
involved, in activities contrary to the national security or
foreign policy interests of the United States.3 This not
only shut off Huawei’s access to advanced computer chips from
the United States, but also limited the ability of companies
located abroad to manufacture or sell semiconductors that used U.S.
technology to Huawei without first obtaining a license to do so
from the United States Department of Commerce (DOC). As recently as
2024, U.S.-based semiconductor manufacturer Intel reported a
significant expected revenue loss to DOC citing new export
restrictions to China, particularly the revocation of certain
licenses for chip exports to Huawei.4
As one of the largest smartphone and telecommunications
equipment manufacturers in the world, Huawei traditionally relied
on foreign-made semiconductors to support its telecommunications
business to include their 5G networks. The ban on sales to Huawei
not only impacted companies around the world that utilized American
chip technology for the design and production of semiconductors for
Huawei, but also forced the Chinese conglomerate to stockpile chips
of their own and pivot to domestic production. Coupled with the
Covid-19 pandemic that forced remote work and factory closures, the
result was a significant shortage in the supply of semiconductors
worldwide for multiple years.
In this type of scenario, which is becoming ever more common,
legal counsel well-versed in the national security and trade
regulation landscape play a critical role in ensuring that
organizations are prepared with supply chain crisis management
plans to limit the impact of supply chain disruptions caused by
government regulation and other actions, such as the situation
created by U.S. restrictions levied against Huawei. This includes
identifying supply chain vulnerabilities that may be exacerbated by
export controls or economic sanctions and assisting in implementing
response plans to mitigate any industry disruptions or failures.
Excluding counsel from such crisis planning at the outset can have
drastic consequences in a global economy often at the mercy of
geopolitical tensions that influence foreign and domestic policy
decisions.
Supply Chain Crisis Planning
Supply chain crisis planning can assist companies in adequately
preparing for crises or disruptions caused by external forces,
including U.S. trade policy. Such preparation is vital to ensure
business continuity when faced with significant challenges. In
addition to developing a baseline understanding and mapping of
one’s supply chain, a robust supply chain crisis plan should
include mitigation efforts such as vulnerability assessments,
diversification options, and contingency planning. In addition,
preventative measures can be taken to improve the flow of
information and provide companies the ability to quickly pivot,
including the integration of advanced technology and automation and
improving communication lines with both suppliers and
distributors.
Of course, some common supply chain disruptions can occur with
little to no advance warning – i.e., global
pandemics and natural disasters. However, disruptions triggered by
geopolitical issues and conflicts in the form of export controls,
economic sanctions, and even tariffs can often be anticipated by
staying abreast of governmental priorities and engaging legal
counsel to monitor and advise on how regulatory and enforcement
actions may lead to supply chain interruptions. To that end, a
detailed and thorough risk management and response plan should be
built into any business working within and outside the United
States. The alternative could lead to lost revenue and sunk costs
that could otherwise have been avoided.
Why Legal Counsel Is Critical in Supply Chain Crisis
Planning
Any major government actions can lead to ripple or seismic
effects across the international trade landscape, impacting
companies with a global footprint. In the midst of such actions,
legal counsel plays a crucial role in ensuring compliance with
ever-evolving regulatory frameworks. Oftentimes, government actions
by current administrations are informed by past or ongoing foreign
relations and conflicts.
1. Economic Sanctions
For instance, in the economic sanctions context, the First Trump
Administration aggressively targeted companies linked to the
Iranian regime as seen by the investigation and eventual indictment
of Huawei by the Department of Justice (DOJ), alleging that the
company assisted Iran in performing domestic surveillance, amongst
other allegations involving violations of U.S. law.5 The
Second Trump Administration has doubled down on such efforts, as
delineated in the February 4, 2025, Maximum Pressure on Iran
National Security Presidential Memorandum (NSPM)6, which
is meant to deny “Iran all paths to a nuclear weapon” and
counter “Iran’s malign influence abroad.” The maximum
pressure campaign was clearly reinforced by the strategic bombing
of Iranian nuclear facilities by the U.S. military. The Department
of Treasury’s (Treasury) Office of Foreign Assets Control
(OFAC) has also followed this NSPM’s lead by adding multiple
entities based worldwide to the United States’ Specially
Designated Nationals and Blocked Persons (SDN) list, which
essentially blocks these entities’ U.S. assets and access to
the U.S. financial system. As recently as June 6, 2025, OFAC added
over 30 individuals and entities to the SDN list based primarily in
Hong Kong and the UAE for their involvement in an Iranian network
that laundered billions of dollars for the Iranian regime through a
shadow banking scheme.7 Involving counsel at all stages
of supply chain crisis planning can help corporations stay informed
and respond swiftly to government actions that may threaten
business continuity.
2. Export Controls
As it pertains to export controls, the DOC’s BIS Entity List
has been used in recent years to create Export Administration
Regulations (EAR) license requirements for the export of items to
certain entities based in China. The EAR requires a license to
export, reexport, or transfer (in-country) certain items specified
on the Commerce Control List (CCL). Actions by BIS relating to
China recently have largely been predicated on determinations that
specific entities were involved in prohibited military end use
shipments, unlicensed shipments to embargoed destinations, military
activities in the South China Sea, and human rights
violations.8
China has responded in kind with retaliatory export controls of
their own, focusing on dual-use goods, military items, and advanced
technology. In 2020, China passed the Export Control Law of the
People’s Republic of China restricting the transfer of
Controlled Items out of China. China also maintains its own
Unreliable Entities List (UEL), which includes some major U.S.
corporations and can take such measures as banning these entities
from engaging in import and export activities related to China and
making new investments in Chinese territory.
This complicated web of international trade regulations that can
affect the supply of goods worldwide are difficult for even the
savviest compliance officers to fully comprehend and track. Legal
counsel can take the lead in engaging with multiple stakeholders
within an organization on such issues and assist executives in
understanding and anticipating all potential legal and business
ramifications such controls may cause.
When to Involve Legal Counsel in Crisis Planning
To ensure there are appropriate built-in contingencies and
timely crisis responses, legal counsel should be brought in at the
early stages of supply chain security planning. This will allow
counsel to guide clients through a variety of integral risk
management steps, such as:
- Thoroughly mapping a company’s own supply chain;
- Drafting comprehensive supplier contracts with safeguards such
as force majeure, export control, and sanctions clauses; - Conducting due diligence on existing and prospective
suppliers; - Ensuring shipping, transportation, and logistics plans comply
with applicable regulations, including the EAR and sanctions;
and - Preparing response plans for worst case disruptions.
During any supply chain interference or catastrophe, legal
counsel also plays crucial roles in crisis mitigation, such as:
- Navigating complex international legal issues, including
competing or conflicting regulatory regimes, that may arise for
affected multinational corporations; - Advising on emergency supplier and distributor negotiations or
any other stopgap measures; - Interfacing with various government agencies, including
Treasury, the DOC, and the United States Department of State (State
Department), who share oversight and enforcement responsibilities;
and - Mitigating any potential reputational damage and civil or
criminal liability.
The risks of not involving counsel early and often in such
situations can lead to severely increased vulnerabilities, greater
financial hardships, and even criminal exposure. Any supply chain
breakdown raises the potential for contractual disputes and
breaches between suppliers, distributors, and customers.
International disputes may also arise where multinational
corporations may be subject to foreign regulatory regimes.
Additionally, civil and criminal liability for sanctions or
export control violations can be quite significant. For instance, a
violation of the International Emergency Economic Powers Act
(IEEPA), which the government typically utilizes to pursue
sanctions violations, carries a civil penalty of up to $250,000 or
twice the amount of the transaction that is the basis of the
violation.9 The statute also carries a criminal penalty
of up to 20 years in prison, a $1,000,000 fine, or
both.10 In April 2023, the DOJ announced a $629 million
settlement with British American Tobacco, one of the world’s
largest manufacturers of tobacco products, related to bank fraud
and sanctions violations arising out of the companies’ scheme
to do business in North Korea in violation of the bank fraud
statute and IEEPA.11 More recently, Congress expanded
the statute of limitations for IEEPA violations from 5 years to 10
years12, broadening the reach for both civil and
criminal penalties. Even further, in February of 2025, the U.S.
Attorney General issued guidance across the Department of Justice
that temporarily eliminated approval requirements for U.S.
Attorney’s offices who seek to bring IEEPA charges in certain
circumstances.13 There is a trend towards more
aggressive utilization of the government’s enforcement
authorities pursuant to IEEPA, making the role of counsel all the
more necessary for multinational companies seeking to avoid such
potential exposure.
The Export Control Reform Act (ECRA) is another tool available
to the government to enforcement export control regulations. A
violation of ECRA carries significant civil penalties to include a
$300,000 fine or an amount twice the value of the transaction that
is the basis of the violation with respect to which the penalty is
imposed, revocation of any export license issued to the liable
person, and a prohibition on the person’s ability to export,
reexport, or in-country transfer any export-controlled items.
See 50 U.S.C. Section 4819. ECRA also carries a potential
criminal penalty of 20 years in prison or a $1,000,000 fine.
For these reasons and more, failure to include knowledgeable
counsel at the outset of any risk management planning can
potentially lead to serious consequences for any company involved
in international trade.
When to Involve Legal Counsel in Supply Chain Planning
In the aftermath of initial planning and any supply chain
breakdown response measures, companies should integrate compliance
programs into their corporate culture. This will include adequate
documentation, record-keeping, communication, due diligence and
disclosure policies, consistent risk assessments and internal
trainings, and a company officer dedicated to implementing
compliance procedures. Independent or outside legal review of
compliance programs on a regular basis will also help ensure
business continuity within legal and ethical boundaries in the face
of any crises and will likely be looked at as a mitigating factor
should a company inadvertently run afoul of domestic or foreign
regulations. For instance, the Department of Justice’s
voluntary self-disclosure guidelines specifically take into
consideration the implementation and testing of effective
compliance programs when considering the scope and need for any
enforcement action.14 On April 30, 2025, the DOJ went so
far as to announce the declination of prosecution of a company that
voluntarily self-disclosed export control offenses committed by one
of its employees and cooperated with the government’s
investigation of that employee.15
Counsel can also assist with any disputes, litigation, or
necessary updates to contracts following supply chain breakdowns
and revisions to compliance policies based on lessons learned.
Establishing effective monitoring systems and confirming adherence
to international trade policies and applicable laws will be
essential to ensuring long-term success. In this manner, legal
counsel plays an essential role in building out an effective
framework for corporate compliance and legal exposure risk
management.
Legal Consequences for Non-Compliance
When geopolitical issues and matters of national security are
implicated, supply chain security can fall victim to a nation’s
superseding foreign policy goals and interests. Multinational
corporations should involve legal counsel early and often in risk
management planning and should immediately considering implementing
the following business strategies:
- Retain legal counsel with an in-depth knowledge and
understanding of national security issues and international trade
to include applicable economic sanctions, export controls, and
tariffs impacted by geopolitical affairs. - Involve counsel in the early stages of any corporate supply
chain disruption risk assessments and risk management
planning. - Stay abreast of any new or evolving government directives,
regulations, or policy announcements issued by the DOJ, OFAC, BIS,
State Department, or other relevant government agencies with the
support and guidance from outside counsel. - Consider implementing mitigation efforts such as integration of
advanced technology and diversification of suppliers or
distributors to improve the flow of communication and supplier
continuity. - Ensure counsel is retained who is well-versed in international
legal frameworks and treaties to confirm compliance with foreign
regulations, and that can quickly advise on any retaliatory
measures taken by other nations. - Engage counsel to draft comprehensive supplier contracts,
conduct due diligence, and interface with government agencies to
include the DOJ, OFAC, BIS, and State Department when
necessary. - Establish a corporate compliance framework with attention to
trade issues and that prioritizes thorough documentation, internal
policies and procedures, regular trainings, and sufficient
oversight.
In an evolving global economy, businesses must integrate legal
counsel into their crisis and disruption planning processes to
ensure supply chain security and integrity, compliance with
applicable regulations, and to enable effective incident response
measures in a timely manner.
We will be posting a weekly article exploring different facets
of Navigating Legal Challenges in Global Supply Chain
Management. Subscribe to the series to receive article
updates.
Footnotes
1. See 15 C.F.R. pt. 744 (2019);
https://www.bis.doc.gov/index.php/documents/regulations-docs/2394-huawei-and-affiliates-entity-list-rule/file
2. See 15 C.F.R. pts. 736, 744, and 762
(2020)
3. Id.
4. https://www.theverge.com/2024/5/8/24152031/intel-revenue-huawei-commerce-department-license-revoked
5. U.S. Department of Justice, “Chinese
Telecommunications Conglomerate Huawei and Subsidiaries Charged in
Racketeering Conspiracy and Conspiracy to Steal Trade
Secrets,” (February 13, 2020); (https://www.justice.gov/usao-edny/pr/chinese-telecommunications-conglomerate-huawei-and-subsidiaries-charged-racketeering
6. The White House, “Fact Sheet: President Donald J.
Trump Restores Maximum Pressure on Iran,” (February 4, 2025);
https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-restores-maximum-pressure-on-iran/
7. U.S. Department of the Treasury, “Treasury
Sanctions Iranian Network Laundering Billions for Regime Through
Shadow Banking Scheme,” (June 6, 2020); https://home.treasury.gov/news/press-releases/sb0159
8. https://www.bis.doc.gov/index.php/220-eco-country-pages/1040-china-export-control-information
9. See 50 U.S.C. Section 1705
10. Id.
11. U.S. Department of Justice, “United States
Obtains $629 Million Settlement with British American Tobacco to
Resolve Illegal Sales to North Korea, Charges Facilitators in
Illicit Tobacco Trade,” (April 25, 2023); https://www.justice.gov/archives/opa/pr/united-states-obtains-629-million-settlement-british-american-tobacco-resolve-illegal-sales
12. U.S. Department of the Treasury Office of Foreign
Assets Control Guidance on Extension of Statute of Limitations
(July 22, 2024); https://ofac.treasury.gov/media/933056/download?inline
13. Office of the Attorney General, “Total
Elimination of Cartels and Transnational Criminal
Organizations,” (Feb. 5, 2025); https://www.justice.gov/ag/media/1388546/dl?inline
14. https://www.justice.gov/corporate-crime/voluntary-self-disclosure-and-monitor-selection-policies
15. U.S. Department of Justice, “Justice Department
Declines Prosecution of Company That Self-Disclosed Export Control
Offenses Committed by Employee,” (April 30, 2025); https://www.justice.gov/opa/pr/justice-department-declines-prosecution-company-self-disclosed-export-control-offenses
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