Customs and Trade

Trade sanctions raise risks for companies

Issues around customs and trade are increasingly important in the legal market, whether it be tax consequences of false country-of-origin declarations, trade sanctions that limit exports and affect distribution models, closer scrutiny from the authorities, or the economic hopes pinned on the Iran trade deal.

A market observer reports, “Nowadays you really notice that the legal or compliance departments are dealing with these issues as ‘trade compliance,’ whereas they used to be a matter for the distribution department.” This is due not only to the new 2016 Union Customs Code (UCC) but also to the fact that “customs administration is much more transparent than it used to be,” as lawyers specializing in this field unanimously attest.

Internal proceedings put to the test

At the same time, this is leading to a stronger tendency toward preventive measures and internal investigations. Numerous companies are engaged in reworking internal processes as well as contract agreements and employee guidelines, and are backing them up with the necessary software. This is because embargo violations resulting in a loss of customs permits can quickly turn into an existential threat. In addition, sanction issues can even affect the production stage, e.g. a decision to limit the percentage of materials from the US in a final product.

Brexit’s effect on relations with the UK, on the other hand, have so far provoked little concern. The first comment by a specialist a few days after the referendum was “political negotiations will be the first priority, but later on there’ll probably need to be discussions concerning customs registration, preferences, and rules of origin.”

Firms with practical business experience have the advantage

Practically every law firm considered opening an office in Iran last year. Among the big firms, only one – CMS Hasche Sigle – decided to take the plunge.

The central change in the market actually came from a different direction: while demand for advice is rising, the integration of customs and trade with civil and distribution law is gaining importance, both for law firms looking to acquire new clients and companies seeking all-round advice.

Graf von Westphalen and Noerr are firms that recognized this early on; both now boast strong positions in a market that was once attractive only for a handful of specialists and international practices. For many internationally active firms, especially those with a strong regulatory practice, advice on sanctions is a major focus.

But the more firms that come to specialize in this area, including those with strong expertise in the day-to-day operation of companies, the less they can distinguish themselves through internationality alone. Firms such as Cleary Gottlieb Steen & Hamilton and Freshfields Bruckhaus Deringer are feeling the competition, and they do not seem committed to investing in this area. At Freshfields, the retirement of highly respected team leader Dr. Hans-Joachim Prieß was followed by the team’s spinoff to form a new boutique named Blomstein.

Whereas some large firms are focusing strategically on certain aspects of customs and trade, such as compliance and sanctions, and develop these as part of their ?compliance advice, Hogan Lovells and CMS Hasche Sigle continue to follow integrated concepts that involve customs and trade specialists in distribution advice.

 


 

This chapter covers firms that are active in the international regulation of the import and export of goods, services and rights, as well as the complex maze of export control and customs. On an international level, some firms also focus on international commercial law and World Trade Organization (WTO) regulations. Lawyers with experience in arbitration and commercial disputes can also be found in the chapter on ?dispute resolution. Export control also plays an increasing role in ?compliance.