NAFTA Re-Negotiation: How Safe Are Your Contracts?

The North American Free Trade Agreement has brought massive changes to supply chains throughout the United States, Mexico and Canada over the past 23 years. Now, for the first time, the United States has an anti-NAFTA administration, which is moving forward on its campaign promise to re-negotiate the agreement. The details are far from final, but some of the proposals on the table should concern anyone involved in negotiating supply contracts. Continue Reading

Arming the Supply Chain

In an effort to bolster his “Buy American” agenda, President Trump and his administration are taking the first steps in allowing for a more lenient oversight of American gun makers to sell non-military small arms and ammunition to foreign buyers. When complete, this plan would shift the oversight of non-military firearm sales from the State Department to the Commerce Department, easing the restrictions on exportation and, in theory, help bolster a recessed industry.

As things currently stand, all forms of weaponry – everything from small recreational shooting range pistols and hunting rifles to fighter jets and surface to air missiles– are covered by the United States Munitions List promulgated by the Department of State., set forth at 22 C.F.R. 121.1.

Every arms manufacturer intent on exporting their products out of the United States must register with the State Department and get a license for each planned export. Every sale transaction is scrutinized by U.S. officials to ensure the importing country adheres to human rights laws and to determine the likelihood of the weapons falling into the hands of parties with adverse interests to those of the United States.

Under the current regulatory structure, U.S. gun makers must compete for foreign market share with one hand tied behind their backs due to this government red tape, regulatory hurdles, and their associated costs.

Under the oversight of the Department of Commerce, the driving force behind the new, eased export regulations will be the reduction of the U.S. trade deficit rather than strict arms control. Non-military small arms are likely to fall under the supervision of the Commerce Control List which requires far less scrutiny that the U.S. Munitions list. Export hurdles could be as slight as (1) determining the product’s Export Control Classification number, (2) delineating where the product is going, (3) stating who the end-user is intended to be, and (4) what will the end use of the product be.

Under the new regulatory scheme, of the $4 billion in commercial firearm exports overseen by the State Department last year, $3.2 billion would have fallen under the control of Commerce, according to Reuters. With the new streamlined export protocols, U.S. gun makers stand to benefit to the tune of an estimated 15 to 20 percent increase in annual sales.

As things stand, these new changes can be enacted without congressional approval and could begin being implemented as early as the first half of next year.

So what does this all mean for the supply chains of U.S. based small arms manufacturers and the defense industry as a whole? Support industries selling components for small arms should see growing oversees opportunities, opening up the global small arms supply chain to new players.

For now, keep an ear to the ground in the coming months for more formal announcements of the proposed changes.


Mother Nature Is Tough – How About Your Contracts?

The news from Texas over the last few days has reminded us that a single storm can flood entire cities, shut down factories, cut off warehouses, wash trucks off the road, close airports, and essentially bring an entire supply chain to a screeching halt.

What happens to supply contracts then? There is law on this point, but law alone is not always helpful. Continue Reading

Heads Up Federal Contractors, Buy American Laws Are Going to Impact Supply Chains

flickr / Chairman of the Joint Chiefs of Staff

Previously (here and here), we discussed the Trump administration’s renegotiation of NAFTA and the steps the President has taken to promote Buy American and Hire American.  Now the Department of Defense and the Department of Commerce, together with the White House, are taking steps to ensure enforcement of Buy American Laws.

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Don’t Just “Pass it Through” – Options for Handling Warranties Down the Supply Chain

Take a simple fact pattern: A sells widgets to B, and B re-sells the widgets to C. Something goes wrong with the widgets and C needs to have them repaired or replaced, or has a claim for damages. Who does C claim against?

One concept that often comes up in negotiations and contracts is a so-called “pass through” warranty: the concept being that the reseller obtains a warranty from a supplier, and “passes” the benefit “through” to their customer. Even though this language sometimes shows up in final contracts, it can be legally ambiguous – there are several ways to accomplish this economic goal, and the precise method can end up having a big impact on the risk allocation between the parties. Before going into your next supply contract negotiation, consider your options in more detail: Continue Reading

Quoted in Corporate Counsel: Lessons from Hobby Lobby’s Settlement

Earlier this month, nationwide arts-and-crafts retailer Hobby Lobby settled with U.S. Department of Justice over allegations of smuggling cultural artifacts from Iraq.  As part of the settlement, Hobby Lobby consented to forfeiture of the artifacts and payment of $3 million.  Hobby Lobby also agreed to adopt internal policies and procedures governing its importation and purchase of cultural property and must submit quarterly reports to the government on any cultural property acquisitions for the next eighteen months.

Corporate Counsel examines what went wrong and the lessons to be learned for any in-house counsel dealing with supply-chain issues.  Sarah Rathke provides comments on the importance of oversight, due diligence, and how companies can take advantage of the benefits of attorney-client privilege.

You can read the article here: 3 Key Lessons for Legal Departments From Hobby Lobby’s $3 Million Antiquities Settlement


The Far-Reaching Reach of REACH; Global Supply Chain Impacts

Last week, we reported on the Restriction of Hazardous Substances Directive (RoHS) in the EU, which took effect in 2006 and restricts the use of toxic chemicals in electronics products.  Although RoHS is an EU directive, we discussed that it has extraterritorial impacts on global supply chains in that the legislation requires electronics manufacturers to compile comprehensive technical files on their products, and to share this information with importers and distributors – in effect, requiring effective cooperation both up and down the supply chain.

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