Trade Sanctions Compliance | Carter Industrial Company
Introduction to Trade Sanctions for Carter Industrial Company
At Carter Industrial Company, a leading GRS-certified synthetic leather manufacturer, we are committed to conducting our business in compliance with all applicable trade sanctions and embargoes. Trade sanctions refer to laws and regulations imposed by countries to further foreign affairs, national security, or human rights objectives, which restrict dealings with targeted individuals, entities, and governments. This Trade Sanctions Policy serves as a guide for all employees, managers, executive officers, and members of the board of directors to ensure compliance with trade sanctions laws and regulations.
Trade sanctions can impose restrictions on the Company's dealings with targeted persons and governments.
Violations of trade sanctions may lead to severe penalties, including monetary fines, imprisonment, and reputational damage.
Close analysis of proposed operations or transactions involving high-risk countries is essential to avoid sanctions violations.
Due diligence of counterparties, including gathering identifying information and conducting screenings, can help mitigate sanctions risks.
Contractual guarantees from counterparties may be sought to further mitigate sanctions risks.
Identifying High-Risk Countries
Employees of Carter Industrial Company must be aware of the risks associated with conducting operations or dealing with individuals and entities in certain countries. The following guidelines apply:
A frequently updated list of countries, included in the Appendix, helps identify potential sanctions-related risks.
Red countries: Under no circumstances should an employee engage in operations or transactions involving the government of a Red country, individuals located in or resident in a Red country, or entities organized under the laws of a Red country, without written permission from the Anti-corruption Compliance Officer. This prohibition also includes entities owned or controlled by the aforementioned categories.
Yellow countries: Prior consultation with the Anti-corruption Compliance Officer is required before engaging in operations or transactions involving the government of a Yellow country, individuals located or resident in a Yellow country, or entities organized under the laws of a Yellow country. This prohibition also encompasses entities owned or controlled by the aforementioned categories.
Countries not listed in Red or Yellow in the Appendix generally present lower sanctions risks, but caution should still be exercised as individuals or entities from these countries may still be sanctions targets. Operations or transactions in neighboring areas to the listed countries may require additional risk assessment and diligence.
The Anti-corruption Compliance Officer is responsible for maintaining an up-to-date Appendix and evaluating the Company's operations periodically to identify any heightened risks of sanctions violations.
Risk Mitigation in Dealings with Counterparties for Carter Industrial Company
To mitigate trade sanctions risks in relation to agents, suppliers, distributors, and other counterparties, Carter Industrial Company must implement due diligence and seek contractual guarantees. The following measures should be followed:
Risk-based due diligence should be conducted to ensure compliance with trade sanctions laws and regulations. Due diligence should focus on the following aspects:
Identifying Sanctions Targets: Determine whether the counterparty itself is a target of sanctions or is owned, controlled, or acting on behalf of any government, individual, or entity subject to sanctions.
Country Assessment: Assess whether the counterparty is located, organized, or resident in a country that is a sanctions target.
The level of due diligence required may vary based on the extent of the Company's engagement with the counterparty. For significant relationships like joint venture partners, more extensive due diligence should be performed compared to suppliers engaged for smaller transactions.
Step 1: Gather Identifying Information
When dealing with new counterparties, individuals and entities should provide the following identifying information:
Country of residence
If the individual is an agent or representative, provide the name of the individual or entity being represented, along with their corresponding information.
Full legal name and any trade names used
Country in which the entity is registered or incorporated
Place of business
Corresponding information for the parent company
If the entity is an agent or representative, provide the name of the individual or entity being represented, along with their corresponding information.
Step 2: Screen
For counterparties located in the EU or U.S. and not owned, controlled, or acting on behalf of a party in another jurisdiction, further diligence is not required unless suspicious behavior is observed or there are obvious risks related to the counterparty.
For counterparties from jurisdictions other than the EU or U.S., screen the names of individuals or entities (including parent companies and those being represented) against the following lists:
The Consolidated List of Persons, Groups, and Entities subject to EU financial sanctions at https://www.eeas.europa.eu/eeas/european-union-sanctions_en.
The U.S. Office of Foreign Assets Control Sanctions List Search available at https://sanctionssearch.ofac.treas.gov/.
Any similar list covering sanctions targets under local law.
Maintain records of screening results to demonstrate compliance with trade sanctions.
Step 3: Consult with the Anti-corruption Compliance Officer (if needed)
If a counterparty is listed or the screening results reveal a relevant match, contact the Anti-corruption Compliance Officer before proceeding with the transaction. Further diligence or potential restrictions on the transaction may be required. Consultation with the Anti-corruption Compliance Officer should also be pursued regarding countries listed in the Appendix for high-risk countries.
In appropriate cases, Carter Industrial Company may seek contractual guarantees from counterparties to confirm the information gathered during due diligence. These guarantees may include assurances that the counterparty is not a sanctions target directly or indirectly, and is not located, organized, resident, or doing business in a country that is a sanctions target.
Depending on the circumstances, the agreement with the counterparty may include undertakings regulating their performance. For example, the counterparty could agree to refrain from engaging with any sanctions target while fulfilling their obligations under the agreement, such as subcontracting to a sanctions target.
Automatic Disqualification of U.S. Persons
In order to comply with U.S. trade sanctions laws and regulations, Carter Industrial Company must implement measures to automatically disqualify U.S. persons from participating in any decisions, dealings, or transactions related to targets of U.S. trade sanctions. The following guidelines should be followed:
U.S. Persons: U.S. persons, including U.S. citizens and permanent residents, are prohibited from dealing with targets of U.S. sanctions and participating in any decision making or actions related to such transactions. Therefore, the following individuals are automatically disqualified from participating in any decisions, dealings, or transactions related to U.S. trade sanctions targets:
All employees of Carter Industrial Company who are U.S. citizens or permanent residents.
All employees of Carter Industrial Company while located in the U.S., such as while traveling on business.
No further action is required from these individuals to disqualify themselves from such circumstances. The authority in this regard is delegated to the direct subordinate of the disqualified employee. Any questions regarding disqualification for sanctions compliance should be directed to the Anti-corruption Compliance Officer.
Violations of trade sanctions can result in severe penalties, including fines and imprisonment. Settlements with authorities can range into the hundreds of millions of euros or dollars. The penalties for sanctions violations vary depending on the jurisdiction and the nature of the violation. Some key points to consider are:
EU Sanctions: Willful and negligent violations of EU sanctions are set and enforced by each EU member state, and they can be punishable by fines and imprisonment. EU sanctions apply to all individuals and entities involved in any business conducted, in whole or in part, within the European Union, including nationals of EU member states and entities incorporated or constituted under the laws of an EU member state.
U.S. Sanctions: Willful violations of U.S. trade sanctions can lead to criminal penalties, including fines of up to USD1 million and imprisonment for up to 20 years. Civil penalties for non-willful violations of most sanctions programs can range up to USD250,000 or twice the amount of the underlying transaction for each violation. U.S. sanctions apply not only to U.S. companies but also to U.S. citizens and permanent residents (regardless of location), foreign branches and subsidiaries of U.S. companies, branches and subsidiaries of non-U.S. companies located in the United States, and any non-U.S. person while in the territory of the United States.
Employee Disciplinary Action: Employees who violate trade sanctions may be subject to disciplinary action by Carter Industrial Company, including termination of employment. Employees who, after consulting with appropriate personnel at the Company, refrain from entering into a transaction due to concerns regarding trade sanctions will not face adverse consequences as a result.
In addition to trade sanctions, it is important for Carter Industrial Company to be aware of and comply with export control regulations, which govern the export of certain items, materials, or technology from various jurisdictions, including the EU and the U.S. These regulations primarily apply to military and dual-use items that have both civilian and military or nuclear applications, but they may also have broader implications in certain cases. Compliance with export controls depends on factors such as the nature of the item, its destination, the end-user, and the intended use. It is worth noting that U.S. export controls also extend to the "re-export" of U.S.-origin goods and technology.
To ensure compliance with export control regulations, the following guidelines should be followed:
Contact Person: Employees who believe that their activities may be subject to export control regulations should reach out to Peter Linderoth at Mannheimer Swartling Advokatbyrå AB for guidance and clarification regarding export controls.
Do's and Don'ts:
Assess whether a proposed activity or transaction involves a high-risk country by consulting the country list provided in the Appendix.
Conduct due diligence on new counterparties by collecting identifying information and screening it against relevant sanctions lists.
Notify the Anti-corruption Compliance Officer if high-risk countries are involved or if screening identifies a match.
Report any suspected sanctions violations through the appropriate channels.
Seek guidance from the Anti-corruption Compliance Officer if any questions arise.
Engage in transactions if the counterparty's location is unclear or if important information has not been provided.
Continue engaging with an existing counterparty that becomes a sanctions target due to changes in sanctions laws or regulations.
Assume there is no issue if a counterparty appears to be acting suspiciously or evading requests for information. Contact the Anti-corruption Compliance Officer.
Attempt to evade sanctions by any means, including routing funds destined for a sanctions target through a third party.
Employees who suspect a violation of trade sanctions within the Company must follow the standard reporting process or adhere to the reporting process outlined in the Whistleblowing Policy.
Carter Industrial Company provides suitable training to all employees based on the Company's risk profile and their respective responsibilities. This training ensures awareness and understanding of trade sanctions and export control regulations.
The Compliance Coordinator is responsible for presenting the Compliance Committee, consisting of the CEO and President with an annual objective and comprehensive audit of the Corporate Compliance Program concerning trade sanctions. These audits take into account the Company's specific areas of operation, geographic locations, and legal obligations.