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 2019[1] 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 years[12], 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.
[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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