Christopher Swift, JD, PhD, is a partner and litigator with Foley & Lardner LLP, specializing in international and national security practices, where he counsels clients on a variety of trade-related issues. Dr. Swift recently spoke to AIAG’s Export Compliance Advisory Group (ECAG), providing important updates on current export compliance issues and concerns. The AIAG ECAG group collaborates to share industry knowledge and create best-in-class programs for effective export compliance in the automotive and related spaces. The committee reviews changing export regulations and critical elements of effective export compliance procedures, sharing training and development opportunities throughout the industry.
In this interview just prior to his ECAG presentation, Dr. Swift forecasts a shift in international relations that will come with the new Biden Administration.
Q: How has the pandemic impacted exports?
Dr. Swift: The pandemic’s primary impact has been on the supply chain — not exports. There’s been a one-third contraction in global trade volume. During the first six months of the pandemic, global trade was 70% of what it was during the same period in 2019. The problem is supply chain disruptions. It is hard to get the products needed to manufacture other products. The pandemic’s impact on all countries has been pretty significant.
For U.S. companies, it has been hard getting stuff not manufactured here in the U.S. Plus, the government invoked the Defense Production Act to increase availability of supplies related to the pandemic, and that will continue. Automotive companies have been affected, and many have had to diversify their manufacturing. All of this will make it harder to export — except if you want to export products related to the pandemic.
Q: What should be top of mind for AIAG members who export?
Dr. Swift: Security and competition. How are you going to deal with competition from China and Russia, for example? And how is the Biden Administration going to be different?
China is still a dangerous and complicated country. Even as much as we collaborate with China, it is also our competitor — a “frenemy” so to speak. Will diplomacy change under the Biden Administration? China, Russia, and Iran are three countries that could cause trouble for the automotive industry.
Q: Can you expand on that?
Dr. Swift: China will continue to be a top priority for Biden in terms of national security. The challenge is that some companies that appear to be commercial companies are actually Chinese military companies doing work for the Chinese military. This causes technology transfer concerns for U.S. exporters.
Regarding Russia, I expect Biden will increase sanctions in Russia. Biden once said he looked into Putin’s eyes and saw no soul. We can expect U.S.-Russian relations to be more adversarial in the next 6 months, more sanctions, more export controls. Existing sanctions will be better enforced. The last 4 years, they were not enforced.
And finally, Iran. There’s been a lot of noise about Biden getting back to a nuclear deal with Iran. Folks are assuming that sanctions with Iran will go away, but that is not the case. The sanctions on friends to Iran will go away, but not the sanctions on Iran. This affects the auto industry for sure. The French, Chinese, and Indians all have automotive ventures in Iran. U.S. companies have to be careful that they are not doing business with automotive companies that are on the U.S. terrorist watch list. Many U.S. companies have gotten in trouble by breaking the law without even realizing it. Things that are illegal under U.S. law may be legal in a company that you’re doing business with.
Q: How can automotive companies reduce their risk in these areas?
Dr. Swift: Don’t think of it as a regulatory challenge. The U.S. government doesn’t think of it as a regulatory issue. The government views this as a national security issue. Biden will put more attention on this issue and dedicate more resources to enforcement. There will be more awareness of the problem, coupled with increased resources. We will see investigations and prosecutions increasing. The U.S. government is now focused on enforcement and discouraging U.S. companies from doing bad things in scary places.