Through The Employer Report blog, our lawyers provide legal updates and practical insights to help clients understand, prepare for and respond to the latest domestic and cross-border Labor and Employment issues affecting US and multinational employers.

Our team of Employment & Compensation lawyers based in Baker McKenzie’s US offices across California, Florida, Illinois, New York, Texas, Washington DC and beyond, work with domestic and multinational businesses to navigate all of their labor and employment needs, from day-to-day human resources requirements to critical global business change projects.

As strategic business partners, we help clients manage their primary asset – their people. Our reputable practitioners leverage the Firm’s global footprint to provide solutions across jurisdictions and cultures, all while being uncompromising in quality. We focus on the key streams of complex, bet-the-company Disputes and Investigations; bespoke, actionable Advice and Counsel; and the “people” aspect of successful corporate Transactions.

The post The Employer Report: Navigating US and Global Employment Law appeared first on Global Compliance News.

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Baker McKenzie’s Sanctions Blog published the alert titled OFAC extends and reissues General License authorizing certain transactions involving the Central Bank of Russia, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation on 9 September 2022. Read the article via the link here. Please also visit our Sanctions Blog for the most recent updates.

The post United States: OFAC extends and reissues General License authorizing certain transactions involving the Central Bank of Russia, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation appeared first on Global Compliance News.

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By Brent Zelinski, Standards Senior Manager, HITRUST

Q2 2022 Threat-Adaptive Evaluation for the HITRUST Implemented, 1-Year (i1) Validated Assessment

Trending Highlights:

  • Internal Spearphishing (T1534)
  • Exploitation for Privilege Escalation (T1068)

When the HITRUST i1 Assessment + Certification was introduced in late 2021, we committed to the HITRUST community to reassess the coverage of the i1 control section requirements against emerging cybersecurity threats each quarter. Our ongoing quarterly threat analysis is meant to verify and reinforce additional controls that may be introduced.

After Q1 2022 analysis, we stated specific action items planned for inclusion in our next release coming later in the year, and this is still the case. Our analysis of Q2 2022 cyberthreat data against the i1 control section requirements confirms our Q1 conclusions.

Based upon the top techniques and associated mitigations identified and addressed in MITRE ATT&CK Framework, the i1 control requirements in the i1 Assessment continue to address the top 20 cyber threats identified during the second quarter of 2022 and address 99% of cyber threats seen.

As a result of our most recent Q2 analysis, HITRUST confirmed its Q1 conclusion to introduce two new requirement statements to enhance the strength of coverage for MITRE Mitigations M1051 and M1017. In addition, with the increase of T1534 Internal Spearphising activity in Q2, the new requirement statement initially proposed to enhance M1017 will be further expanded to include internal spearphishing. Both enhancements are scheduled for introduction alongside the release version of the HITRUST CSF framework expected later this year.

Q2 2022 Threat Data Analysis Details

Initial Findings: HITRUST noted the following MITRE Techniques shown below had the largest increase of occurrence during Q2 2022, as compared to the same data from Q1 2022.

T1499 T1498 T1059 T1595 T1490 T1534 T1068
Endpoint Denial of Service Network Denial of Service Command and Scripting Interpreter Active Scanning Inhibit System Recovery Internal Spearphishing Exploitation for Privilege Escalation

i1 Status Evaluation: For each of the threat techniques identified above, HITRUST explored in depth the existing i1 Assessment control set and found that the requirement statements currently included provided significant coverage against each of these techniques.

Overall Technique Coverage

T1534: Internal Spearphishing

i1 Coverage Evaluation: For T1534: Internal Spearphishing attack technique, the existing coverage is currently addressed in the i1 through two HITRUST CSF requirements:

  • The organization provides specialized security and privacy education and training appropriate to the employee’s roles/responsibilities, including organizational business unit security POCs and system/software developers.
  • Personnel with significant security responsibilities receive specialized education and training on their roles and responsibilities: (i) prior to being granted access to the organization’s systems and resources; (ii) when required by system changes; (iii) when entering into a new position that requires additional training; and, (iv) no less than annually thereafter.

In Q1 of 2022, the HITRUST threat analysts noted T1566: Phishing as a prevalent threat technique and concluded that while our current i1 control requirements address the need for initial and ongoing security and privacy training to mitigate phishing cyberattacks, the requirements do not specifically address how to avoid phishing and ransomware attacks, including: avoiding opening files, clicking on links, etc. from unknown sources without first checking them for suspicious content. With T1534: Internal Spearphishing emerging as a top threat this quarter, we emphasize the importance of the above requirement statements related to training of individuals with significant and specialized roles.

Future Action:  An additional requirement addressing the need to conduct user training with content specific to phishing, internal spearphishing, and ransomware will be included in i1 assessments generated based on the next release version of the HITRUST CSF framework expected later this year.

T1068: Exploitation for Privilege Escalation
The T1068 attack technique was the only threat to show top growth increases across both Q1 and Q2 of 2022.

Future Action:  This continuing threat increase reinforces our prior decision to introduce an additional requirement addressing the need to install regular software updates manually for systems that do not support automatic updates.

For more information on our current i1 control coverage for related MITRE mitigations visit our Q1 post.

Summary

Going-forward, HITRUST will continue to evaluate current and evolving cyberthreats and will update the HITRUST CSF framework and the preset controls in the i1 Assessment to address emerging attack techniques. This unique threat-adaptive functionality sets HITRUST apart from other methodologies to provide added assurance that information protection programs remain up to date.

Since the i1 is threat-adaptive with a control set that evolves over time, an i1 Assessment must use the then-current version of the HITRUST CSF (currently v9.6). Entities with i1 assessments underway (object created), and those with a valid i1 Certification, will not be affected by i1 control selection updates until their next HITRUST assessment effort.

Learn More about the HITRUST i1 Threat-Adaptive Assessment.

Follow HITRUST on Twitter.
Follow HITRUST on LinkedIn.


 

Glossary

T1068: Exploitation for Privilege Escalation
Exploitation of a software vulnerability occurs when an adversary takes advantage of a programming error in a program, service, or within the operating system software or kernel itself to execute adversary-controlled code.

M1051: Update Software
Perform regular software updates to mitigate exploitation risk.

T1534: Internal Spearphishing
Internal Spearphishing is a multi-staged campaign where an email account is owned either by controlling the user’s device with previously installed malware or by compromising the account credentials of the user. Adversaries attempt to take advantage of a trusted internal account to increase the likelihood of tricking the target into falling for the phish attempt.

T1566: Phishing
All forms of phishing are electronically delivered social engineering. Adversaries may send victims emails containing malicious attachments or links, typically to execute malicious code on victim systems. Phishing may also be conducted via third-party services, like social media platforms.

 


 

About the Author

Ryan PatrickBrent Zelinski, Standards, Senior Manager, HITRUST

Brent brings deep levels of expertise in vulnerability and threat management, ethical hacking, and information security governance to the HITRUST Standards Group. His responsibilities include cyberthreat research along with correlating enhancements and maintenance to the HITRUST CSF framework. Brent’s decade of diverse consulting and support experience includes serving organizations and regulatory bodies of all size and function.

 

The post Q2 2022 i1 Assessment Update: Control Requirements Analysis appeared first on HITRUST Alliance.

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In brief

On 25 August 2022, the Securities and Exchange Commission (SEC) released a final rule in the form of new Item 402(v) of Regulation S-K that seeks to shine an ever-brighter spotlight on the link between executive pay and company performance at certain US public companies.


Overview

Beginning with any proxy statement or information statement filed for fiscal years ending on or after 16 December 2022 (i.e., the 2023 proxy season for calendar year companies), reporting companies (except foreign private issuers, registered investment companies and emerging growth companies) will need to provide a new pay versus performance table accompanied by a narrative and/or graphical explanation of the relationship between executive compensation ‘actually paid’ to the company’s named executive officers and the company’s financial performance, generally for the five most recently completed fiscal years,1 with scaled disclosures for smaller reporting companies. Item 402(v) disclosure will be treated as ‘filed’ for purposes of the Securities Exchange Act of 1934 and will be subject to the say-on-pay advisory vote under Securities Exchange Act Rule 14a-21(a).

Background

 The Dodd-Frank Wall Street Reform and Consumer Protection Act called on the SEC to adopt final rules to implement a pay versus performance proxy disclosure requirement. In response, the SEC proposed rules on pay for performance in 2015, and seven years later the SEC issued the final rules, on 25 August 2022, by a 3-2 vote.2 The final rules adopt a prescriptive approach to providing the requisite disclosure in a consistent format, rather than a more principles-based approach.

New Pay Versus Performance Table

Under Item 402(v) of Regulation S-K, companies will need to disclose the following information in a new table: 

I. Summary Compensation Table Compensation Information. The total compensation for the Principal Executive Officer (PEO) and the average of total compensation for the remaining Named Executive Officers (NEOs) as reported in the Summary Compensation Table. If there is more than one PEO during a fiscal year, separate disclosure is required for each PEO. 

II. Executive Compensation Actually Paid. The “executive compensation actually paid” for the PEO and the average of the “executive compensation actually paid” for the other NEOs. The definition of “executive compensation actually paid” for a fiscal year generally refers to the total compensation as reported in the Summary Compensation Table adjusted as follows: 

A. For all defined benefit and actuarial pension plans:  

  • Deduct the change in the actuarial present value of all defined benefit and actuarial pension plan benefits as reported in the Summary Compensation Table for the applicable fiscal year. 
  • Add the sum of (i) the actuarially determined service cost for services rendered by the executive during the fiscal year and (ii) in the case of any plan amendment or newly adopted plan during the fiscal year, the prior service cost, which refers to the entire cost of benefits granted (or credit for benefits reduced) pursuant to the amendment or newly adopted plan that is attributed by the plan’s benefit formula to services rendered in periods prior to the amendment or adoption. 

B. For equity awards: 

  • Deduct the grant date fair value of equity awards as reported in the Summary Compensation Table for the applicable fiscal year. 
  • For equity awards granted in fiscal years prior to the applicable fiscal year, add (or subtract) (i) the change in fair value of awards that are outstanding as of the end of the applicable fiscal year end compared to the end of the prior fiscal year and (ii) the change in fair value of equity awards that vested during the fiscal year as of the vesting date compared to the end of the prior fiscal year, and subtract the fair value as the end of the prior fiscal year of any equity awards that failed to vest during the applicable fiscal year. 
  • For equity awards granted during the applicable fiscal year, add the fair value of as of the end of the year (or as of the vesting date if the award vested during the year) and disregard any award that is both granted and forfeited during the year. 
  • If dividends are not reflected in the fair value of an equity award as disclosed in the Summary Compensation Table, add the dollar value of any dividends or other earnings paid on equity awards during the applicable fiscal year prior to the vesting date. 

III. Financial Performance Measures. The following financial performance measures, must be included in the disclosure: 

A. The company’s cumulative total shareholder return (TSR) and peer group3 cumulative TSR for each of the fiscal years covered by the table, starting with the earliest fiscal year included in the table through the end of the applicable fiscal year 

B. The company’s net income

C. A ‘company-selected’ financial measure (other than TSR or net income) that the company determines represents the most important financial performance measure it uses to link compensation actually paid to the NEOs to company performance for the most recently completed fiscal year4

The new reporting table format will be as follows:

Other Disclosure Requirements

  • Explanation of the Relationship Between Compensation and Performance. In addition to the table, the final rules require a clear description (in narrative or graphical format) of the relationship between each financial performance measure (TSR, peer group TSR, net income and the company-selected measure) and the compensation actually paid to the PEO and to the other NEOs over the company’s five most recently completed fiscal years. A description of the relationship between the company’s TSR and the peer group TSR must also be included. 
  • Tabular List of Performance Measures. The final rules also require a tabular list of three to seven performance measures (including the company-selected measure) that the company determines are its most important measures to link pay and performance, which may include non-financial measures if considered to be among the most important measures (but only if at least three financial measures are included). The tabular list does not have to be ordered or ranked.  
  • XBRL Tagging. Companies will be required to use Inline XBRL to tag their pay versus performance disclosure.

Smaller Reporting Companies

Smaller reporting companies are subject to the following scaled executive compensation disclosure requirements:   

  • Generally required to provide three years of pay versus performance disclosure, instead of five (or two years of disclosure for the first filing, instead of three)
  • Do not have to disclose pension-related amounts in executive compensation actually paid
  • Do not have to disclose peer group TSR or a company-selected measure 
  • Do not have to provide a tabular list of financial performance measures
  • Do not have to provide Inline XBRL tagging until the third filing in which the pay-versus-performance disclosure is made (instead of the first)

Next Steps

Given these heightened disclosure requirements, covered reporting companies should begin consulting legal, accounting and compensation advisors to ensure they have developed systems and procedures to collect relevant information and comply with the rules of Item 402(v) of Regulation S-K for the upcoming proxy season. For example, companies will need to (i) have systems in place to calculate year-end and vesting date fair values of equity awards and the applicable annual service cost of defined benefit and pension plans for purposes of reporting compensation ‘actually paid’, (ii) determine their peer group for purposes of calculating cumulative peer group TSR, (iii) determine the measure that will be disclosed as the company-selected measure and the additional tabular list of three to seven ‘most important’ performance measures, and (iv) assess the narrative and/or graphical disclosure about the relationship between executive compensation ‘actually paid’ to the company’s NEOs and the company’s financial performance and between the company’s TSR performance compared to that of its selected peer group. Given that the new rules will apply for fiscal years ending on or after 16 December 2022, there is no time like the present to get started.
_________________________________________

1Under the transition rules, this data is required for three years, rather than five, for the first filing in which the reporting company provides these disclosures, adding one additional year in each of the subsequent two years.
2The Chair of the SEC and the two concurring SEC Commissioners praised the final rule as promoting transparency and accountability to investors. However, the two dissenting SEC Commissioners criticized the final rule as requiring ‘costly, complicated, disclosure of questionable utility’, taking ‘a sweeping and complex prescriptive approach that is not required under the statute’, and using a ‘stale’ economic analysis prepared under the SEC’s 2015 proposed rule (essentially comparing 2015 apples to 2022 oranges) in violation of the Administrative Procedure Act.
3The peer group must be either the peer group used for purposes of the Performance Graph required by Item 201(e) of Regulation S-K or the peer group used in any CD&A disclosure of benchmarking practices. 
4If the company-selected measure is a non-GAAP measure, disclosure must be provided as to how the number is calculated from the company’s audited financial statements, but a full reconciliation is not required.

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Baker McKenzie’s Sanctions Blog published the alert titled BIS issues new FAQs addressing red flags related to Russia/Belarus and semiconductor foundries’ potential entity list dealings on 1 September 2022. Read the article via the link here. Please also visit our Sanctions Blog for the most recent updates.

The post BIS Issues New FAQs Addressing Red Flags Related to Russia/Belarus and Semiconductor Foundries’ Potential Entity List Dealings appeared first on Global Compliance News.

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In brief

The semiconductor shortage is increasingly obvious, from the automotive industry to consumer electronics. In fact, the chip shortage has even been referenced as a potential matter of national security. H.R. 4346, better known as the CHIPs and Science Act (“Act”), was signed into law by President Biden on 9 August, 2022 and seeks to promote semiconductor supply chain resilience by establishing incentives to increase the production of microchips and related devices, including through an effectively refundable tax credit, as well as through other measures. Semiconductor manufacturing companies and other companies that participate in semiconductor supply chains should consider how the Act applies to their business.  We highlight a few key provisions here.

Advanced Manufacturing Investment Credit

Specifically, section 107 of the Act creates new Code Section 48D, which allows for a 25% investment tax credit, the “advanced manufacturing investment credit,” for investments in semiconductor manufacturing. 

The credit for any taxable year is 25% of the qualified investment (which excludes basis of property attributable to qualified rehabilitation expenditures) for such year with respect to any advanced manufacturing facility (i.e., a facility for which the primary purpose is manufacturing semiconductors or semiconductor manufacturing equipment) of an eligible taxpayer. A qualified investment is the basis of any qualified property placed in service by the taxpayer during the taxable year that is part of an advanced manufacturing facility. Qualified property is property (i) that is tangible property; (ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable; (iii) which is either (A) constructed, reconstructed, or erected by the taxpayer or (B) acquired by the taxpayer if its original use commences with such taxpayer; and (iv) which is integral to the advanced manufacturing facility’s operation. Qualified property includes any building or its structural components otherwise meeting the qualified property criteria but specifically does not include buildings (or portions of buildings) used for offices, administrative services, or other functions unrelated to manufacturing. 

To be eligible for the credit, the taxpayer cannot be a “foreign entity of concern” (as defined in section 9901(6) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021). Furthermore, the taxpayer cannot enter into a “significant transaction” that involves the material expansion of the taxpayer’s semiconductor manufacturing capacity in the People’s Republic of China or other foreign countries of concern in the taxable year in which property that would otherwise be eligible for the credit is placed into service.

Additionally, instead of taking the full 25% tax credit into account in the year in which the property is placed in service, section 48D permits the application of the qualified progress expenditure rules in section 46(c)(4) and section 46(d) (as in effect the day before the date of enactment of the Revenue Reconciliation Act of 1990). As a practical matter, these rules allow taxpayers to accelerate claiming the 25% credit where the normal construction period exceeds two years and it is reasonable to believe that the taxpayer constructing the property will be the taxpayer placing the property in service. 

Generally, taxpayers can make an election to treat the credit allowed in any tax year as a payment against tax. The election, which is irrevocable, must be made no later than the due date (including extensions) for the tax return for the year for which the election is made but in no event earlier than 270 days after the Act’s enactment. If a taxpayer makes the election, it is not eligible for a double benefit by also claiming the credit for the applicable year. If the election is made and the credit is treated as a payment against tax, the taxpayer making the election would be eligible to receive a refund if such payment exceeds its actual tax liability for the applicable year. For property held directly by partnerships and S corporations, the election to treat the credit as a payment against tax is made at the entity level even though partnerships and S corporations are not directly liable for tax. If the election is made by a partnership or S corporation, the IRS will make a payment to the entity equal to the amount of the credit, which will be treated as tax exempt income, and each partner’s or S corporation shareholder’s allocable share of such tax exempt income will be equal to the partner’s or S corporation shareholder’s allocable share of the credit, had the entity claimed a credit instead of making the election. If the IRS subsequently determines that there was an excess payment (because the amount treated as payment against tax exceeds the otherwise allowable credit amount for the applicable tax year), the tax imposed on the taxpayer for the applicable taxable year will be increased by the amount of the excessive payment, plus a penalty equal to 20% of the excess payment unless the taxpayer demonstrates that it had reasonable cause for claiming the excess payment.

The advanced manufacturing investment credit applies to property placed in service after 31 December 2022, and, if construction of any such property begins prior to 1 January 2023, only to the extent of basis attributable to the construction, reconstruction, or erection after the date of the Act’s enactment (which is 9 August 2022). Additionally, the credit only applies to property the construction of which begins on or before 31 December 2026.

The rules of section 50, which apply to other investment tax credits, also apply to the section 48D credit and to any payment received in lieu of the credit if the refund election is made. These rules provide that a ratable portion of the credit is subject to recapture if the property with respect to which the credit was claimed ceases to be eligible property in the hands of the taxpayer or if the taxpayer that claimed the credit disposes of that property, in each case within five years of the date on which the property is placed in service. If a portion of the credit is subject to recapture, the taxpayer must increase its tax liability by the amount subject to recapture for the tax year in which the recapture event occurs. Additionally, the depreciable or amortizable tax basis of any property with respect to which the credit is claimed or a refund payment is received must be reduced by the amount of the credit (or payment).

The Act also adds a special recapture provision that applies only to the “advanced manufacturing investment tax credit” but not to other investment tax credits. It provides that, if a taxpayer places into service property with respect to which it claims a section 48D advanced manufacturing investment tax credit or receives a refund payment in lieu of such credit and within a ten-year period of any such property being placed in service, the taxpayer enters into a “significant transaction” that involves the material expansion of the taxpayer’s semiconductor manufacturing capacity in the People’s Republic of China or any “foreign country of concern” (as defined in section 9901(7) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021), the taxpayer must recapture 100% of the amount of such tax credit or payment in lieu. However, a transaction that involves the expansion of a taxpayer’s manufacturing capacity for “legacy semiconductors” (as defined in section 9902(a)(6) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021) is excepted from this recapture rule.

Regulatory Guidance Required

The legislation includes explicit grants of regulatory authority, pursuant to which Treasury and the IRS are directed to issue regulations or other guidance to carry out the purposes of the newly-enacted provisions discussed above, including rules for determining a partner’s or S-corporation shareholder’s allocable share of the tax-exempt income attributable to a refund payment in lieu of the credit, guidance to ensure that the amount of such payment in lieu is commensurate with the amount of the credit that would otherwise be allowable, and guidance clarifying what constitutes a prohibited expansion of semiconductor manufacturing capacity in the People’s Republic of China and other foreign countries of concern. We believe it is likely that Treasury and the IRS will issue regulations providing additional guidance to ensure that taxpayers investing with the intent of qualifying for the credit are able to do so.

The Act is an encouraging step in resolving the chip shortage on the global supply chain. There are, however, several statutory ambiguities in the Act that the IRS may need to clarify to provide more certainty to taxpayers ready and willing to make the significant financial investments that Congress intended to incentivize by enacting section 48D. First, the IRS may provide guidance on the definition of “primary purpose” when defining an advanced manufacturing facility. To provide certainty to taxpayers throughout the construction process, the IRS may consider providing a safe harbor for what constitutes “primary purpose.” Second, the IRS may issue guidance defining what is “integral” to an advanced manufacturing facility’s operation. It would be beneficial for industry experts to provide industry-specific information, such as a list of activities that should qualify as “integral,” for the IRS to consider when drafting such guidance. Third, the IRS may also consider issuing guidance on the treatment of mixed-use property. In particular, it would be helpful if such guidance (i) confirms that this will not be an “all or nothing” determination and (ii) describes the method that taxpayers should use for apportioning the amount of mixed-use property that will be qualified property. Fourth, the IRS may provide guidance on facilities that are already in the process of being constructed to help taxpayers determine what portion of the basis should be allocated to the period prior to the Act’s enactment versus the remaining basis that should be allocated to the post-enactment period (and would thus be eligible for the credit). Finally, the IRS can provide guidance on what activities constitute beginning of construction, as it has in the renewable energy area, to provide taxpayers with a safe harbor that is tailored to manufacturing facilities. While taxpayers have several years before which construction must begin to qualify for the credit, the types of manufacturing facilities that are eligible for the credit generally require advanced planning and regulatory approvals. Taxpayers may need to know what activities they need to take to be deemed to have begun the construction of an eligible manufacturing facility prior to taking even preliminary construction steps.

Federal Government Procurement Policy Changes to Promote Domestic Manufacturing

The Act also includes several changes with respect to federal government procurement policy. Specifically, the Act requires agency heads to establish policies to promote the domestic production of technologies developed by the Manufacturing USA Network, a network of research institutes that develops manufacturing technologies through public-private partnerships. These policies will include: 

  • Measures to partner domestic developers of goods, services, or technologies with domestic manufacturers and financing
  • Incentives to promote the transfer of intellectual property and goods, services, or technologies developed by Manufacturing USA Network activities to domestic manufacturers
  • Measures to prioritize federal procurement of goods, services, or technologies developed by the Manufacturing USA Network activities from domestic sources; 
  • Measures to assist with supplier scouting and other supply chain development (including through the use of a national network of centers to provide custom services to small and medium-sized manufacturers to improve production processes, upgrade technological capabilities, and facilitate product innovation through the Hollings Manufacturing Extension Partnership)
  • Process to review and approve or deny membership in a Manufacturing USA institute by foreign-owned entities, especially from foreign countries of concern, including the People’s Republic of China. 

No Trade Measures in the Act

Earlier versions of this legislation that the House and Senate had each passed and begun conference negotiations on in recent months took more of a “carrot and stick” approach, with several trade measures acting as the “sticks” to supplement the tax incentive “carrots.” However, these trade measures were excluded from the Act.

Specifically, the larger economic competitiveness bills, the Senate’s U.S. Innovation and Competition Act (USICA) (S. 1260) and House’s America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education and Science (COMPETES Act) (H.R. 4521), each contained key trade and foreign policy provisions. However, with the chambers at an impasse on these issues, they were removed from the Act. As a result, the currently expired Trade Adjustment Assistance, Miscellaneous Tariff Bill, and Generalized System of Preferences programs were left out for future negotiation in a separate legislative vehicle. In addition, products from the People’s Republic of China that are subject to additional tariffs under section 301 of the Trade Act of 1974 and that previously benefited from an expired tariff exclusion will continue to be subject to additional tariffs. Further, new proposals to remove de minimis tariff treatment for products coming from certain countries and to screen outbound investments will not become law as part of this Act. Finally, export control provisions were left out of the Act, such as a statement of policy to use export control measures to protect human rights.

The post United States: Giving tax credits where credit is due – Small chips causing big problems appeared first on Global Compliance News.

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In brief

Please join us for a weekly series, hosted by Baker McKenzie’s North America Government Enforcement partners Jeffrey Martino and Jerome Tomas.

This weekly briefing is available on demand and will cover hot topics and current enforcement actions related to white collar crime and criminal investigations in the US and abroad to arm you with the information you need for your business week.

As one of the largest global law firms, we will call upon our exceptionally deep and broad bench of white collar experts throughout the world and particularly in the commercial hubs of Europe, Asia, Africa and Latin America to join our weekly discussion series.

These briefings cover:

  • High-profile DOJ case updates and implications
  • SEC enforcement developments 
  • CFTC enforcement developments
  • Other white collar defense industry developments

29 August 2022

This week’s discussion will cover the following:

  • PCAOB Statement of Protocol Agreement with the China Securities Regulatory Commission
  • China Ministry of Finance regarding oversight of PCAOB-registered public accounting firms in China and Hong Kong

Video Link

Podcast Link

5 August 2022

This week’s discussion will cover the following: 

  • Our white collar thoughts on this week’s “Economist” article on ESG
  • SEC breaks new ground in insider trading case involving crypto assets
  • DOJ remains vigilant in promoting competition in the labor markets through several recent enforcement efforts:
    • Health care staffing company and former regional manager are negotiating an agreement with DOJ to resolve wage-fixing charges
    • DOJ announced a civil settlement with poultry processors to end a conspiracy to exchange compensation information and collaborate on compensation decisions
    • DOJ and FTC are joining with NLRB to strengthen their partnerships in combating labor competition issue

Video link

Podcast link

21 June 2022

This week’s discussion will cover the following: 

  • The Antitrust Division’s updates of its leniency policy and revisions to the leniency FAQs and the increased burden on applicants
  • Policy shifts and the revival of criminal enforcement under Section 2 of the Sherman Act

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Podcast link

24 January 2022

This week’s discussion will cover the following:

  • Indictment of Belarus government officials for air piracy in connection with forced landing of Ryanair jet
  • First DOJ indictment over threatening of election officials 
  • SEC v. David P. Forte, et al.  – SEC and DOJ Continue to Pursue Insider Trading Based on Circumstantial Evidence
  • Discussion of most recent tipper-tippee insider trading case

Video link

Podcast link

20 January 2022

This week’s discussion will cover the following:

  • SEC v Panuwat
  • Shadow Trading Case – Defendant’s Motion to Dismiss Denied

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Podcast link

12 January 2022

This week’s discussion will cover the following:

  • Sentencing in Elizabeth Holmes case
  • SEC Pays Out Whistleblower Bounty for Overseas Tip
  • A Discussion of the Geographic Sources of Whistleblower Tips

Video link

Podcast link

13 December 2021

This week’s discussion will cover the following

  • 6 January Investigation Update
  • White House Anti-Corruption Strategy
  • New OFAC Anti-Corruption Sanctions
  • DOJ Notice of Proposed Rulemaking on FARA 
  • ESG Update: Office of Comptroller of the Currency’s National Risk Committee Identifies Climate Change Initiative in Semiannual Risk Perspective report

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Podcast link

30 November 2021

This week’s discussion will cover the following:

  • New OECD guidance on anti-corruption
  • SEC Enforcement Focus Relating to Undisclosed Executive Compensation and Perquisites Continues: ProPetro Holding Corp. matter.

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Podcast link

22 November 2021

This week’s discussion will cover the following: 

  • Update on Elizabeth Holmes trial
  • Update on Belarus Sanctions
  • FinCEN Notice on Environmental Crimes  
  • Insights on SEC Enforcement – SEC Enforcement’s FY21 report and the NYU Pollack Center for Law & Business and Cornerstone Research report on SEC Corporate Enforcement

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Podcast link

15 November 2021 

This week’s discussion will cover the following: 

  • New Cambodia Sanctions
  • Steve Bannon Indictment

Video link

Podcast link

8 November 2021 

This week’s discussion will cover the following: 

  • Deputy Attorney General Lisa Monaco on corporate enforcement priorities under the Biden Administration
  • The Consumer Financial Protection Bureau (CFPB) is targeting big tech 
    • What do they want and why do they want it?
    • How should tech firms prepare, whether they receive a request from CFPB or not?

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Podcast link

1 November 2021

This week’s discussion will cover the following: 

  • Managing Allegations of Workplace Wrongdoing: Independent Investigator’s Report on Chicago Blackhawks Allegations of Sexual Misconduct

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Podcast link

25 October 2021 

This week’s discussion will cover the following: 

  • Tether Holdings CFTC Crypto Settlement: Reminder that the CFTC is asserting a prominent role in the regulation and enforcement of cryptocurrencies. 
  • SEC Report on January 2021 Market Frenzy: “Staff Report on Equity and Options Market Structure Conditions in Early 2021”
  • Will DOJ Prosecute Steve Bannon for Contempt?

Video link

Podcast link

18 October 2021

This week’s discussion will cover the following: 

  • 6 January Commission and possible prosecution of Steve Bannon for contempt.
  • SEC Enforcement Director Grewal’s speech on appropriate approaches to compliance, proactive enforcement, electronic message retention/production, cooperation, and civil penalties.

Video link

Podcast link

27 September 2021

This week’s discussion will cover the following: 

  • CFTC v. HDR GLOBAL TRADING LIMITED, ET AL
  • Motion to Dismiss Unregistered Crypto Exchange Claims
  • Control Person Liability Runs Into “Minimum Contacts”   
  • House Committee on January 6 Attack Subpoenas Trump Advisors

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20 September 2021

This week’s discussion will cover the following: 

  • Details Behind The SEC Whistleblower Award That Pushed the Program Over USD 1 Billion in Whistleblower Payouts
  • SEC v. DAYAKAR R. MALLU – Tipper-Tippee Insider Trading Case – SEC Investigation Tactics and Trends
  • Indictment of lawyer by Trump-appointed Special Counsel for lying to the FBI in Russia investigation.

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14 September 2021

This week’s discussion will cover the Elizabeth Holmes Theranos trial. 

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30 August 2021

This week’s discussion will cover the following: 

  • Organized crime charges in new elder abuse case
  • Novel SEC Insider Trading Action — Shadow Trading — SEC v. Matthew Panuwa
  • Quick blurb on 18 year old and under crackdown on video game playing in China
  • SEC v. MANISH LACHWANI – The SEC’s Enforcement Focus on Unicorns

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23 August 2021 

This week’s discussion will cover the following: 

  • Special Inspector General for Afghanistan Reconstruction (SIGAR) Report on Lessons of Corruption in Afghanistan
  • Novel SEC Insider Trading Action — Shadow Trading — SEC v. Matthew Panuwa

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9 August 2021

This week’s discussion will cover the following: 

  • SEC brings charges unregistered crypto exchange: In the Matter of Poloniex, LLC
  • The need to keep your auditor at arm’s length — SEC brings auditor independence case for audit bid-related misconduct against accounting firm, it’s partners and the Chief Accounting Officer of public company: In the Matter of Ernst & Young LLP, et al. and In the Matter of William G. Stiehl
  • Accusations against Governor Cuomo: Key Legal Issues
  • New Belarus Sanctions

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3 August 2021

This week’s discussion will cover the following: 

  • New DOJ opinion on Trump tax returns
  • New DOJ policy on subpoenas to new organizations
  • New DOJ memorandum on White House communications
  • SEC Chair Gensler’s Public Statement on Disclosures Required by Chinese Companies Listed In US

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26 July 2021

This week’s discussion will cover the following:

  • The Importance of Having Up-To-Date Automated Accounting Procedures, Effective Manual Accounting Procedures, and Trained Accounting Staff:  The SEC’s Latest Accounting Case Against Tandy Leather Factory Inc. and its former chief executive officer Shannon Greene.
  • Indictment of Trump Advisor Thomas Barrack
  • Biden Executive Order on Promoting Competition

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13 July 2021

This week’s discussion will cover the following:

  • Manhattan DA’s Indictment of the Trump Organization and Allen Weisselberg
  • New SEC Enforcement Director – New Jersey Attorney General Gurbir Grewal
  • SEC and federal criminal charges filed arising out of alleged fraudulent scheme to sell “insider trading tips” on the Dark Web- SEC v. Apostolos Trovias

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29 June 2021

This week’s discussion will cover the following: 

  • SEC Cybersecurity Enforcement Sweep:  The SEC Clarifies, Sort Of
  • Latest, and Interesting, Comments By SEC Commissioner on ESG
  • Combating Global Corruption Act of 2021
  • Global Magnitsky Reauthorization Act
  • New Belarus Sanctions 

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22 June 2021

This week’s discussion will cover the following: 

  • New Charges in 1MDB Case
  • FARA Reform Proposals
  • Possible New Russia Sanctions  
  • Cyber SEC Enforcement: Latest SEC Disclosure Controls and Procedures Enforcement Case
  • A New SEC Cyber Enforcement Sweep

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9 June 2021

This week’s discussion will cover the following: 

  • Potential SEC ESG Disclosure Rulemaking and Materiality:  Commissioners Allison Herren Lee and Elad Roisman Continue to Volley
  • White House strategy statement on corruption and national security
  • Belarus sanctions
  • Bulgaria sanctions
  • Executive Order on Western Balkans

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25 May 2021

This week’s discussion will cover the following: 

  • Insight on Gary Gensler’s SEC Enforcement Agenda: SEC Chair’s Remarks at 2021 FINRA Annual Conference
  • Discussion of Treasury’s Plan to Increase IRS Enforcement and Narrow the Tax Gap
  • Update on Nord Stream 2 Sanctions 

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18 May 2021

This week’s discussion will cover the following:

  • Russian Response to US Sanctions and Designation of US as an “Unfriendly” Country  
  • Trial of Mayor of Fall River, Massachusetts for Extorting Marijuana Businesses  
  • The Challenges of Fitting Modern Practices into Old Laws: SEC Commissioner Hester Peirce’s Statement Regarding an Index Fund SEC Settlement  
  • SEC’s Continued Slow Embrace of Crypto Assets: Division of Investment Management’s Statement on ETF Holdings of Crypto Assets and Potential Enforcement Implications  to Assets and Potential Enforcement Implications  

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10 May 2021

This week’s discussion will cover the following:

  • Crypto developments:  SEC Chair Gensler’s Testimony, Dogecoin and Saturday Night Live
  • The “Swiss George Floyd Case”  (for more information about this case, please see this documentary featuring Simon Ntah here

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3 May 2021

This week’s discussion will cover the following:

  • First Voluntary Self-Disclosure of Sanctions and Export Violations Leads to Settlement between Software Company and DOJ
  • The Sudden Resignation of SEC Enforcement Director Alex Oh:  What is Next For SEC Enforcement?

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26 April 2021

This week’s discussion will cover the following:

  • New SEC Enforcement Director Alex Oh: What It May Mean For SEC Enforcement
  • DOJ Pattern and Practice Investigation of Minneapolis Police Department

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19 April 2021

This week’s discussion will cover the following:

  • First guilty plea in Capitol attack cases: What it means for future prosecutions
  • New Russia sanctions: What they do and don’t do, and what could be next
  • Comments by Acting Director of the SEC’s Division of Corporation Finance, “SPACs, IPOs and Liability Risk under the Securities Laws”: What it means for SEC enforcement

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12 April 2021

This week’s discussion will cover the following:

  • Criminal Antitrust Prosecutions of No Poaching and Wage Fixing Agreements: Perspective of a Leading Antitrust Lawyer.
  • Enforcement perspectives arising out of the SEC’s April 9, 2021 “Risk Alert” relating to ESG products and services offered by investment advisers, registered investment companies and private funds.
  • DOJ Priorities under the Biden Administration: What the Budget Tells Us.

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30 March 2021

This week’s discussion will cover the following:

  • SEC Enforcement Sweep Looks Into SPAC IPOs
  • New Legal Issues in the Capitol Riot Cases

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15 March 2021

This week’s discussion will cover the following:

  • DOJ/SEC FCPA priorities
  • Oath Keepers conspiracy case
  • New Russian law to protect officials against corruption charges
  • Does SEC Commissioner Crenshaw’s speech about increased corporate penalties foreshadow a possible retraction of the SEC’s 2006 Statement Concerning Financial Penalties and what we can expect from corporate securities enforcement over the next 4 years?

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8 March 2021

This week’s discussion will cover the following:

  • This week, Jerome is joined by his partners Amy Greer and Jen Klass and they will dig deep into the enforcement issues presented by the SEC’s “Enforcement Task Force Focused on Climate and ESG Issues” 

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1 March 2021

This week’s discussion will cover the following:

  • The SEC’s Plan to Dig Into Public Company Climate Change Disclosures: A White Collar Enforcement Perspective
  • Key Takeaways from Merrick Garland Confirmation Hearing
  • Update on Capitol Riot Cases
  • Secretary Blinken Statement on Anticorruption Champions 

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22 February 2021

This week’s discussion will cover the following:

  • Potential prosecution of former President Trump for incitement of the Capitol attack
  • The SEC’s latest message following the “The Market Events”: trading suspension in In the Matter of SpectraScience, Inc. 
  • New Transparency International Corruption Report
  • The SEC’s ICO enforcement initiative lives on: SEC v. Coinseed, Inc., et al. (S.D.N.Y. 17 February 2021)

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15 February 2021

This week’s discussion will cover the following:

  • Update on Capitol riot cases
  • The legal definition  of “incitement of insurrection” 
  • Discussion of the reported DOJ and SEC investigations into the retail traders in last month’s market events
  • A reminder on the scope of the US insider trading laws, courtesy of SEC v. Mark Ahn (D. Mass) (also a parallel criminal case was filed)

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8 February 2021

This week’s discussion will cover the following:

  • An update on the Capitol Riots
  • Consideration of new sanctions on Russia
  • An update on stock market events, including the FINRA notice on broker-dealer “game-style” trading apps 

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1 February 2021

This week’s discussion will cover the following:

  • Analysis of the Reddit/WallStreetBets-driven stock surges, with a special appearance by Jerome’s 15 year old son, Sam, who has been following the events on Reddit and Discord  
  • Discussion of the Hoskins appeal and the future of the FCPA’s “Agency” theory
  • Update on the Capitol raid prosecutions

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18 January 2021

This week’s discussion will cover the following:

  • New SEC Enforcement Statute of Limitations and Disgorgement Provisions Contained in the NDAA
  • New AML Whistleblower Bounty Provision in the NDAA
  • Criminal charges against Capitol rioters
  • Julian Assange extradition case

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4 January 2021

This week’s discussion will cover the following:

  • What criminal statutes might apply to the attack on the Capitol?
    • 18 USC 2383 – Rebellion or Insurrection
    • 18 USC 2384 – Seditious Conspiracy
    • 18 USC 1752 – Restricted Building or Grounds
  • What, if any, criminal statutes might apply to President Trump’s call last week with Georgia Secretary of State?
  • The 25th Amendment — A brief history of the amendment, what the amendment provides for and how it might apply in light of these events.

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14 December 2020

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07 December 2020

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23 November 2020

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16 November 2020

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9 November 2020

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26 October 2020

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19 October 2020

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5 October 2020

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29 September 2020

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8 September 2020

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24 August 2020

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17 August 2020

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10 August 2020

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3 August 2020

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27 July 2020

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20 July 2020

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13 July 2020

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6 July 2020

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29 June 2020

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22 June 2020

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17 June 2020

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9 June 2020

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26 May 2020 

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The post United States: This Week in Government Enforcement (Video Chat) appeared first on Global Compliance News.

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In brief

With a growing trend toward taking more ESG measures, some companies are at risk of lawsuits from consumers involving plastic packaging. Here are some best practices boards should know about to mitigate the risk of litigation.


Best preventative practices

In light of these trends, corporate boards should take steps to reduce the risk of ESG litigation in connection with their companies’ plastic recyclability labeling and use of plastics within their supply chains, including by doing the following:

  1. Prompt management to oversee or assign oversight of the use of recyclability labeling on all products, including product packaging. Increase accountability for any misalignment in representations or other statements regarding recyclability and the recyclability criteria in the jurisdictions in which the product is sold or distributed.
  2. Review all corporate ESG statements at the board level. Maintain communication with management to ensure that both formal and informal statements (including investor communications) with aspirational language cannot be misconstrued as false or misleading. Any public statement or disclosure can create the risk of liability and should be carefully vetted.
  3. Stay updated on evolving legislation in this area, such as California SB 343. Given current trends, similar legislation may arise in various other jurisdictions, so it is important to be prepared and keep abreast of the impact of the changing legal landscape. Consider evolving definitions of what is “recyclable”.

As the volume of plastic-related lawsuits against businesses continues to increase, it is growing more important for boards to become involved in overseeing and helping mitigate the litigation risks that have arisen or may arise in the future.

In a recent trend, citizen advocates and environmental groups have been filing lawsuits asserting novel theories against major companies that use or rely on plastic, even if the companies do not produce plastic products or are not involved in the disposal of plastic products. The disruptive increase in plastic-related environmental, social, and governance (ESG) litigation is poised to affect companies in virtually all industries—including technology, manufacturing, food, retail, and transportation—because environmental organizations are targeting companies that use plastic anywhere in their supply chains. Boards of directors need to be aware of the very real risk that their companies can become targets of lawsuits, even if the companies’ use of plastic is ancillary to their actual business. The steep increase in lawsuits against companies suggests that recyclability and other plastics-related litigation is only going to continue to increase and may even reach the proportions of asbestos, tobacco, or opioid litigation. Below, we summarize recent developments and provide advice on what directors can do to mitigate the litigation risk posed by such claims.

For the last few years, plaintiffs have used consumer protection laws to pursue environmental claims against companies that use plastic packaging for their products, alleging that the companies misrepresent the environmental impact or the recyclability of such packaging. Even companies dealing only at a very attenuated level with plastic have been the subject of such lawsuits, such as pharmacies (for their use of reusable plastic grocery bags) and cargo and freight companies (for packaging and shipping plastic material that supposedly pollutes local environments). Plaintiffs have also claimed that, even if a product technically can be recycled, references to recyclability are false—or at least misleading—because the plastic recycling process is often ineffective, a fact of which the consumer products industry is well aware while average consumers are not. This was the plaintiffs’ argument in Smith v. Keurig Green Mountain, Inc., which arose out of Keurig’s sale of disposable coffee pods, some of which were labeled “recyclable”. Plaintiffs alleged that, although the pods were capable of being recycled, they were not recyclable in a practical way because municipal recycling facilities were unable to separate small materials like the Keurig pods. In February 2022, Keurig and the plaintiffs entered into a USD 10 million settlement by which Keurig agreed that it would refrain from labeling its pods as or otherwise claiming that its pods are recyclable absent qualifying language.

The upward trend in lawsuits based on recyclability is likely to continue. In 2021, California Governor Gavin Newsom signed Senate Bill 343 (SB 343), which prohibits the use of symbols or other claims suggesting recyclability, including the chasing arrows symbol, on any product or packaging that fails to meet strict recyclability criteria. Penalties may be imposed for violations. The latest reforms under SB 343 could result in investigations by government entities, including the California attorney general and consumer groups. Other states have started to enact similar legislation, including IllinoisOregonConnecticutMaineHawaii, and Maryland, among others.

The post United States: Plastic and recyclability litigation – Best practices to minimize risk appeared first on Global Compliance News.

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Baker McKenzie’s Sanctions Blog published the alert titled BIS adds foreign-produced aircraft to list of aircraft exported to Russia in apparent violation of the EAR and OFAC issues new and amended Russia general licenses on 22 August 2022. Read the article via the link here. Please also visit our Sanctions Blog for the most recent updates.

The post United States: BIS adds foreign-produced aircraft to list of aircraft exported to Russia in apparent violation of the EAR and OFAC issues new and amended Russia general licenses appeared first on Global Compliance News.

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Baker McKenzie’s Sanctions Blog published the alert titled OFAC amends existing and issues new General Licenses under Russia sanctions to authorize pension payments to non-US persons outside of Russia and closing individual accounts at blocked banks on 29 August 2022. Read the article via the link here. Please also visit our Sanctions Blog for the most recent updates.

The post United States: OFAC amends existing and issues new General Licenses under Russia sanctions to authorize pension payments to non-US persons outside of Russia and closing individual accounts at blocked banks appeared first on Global Compliance News.

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