Distributorship Agreement Without The Clause, ‘‘th Agreement Shall Not Enter Into Force, And May Not Be Amended Or Extended, Without The Prior Written Approval Of The Department Of State Of U.S. Government" Be Removed. The Negotiating Team Has Done So And Replaced It With A Clause That Says, ‘‘th Agreement Takes Effect On The First Day Of The Month Following Signature" And It Has Now Been Signed By Both Parties. What Action Should You Take?
You need to notify the distributor and negotiating team that the signed agreement is not legal and cannot be upheld. The clause that was removed is required to be included in the agreement per 22CFR 124.14(c)(1). A similar clause is also required in the transmittal letter that would accompany the agreement per 22CFR 124.14(f)(2). The negotiating team should have explained to the German warehousing company that that clause could not be removed from the agreement. The EO cannot submit the application as it does not meet all the requirements. If it was submitted as is it would not be approved. The EO could not allow any exports to take place until
DDTC approval is granted or they would be violation by allowing exports prior to the approval.
Until such time as the agreement, including the previously removed clause, is approved in writing by the DDTC you must have a valid license in place to ship to the distributor. The end users must be properly identified for any shipment from the distributor on the license. Certain exemptions might apply as described in 22CFR 123.16. Because the distribution agreement is not approved by the DDTC the exemption described in 22CFR 123.16(b)(v) would not apply.
In order to prevent future occurrences like this, I believe any agreement negotiations involve exported goods or services should include the EO or another person thoroughly trained in international trade regulations to be sure all the requirements are met prior to signature. At the very least the contract should be reviewed and approved for presentation by someone from the export compliance department or an EO. Depending upon the terms of the contract there may be monetary or other costs incurred for breach of contract because the inability to perform because you cannot get the agreement approved by DDTC. Any agreement should have a statement that does not hold you responsible for damages incurred because of the inability to receive...
View Full Essay