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Tips for Improving Your Client Retention Rates [INFOGRAPHIC]

The Rainmaker Institute

Client retention consultancy Sparked counts some of the world’s most successful brands as its clients, including Microsoft, Google, Kraft, SAP, Barclays and more.  So it’s worth lending an ear when they release research that shows a mere 5% increase in a company’s client retention rate can increase profits by as much as 95%.

Many firms don’t place much emphasis on client retention, believing such fallacies as one or two poor experiences can jettison a relationship (actually, clients leave because of poor performance overall, not just a few isolated incidents).

Sparked has created this infographic to show where firms go wrong when it comes to client retention and provides the remedies for correcting it:

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New U.S. Restrictions on Russia: OFAC (Office of Foreign Assets Control) Guidance and Industry-Specific Sanctions

Sheppard Mullin Law Firm

OFAC Expands the 50 Percent Rule

Last month, the Department of Treasury’s Office of Foreign Assets Control (OFAC) released new guidance related to entities owned or controlled by persons designated as a Specially Designated National (SDN) on OFAC’s SDN list.  Although the guidance leaves intact the current meaning “50 percent rule,” the rule will now allow OFAC to take a far broader approach in determining when the 50 percent rule applies.

Under the 50 percent rule, as it stood before the August 13 release of the updated guidance, all entities owned or controlled, directly or indirectly, by an SDN (i.e., any entity of which an SDN owns 50 percent or more) are considered designated by operation of law and must be treated as SDNs.  Thus, companies owned or controlled by SDNs are blocked, even if they are not themselves specifically listed on the SDN list.  It is unlawful for U.S. persons to conduct virtually any business with any SDN.

In a major expansion of the 50 percent rule, OFAC will now aggregate the ownership interests of SDNs when it determines whether the rule applies.  Specifically, the new guidance provides that “any entity owned in the aggregate, directly or indirectly, 50 percent or more by one or moreblocked persons is itself considered to be a blocked person” (emphasis added).  According to OFAC’S updated Frequently Asked Questions on the issue, “if Blocked Person X owns 25 percent of Entity A, and Blocked Person Y owns another 25 percent of Entity A, Entity A is considered to be blocked.”  Taken to the logical conclusion, the new approach means that an entity owned or controlled by a large number of SDNs, each with a small interest in the entity itself, may nonetheless be designated, and afforded the same regulatory treatment, as an SDN.

Notably, OFAC did not provide for a transition period as the new rule takes effect, nor is there any mention of a general authorization for companies to end involvement in now-potentially prohibited transactions.

More than ever, companies must focus on conducting appropriate due diligence when operating in the universe of potentially covered persons, entities, or transactions.  Due to the expansion of potentially blocked entities, American companies must determine what policies and procedures need to be in place for vetting would-be business partners before engaging in any transaction, so they do not inadvertently conduct unlawful business with SDNs.

Russian Industry Sector Sanctions

Separately, On August 6, 2014, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) issued a final rule amending the U.S. Export Administration Regulations (EAR) to implement the most aggressive set of export controls against Russia in recent memory.  In short, the new rules will deny export, reexport, and transfer (in-country) licenses for certain dual-use items for use in Russia’s energy sector.

Specifically, under the new EAR section 746.5 and amendments to other sections, a license is now required to export, reexport, or transfer (in-country) certain items when the exporter “knows or is informed that the item will be used directly or indirectly in Russia’s energy sector for exploration or production from deepwater …, Arctic offshore, or shale projects in Russia that have the potential to produce oil or gas or is unable to determine whether the item will be used in such projects in Russia.”

The “certain items” referred to in the regulation include two classes of products: (1) any item subject to the EAR listed in Supplement No. 2 to Part 746, including fifty-two specific products listed by Schedule B number; and (2) any item specified in the following Export Control Classification Numbers: 0A998, 1C992, 3A229, 3A231, 3A232, 6A991, 8A992, or 8D999.  BIS includes the following list of illustrative examples of restricted products: “drilling rigs, parts for horizontal drilling, drilling and completion equipment, subsea processing equipment, Arctic-capable marine equipment, wireline and down hole motors and equipment, drill pipe and casing, software for hydraulic fracturing, high pressure pumps, seismic acquisition equipment, remotely operated vehicles, compressors, expanders, valves, and risers.”

With the exception of License Exception GOV, which authorizes certain exports and reexports to U.S. and foreign governmental agencies and intergovernmental organizations, no license exceptions are available to fulfill the new licensing requirement.  Thus, all exports of the restricted products will require a BIS license for export or reexport to Russia, regardless of whether those products were formerly exportable to Russia with no license required.  Further, the new BIS rule imposes a presumption of denial for license applications “when there is potential for use directly or indirectly for exploration or production” from deepwater, Arctic offshore, or shale projects in Russia with the potential to produce oil.

The final rule does not contain a savings clause. That means any restricted products exported to Russia without a license on or after August 6 may be considered violations, even if the products were formerly exported under a license exception.

Those companies exporting items used in the exploration or production of oil or gas should immediately determine whether any of the products they export, reexport, or transfer to Russian end-users (or intermediaries with constructive or direct knowledge that the ultimate end-user is in Russia) are restricted products as defined in the new rule.  If so, companies should understand the implications of the new licensing requirements and the presumption of denial for license applications.  Further, if your company is unable to determine whether your products are used in the end-uses defined in the rule, the rule requires that such products be considered subject to the licensing requirements.  Thus, unless you can affirmatively determine that your products are not to be used for the energy-related activities defined in the rule, then your company should assume that its products are subject to the licensing requirements.

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Copyright © 2014, Sheppard Mullin Richter & Hampton LLP.
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