On February 19, 2026, the U.S. Department of the Treasury鈥檚 Office of Foreign Assets Control (OFAC) sanctioned a luxury timeshare resort near Puerto Vallarta connected to Cartel de Jalisco Nueva Generacion鈥檚 (CJNG).¹ This action signals increased scrutiny of tourism-related businesses operating in high-traffic resort destinations and highlights potential sanctions exposure for companies across the broader travel and hospitality industry.

Adjacent industries such as cruise operators and companies that maintain relationships with tourism-related businesses in Mexico and other major tourist destinations should pay close attention to these enforcement actions and make sure that their compliance programs proactively address such risks.

OFAC Targets Timeshare Fraud Network Linked to CJNG

Consistent with the U.S. Government鈥檚 crackdown on transnational criminal organizations and cartels, OFAC added Kovay Gardens, a luxury timeshare resort located near Puerto Vallarta, Mexico 鈥� along with multiple individuals and affiliated companies tied to the CJNG 鈥� to the Specially Designated Nationals and Blocked Persons (SDN) List.² According to the U.S. Department of the Treasury, the sanctioned network allegedly operated a sophisticated fraud scheme targeting U.S. timeshare owners.

The scheme reportedly involved deceptive sales and resale tactics designed to induce victims to pay fees connected to purported rental or resale opportunities. Victims, who were often elderly U.S.-based Mexico timeshare holders, were often contacted through cartel-run call centers that brokers or intermediaries had used to locate buyers or renters for their properties. They were asked to first pay taxes, transfer fees, or other costs tied to promised transactions that ultimately never occurred.

As a result of the designation, all property and interests in property of the designated or blocked persons that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned directly or indirectly, individually or in the aggregate, 50% or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC鈥檚 regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked persons. OFAC has issued one such license, authorizing the wind down of transactions involving Kovay Gardens.³ The sanctioned individuals and entities can be found on OFAC鈥檚 designation page .

Background on Timeshare Fraud in Mexico

Timeshare-related fraud schemes have increasingly become a focus of U.S. enforcement authorities in recent years. Law enforcement agencies have reported significant financial losses by U.S. consumers connected to fraudulent resale and rental schemes targeting timeshare owners. OFAC issued an alert in March 2023 regarding such scams, warning that individuals may falsely claim to represent OFAC in furtherance of their fraud.⁴ According to the U.S. Department of Treasury, the Kovay Gardens designation also marks the sixth time OFAC has sanctioned those linked, directly or indirectly, to CJNG鈥檚 timeshare fraud activities, resulting in the designation of over 90 individuals and entities at the time of the February designation.⁵

Industry stakeholders have welcomed increased enforcement efforts targeting timeshare fraud. The American Resort Development Association (ARDA), the leading trade association representing the timeshare industry, publicly supported the actions, emphasizing that enforcement against fraudulent actors protects consumers while reinforcing the integrity of legitimate timeshare operations.⁶

The Kovay Gardens designation thus reflects both a consumer protection priority and a broader strategy to disrupt cartel-linked financial networks operating in tourism-related sectors.

Implications for Cruise and Travel Operators

Although the designation specifically involves a timeshare resort, the development has broader implications for companies operating across the travel and hospitality industry.

Cruise operators and travel companies frequently interact with a wide range of local tourism businesses, including resort operators, excursion providers, transportation vendors, and tourism services in major destination markets. These relationships can create potential sanctions exposure where such businesses are connected to sanctioned persons or criminal networks.

Sanctions risks may arise where travel companies engage vendors or service providers that are owned or controlled by designated parties or where payments or transactions indirectly involve blocked entities. For example, news outlets found that travel operators were still selling bookings at Kovay Gardens, even after the sanction designation.⁷ As a result, cruise operators frequenting popular resort destinations should consider whether existing compliance frameworks adequately address such risks.

Parallel Enforcement Activity in Mexico

Enforcement is not just happening on the U.S. side. Mexican authorities have also taken parallel enforcement action in coordination with the U.S. sanctions designations. At the same time OFAC announced the Kovay Gardens related sanctions, Mexico鈥檚 Ministry of Finance and Public Credit, acting through its Financial Intelligence Unit (FIU), added several individuals and entities tied to the same CJNG network to Mexico鈥檚 List of Blocked Persons.⁸ The Secretary of Security and Citizen Protection in Mexico, Omar Garc铆a Harfuch, recently also reported that there are additional investigations in Mexico related to resorts allegedly linked to criminal operations.⁹ The coordinated actions reflect increasing information sharing and enforcement alignment between U.S. and Mexican authorities targeting cartel-linked financial activity in tourism-related sectors.

Compliance Takeaways for Travel and Hospitality Companies

As U.S. enforcement authorities continue to expand efforts to target cartel-linked financial activity, companies operating in the travel and hospitality industry should review their sanctions compliance programs to ensure they remain aligned with evolving enforcement priorities. The Kovay Gardens designation provides several practical compliance considerations for companies operating in the travel, tourism, and hospitality sectors:

1. First, companies should ensure that sanctions screening and due diligence procedures extend to local tourism partners, including resort operators, excursion providers, travel agencies, and related vendors. Such screening should always be run against updated designation lists and should include screenings for any individuals or entities identified by OFAC and other agencies.
2. Second, organizations should evaluate whether their compliance programs account for beneficial ownership risks associated with foreign vendors that may operate through layered corporate structures.
3. Third, hospitality companies should consider whether vendor onboarding and payment approval processes adequately identify potential sanctions exposure in high-risk tourism markets. Currently onboarded vendors should undergo a process for ongoing counterparty review and re-screening. Changes in business scope, leadership, or operating regions should automatically trigger a due diligence refresh and possibly a targeted audit.
4. Finally, companies should ensure that personnel responsible for operations and vendor relationships in international destinations are trained to identify sanctions-related risks, escalate potential concerns, and report signs of cartel or TCO interference. Companies should be sure to establish secure, anonymous internal whistleblower channels and provide amnesty or protection policies to encourage early reporting of compliance breaches or attempted criminal coercion.

Foley鈥檚 multidisciplinary international trade and national security team advises U.S. and multinational companies on sanctions compliance, export controls, customs enforcement, supply chain risk management, and other regulatory issues affecting cross border operations. Our team regularly counsels companies in the travel, hospitality, transportation, and tourism sectors on sanctions exposure, third party risk management, and evolving enforcement priorities involving transnational criminal organizations. To discuss how 番茄社区; Lardner LLP can assist with navigating sanctions compliance and related regulatory risks in international tourism markets, please contact Alejandro Gomez (agomez@foley.com ), Olivia Singelmann (osingelmann@foley.com), Jack Korba (jack.korba@foley.com ), or Ahmad Murrar (amurrar@foley.com).

---

The February 26, 2026, 鈥淣ewish鈥� Independent Contractor Test

The independent contractor test under the Fair Labor Standards Act (FLSA), which determines whether an individual is classified as an employee or an independent contractor, has started to resemble a ping-pong match 鈥� over the last five years the test has changed three times 鈥� leaving employers uncertain whether they may face steep penalties for employee misclassification. On Friday, February 26, 2026, the Department of Labor (DOL) issued a that largely reverts back to the 2021 business-friendly, five-part 鈥渆conomic reality鈥� test to determine independent contractor status under FLSA, the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) (the proposed rule).

The proposed rule seeks to replace President Biden鈥檚 2024 鈥渢otality of the circumstances鈥� rule. The back and forth (summarized below) has left businesses grasping for certainty in classifying workers. Revisions to worker classification criteria can significantly impact franchisors and manufacturers, particularly concerning the categorization of franchisees and distributors. The balance between exercising control over brand standards and allowing operational independence franchisors and manufacturers susceptible to misclassification claims.

• 2021 (Trump administration): Established a five-factor “economic reality鈥� test, elevating two core factors (control and opportunity for profit/loss) as the most important.
• 2024 (Biden administration): Rescinded the 2021 rule, returning to a “totality of the circumstances” test, where no single factor was weighted more than others, making it harder to classify workers as independent contractors.
• 2026 (Proposed 鈥� Trump administration): The 2026 proposed rule aims to reverse the 2024 rule’s “chilling effect” on contracting, prioritizing business certainty and reducing “regulatory whiplash.” While 2024 focused on reducing misclassification, the 2026 proposal seeks to re-establish an “employer-friendly” standard, similar to the 2021 regulations under the five-factor analysis.

The new proposed rule reflects an ongoing effort by the DOL to realign classification rules with long鈥憇tanding interpretations grounded in the 鈥渆conomic reality鈥� test. It closely resembles the prior Trump administration鈥檚 2021 classification test, which was replaced in 2024.

The 2026 Proposed Rule Summary

The proposed rule focuses on two main 鈥渃ore factors.鈥� If the core factors do not 鈥渂oth point to the same classification decision,鈥� three additional and less important 鈥渟econdary factors鈥� may be considered. However, the DOL seeks to continue with the 2021 rule鈥檚 emphasis that these factors are not exhaustive.

• Core factors:
  • Nature and degree of control over the work.
  • Opportunity for profit or loss based on initiative and/or investment. If these two factors align, there is a 鈥渟ubstantial likelihood鈥� that the classification is accurate.
• Secondary factors (used when core factors are inconclusive):
  • Amount of skill required for the work.
  • Degree of permanence of the working relationship.
  • Whether the work is part of an integrated unit of production. 

Why the Proposed Rule Was Issued to Change the Independent Contract Test 鈥� Again

The DOL explains that the 2024 rule failed to provide clarity on how the different factors should be weighed and applied as well as failed to emphasize that the proper inquiry is whether there is economic dependence on work rather than economic dependence for income.

The DOL also noted that the existing approach had a chilling effect on independent contractor status and referred to changes in the 2024 rule that were not consistent with applicable Supreme Court rulings. For example, the 鈥渋nvestment factor鈥� analysis typically focused on the investment of the worker. While the 2024 rule changed the investment fact analysis to consider the investment of the worker and the potential employer, prior Supreme Court authority focused solely on the investment of the worker. The proposed rule reverts back to this standard.

What Happens Next?

The DOL has invited comments to the Notice of Proposed Rulemaking (NPRM)within 60 days, or until April 28, 2026. The 2024 rule was not finalized for over a year after the NPRM was issued, so businesses should not anticipate an immediate change.

What Can Your Business Do Now?

Businesses should keep in mind that the proposed rule only addresses independent contractor status with respect to the FLSA and federal laws that incorporate the FLSA鈥檚 scope of employment. State-specific independent contractor tests, as well as different tests for purposes such as IRS compliance and the National Labor Relations Act, remain in effect and still must be complied with where applicable.

Businesses should look for guidance under the 2021 rule to determine if a worker鈥檚 job duties are controlled by company management and whether the worker has made a financial investment in the work.

Companies should also consider an internal audit of risky independent contractor decisions to determine independent contractor status under the core factors. Audits conducted in conjunction with legal counsel can provide a good faith defense to liquidated damages in the event a lawsuit is filed.

Companies should work closely with their legal counsel to determine whether decisions made under prior independent contractor tests will survive analysis under the proposed rule.

On February 3, 2026, the Delaware Supreme Court issued a decision reiterating the well-settled contract principle that courts should consider the adequacy of consideration for restrictive covenants at the time of contract formation, not at the time of enforcement. The case is North American Fire Ultimate Holdings, LP v. Alan Doorly.鹿

As we have previously written, although the Federal Trade Commission (FTC) recently walked away from its multi-year effort to ban employee noncompete covenants altogether, states like Delaware are still making it harder to enforce noncompetes that do not contain reasonable temporal, geographic, or scope of activity restrictions. Employers thus need to remain vigilant and ensure that their employee restrictive covenants meet the necessary requirements for enforcement.

One often overlooked element of contract formation in the restrictive covenant space is the existence of adequate consideration. Many employers take for granted that their agreements with employees contain sufficient consideration to support the reciprocal promise to abide by post-employment restrictions. A common form of consideration in such agreements is stock or incentive units, which sometimes can be forfeited under specific conditions, and the Doorly decision addressed one critical aspect of this arrangement: when does a court assess the adequacy of consideration where the consideration is forfeited?

In Doorly, an employer and employee entered into an incentive unit grant agreement where, in exchange for the employer鈥檚 issuance of common units that would vest over time, the employee agreed to, among other things, abide by certain noncompetition and non-solicitation covenants. The unit agreement further contained a clause that required forfeiture of all vested and unvested units if the employee was terminated for cause, which the employer triggered when it terminated the employee for cause because he formed a competitive entity during employment.

The employer subsequently filed a lawsuit in Delaware Chancery Court seeking to enforce the restrictive covenants, and the employee responded by filing a motion to dismiss, arguing in part that the forfeiture of the units made the contract unenforceable for lack of consideration. The Delaware Chancery Court granted the motion to dismiss, holding that the units were the sole consideration for the restrictive covenants, and thus, once the employer terminated the employee for cause and declared the forfeiture of the units, the consideration disappeared. In other words, the Chancery Court said, 鈥渘o consideration means no enforceable contract.鈥�

The employer appealed this decision, arguing that consideration existed at the time of the contract鈥檚 formation, and thus that the Chancery Court erred by analyzing the consideration element after forfeiture, i.e., at the time of enforcement. The Delaware Supreme Court agreed with the employer, concluding that the determination of whether valid consideration exists should be assessed at the time of contract formation, not at the time of enforcement. The Delaware Supreme Court did not, however, reach the issue of whether forfeitable incentive units constitute valid consideration at the time of formation, instead sending the case back to the Chancery Court to reconsider this issue as well as the other arguments raised by the parties in the case below.

The Doorly decision reminds us that restrictive covenants are essentially just clauses in a contract, and Delaware law follows the bedrock contract principle that the existence of consideration is a necessary element for contract formation. It is also a warning to all employers that utilize Delaware choice of law clauses 鈥� which are popular in stock award agreements like the unit agreement in Doorly 鈥� to review their agreements to ensure the adequacy of consideration given in exchange for the promise to abide by the restrictive covenants. This is doubly true if the incentive units are forfeitable under various conditions, and employers should consider specifying other or additional consideration for the restrictive covenants to ensure the adequacy of the consideration, even in the event of forfeiture.

1. C.A. 142, 2026 WL 274647 (Del. Supr. Feb. 3, 2026)

---

On January 14, 2026, following an investigation by the U.S. Secretary of Commerce (Secretary), under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862) (Section 232), into the effects of imports of processed critical minerals and their derivative products (Critical Minerals) on the national security of the United States. After concurring with the Secretary鈥檚 determination that the quantities and circumstances of current Critical Minerals imports 鈥渢hreaten to impair the national security of the United States,鈥� the President has authorized actions to be taken to adjust the imports of Critical Minerals to address the identified threat.

Overview of the Federal Action

The President has officially concurred with findings that the United States lacks a secure and reliable supply chain for Critical Minerals. In making this determination, Section 232 directs the Secretary and the President to consider factors related to national defense (including required domestic production needed for defense requirements, capacity of the domestic industry to meet such production needs, and availability of supplies and raw materials) as well as factors related to the national economy (including impacts of foreign competition and the displacement of U.S. products by 鈥渆xcessive imports鈥�).

Consequently, the administration has initiated the following:

1. Negotiations with Trading Partners and Potential Trade Restrictions: The U.S. Trade Representative and the Secretary are directed to negotiate with foreign nations to adjust imports and mitigate security vulnerabilities. If negotiations are unsuccessful within 180 days, the administration may implement further measures, including tariffs or minimum import prices (price floors) for specific minerals.
2. Additional Regulatory or Deregulatory Actions: The Secretary, U.S. Trade Representative, and the Secretary of Homeland Security are directed to effectuate the proclamation through the issuance, amendment, or temporary suspension of their respective regulations, rules, and guidance. 聽
3. Supply Chain Monitoring: The Secretary will continue to monitor import levels and review their impact on national security to determine if further executive action is required
4. No Tariffs 鈥� Yet: Unlike for several other recent Section 232 investigations, the President has not (at this time) imposed tariffs.

Key Minerals Identified

The Secretary determined that Critical Minerals underpin critical military and economic applications and found that Critical Minerals are essential to each of the 16 critical infrastructure sectors identified by of April 30, 2024 (Critical Infrastructure Security and Resilience), including:

• Chemical Sector: lithium, fluorite, and bromine;
  • Communications Sector: gallium, germanium, indium, and yttrium;
  • Energy Sector: cobalt, nickel, uranium, praseodymium, and terbium.

Why This Matters to Companies with U.S. Mining and Processing Operations

This federal shift is highly relevant to companies mining for Critical Minerals in the United States for several key reasons:

1. Focus on Domestic Capacity: The proclamation explicitly identifies the decline in domestic production and the offshoring of facilities as a strategic weakness. The federal government now views 鈥渟ufficient domestic mining and processing鈥� as imperative to reducing reliance on foreign actors.
2. Addressing Price Volatility: The Secretary found that extreme price volatility in mineral markets has historically hindered private sector investment and led to the closure of domestic facilities. The administration鈥檚 intent to consider 鈥減rice floors鈥� is a direct attempt to ensure the long-term viability of domestic mining and processing.
3. Bridging the Processing Gap: The proclamation highlights a critical vulnerability 鈥� even when minerals are mined domestically, they are often exported for refining due to a lack of domestic processing capacity. For example, while the United States is a major producer of rare earth oxides, it remains nearly 100% reliant on imported rare earth permanent magnets. This indicates a federal push to not only mine but also process materials within the United States.
4. Alignment with Related Administration Trade Initiatives: Under the United States-Japan Framework for Securing the Supply of Critical Minerals and Rare Earths through Mining and Processing, signed October 28, 2025, the United States and Japan jointly committed to work together on investments in critical minerals mapping, mining, and recycling and to arrange for mutually complementary stockpiling. Japan has also announced investment commitments in the United States for critical minerals development, including a $350 million investment in a lithium-iron-phosphate production facility in the United States.聽 The proclamation potentially provides additional support for these commitments.

Next Steps

If action is taken by the President, Section 232 requires the President to provide a report to Congress within 30 days of the proclamation, explaining the President鈥檚 decision to take action under the statute. Moreover, the administration is required to provide an update on the status of trade negotiations within 180 days. We will continue to monitor these negotiations and any potential regulatory changes or guidance issued by the Department of Commerce or Homeland Security that may affect your operations or trade status.

About Foley鈥檚 Energy & Infrastructure Sector

Foley鈥檚 cross-disciplinary Energy & Infrastructure team of more than 200 attorneys regularly represents clients in the traditional and renewable power, oil and gas, nuclear, and infrastructure and energy transition industries. Foley offers comprehensive legal services for energy and infrastructure companies and projects to guide clients through every phase 鈥� from development and site control to investment, commercial contracting and financing. Foley can also assist companies involved in mining, processing, and disposal to navigate the various state and federal regulations, international agreements, and national security considerations.

The doctrine of obviousness-type double patenting (鈥淥TDP鈥�) is one of the most complicated aspects of U.S. patent law. Recent Federal Circuit decisions have addressed specific OTDP issues, but tension between competing objectives of this judge-made doctrine leave many open questions. Current USPTO leadership has not proposed new rules that would change how the Examining Corps applies the doctrine, but ex parte decisions by the USPTO Patent Trial and Appeal Board (PTAB) seem to reflect a willingness to hold examiners to the current state of the law.

OTDP Rejections Require a Reasoned Analysis

In Ex parte Mobile Tech, Inc., Appeal 2022-001034 (Reexamination Control 90/014,363) (decided Feb. 11, 2022), the PTAB reversed four OTDP rejections where the Examiner had not provided 鈥渁n explanation 鈥� 鈥� to substantiate the Examiner鈥檚 conclusion鈥� that the claims on appeal were obvious in view of the cited claims. The Office Action provided a claim chart aligning claim limitations, but did not address textual differences between the pending claims and the cited claims.

In reversing the rejections, the PTAB explained:

[W]here, as here, the Examiner鈥檚 rejection fails to (1) articulate any analysis apart from merely quoting the language of the relied-upon claims; (2) acknowledge the differences in that language; and (3) explain why those differences would have been obvious to ordinarily skilled artisans, the Examiner has not established non-statutory double patenting on this record. The rejection is, therefore, erroneous for that reason alone.

Later-Filed, Later-Expiring Patents Are Not Proper OTDP References

In Ex parte Baurin, Appeal 2024-002920, (Application No. 17/135,529) (decided Nov. 11, 2024) (reh鈥檊 denied Dec. 18, 2025), the PTAB reversed five OTDP rejections that cited later-filed, later-expiring patents as OTDP references and reversed a provisional OTDP rejection over a later-filed pending application with a later patent term filing date, finding that the later-expiring patents/application were not proper OTDP references.

The PTAB cited the Federal Circuit decision in Allergan USA, Inc. v. MSN Labs. Private LTD., 111 F.4th 1358 (Fed. Cir. 2024), for the principal that the purpose of OTDP doctrine 鈥溾�榠s to prevent patentees from obtaining a second patent on a patentably indistinct invention to effectively extend the life of a first patent to that subject matter.鈥欌�� The PTAB also considered the Federal Circuit decisions in Gilead Sciences, Inc. v. Natco Pharma Ltd., 753 F.3d 1208 (Fed. Cir. 2014), and Abbvie v. Mathilda & Terrence Kennedy Institute, 764 F. 3d 1366 (Fed. Cir. 2014), and noted that in both cases the cited claims had an earlier filing date and earlier expiration date than the claims at issue. In contrast, the rejections on appeal relied on patents granted from later-filed applications with later expiration dates. Because they did not fit the Allergan paradigm, the rejections were reversed.

In a rare turn of events, the examiner filed a Request for Rehearing, arguing:

(1) the Board’s decision misapprehends the holding of Allergan;

(2) the Board’s decision is not consistent with USPTO guidance set forth in MPEP 搂搂 804 and 804.02; and

(3) the Board’s conclusion that the risk of separate ownership is 鈥渋mmaterial鈥� 鈥� is not supported by case law or USPTO guidance.

A reconstituted PTAB panel denied the request for rehearing in a 2-1 decision, with the new panel member dissenting. As to point (1), the majority stood by its application of Allergan and rejected the Examiner鈥檚 attempts to limit it to its facts. As to point (2), the majority disagreed in some respects and emphasized that the MPEP 鈥渃annot create new law or ignore the law.鈥� As to point (3), the majority found that the risk of separate ownership does not justify an OTDP rejection based on an improper reference patent.

Precedential Decisions Would Provide Clear Guidance

While these decisions are not precedential, I understand the PTAB Bar Association has asked Director Squires to designate both as precedential. Doing so would provide clear guidance to applicants and examiners, and promote consistency in examination of applications under this complex doctrine.  In the meantime, Applicants faced with improper OTDP rejections can point to these decisions as informative, and consider appealing maintained rejections to the PTAB.

Attorneys at Foley have extensive experience counseling clients on OTDP issues in their own and competitor patent portfolios. Contact the author or your Foley attorney for more information.

Cryptocurrency investment scams perpetrated by transnational criminal organizations (TCOs) located in Southeast Asia are on the rise. Colloquially known as 鈥減ig-butchering鈥� scams, TCOs build trust with victims, convince victims to invest in real cryptocurrency, and then con victims into transferring the real cryptocurrency into fake cryptocurrency investments. The TCO scammers then launder the cryptocurrency through sophisticated methods to include the utilization of accounts that are outside of U.S. jurisdiction. According to the U.S. Secret Service (鈥淯SSS鈥�), 鈥渢his scam industry defrauds Americans of nearly $10 billion per year.鈥�[1] Now,  the U.S. Attorney鈥檚 office for the District of Columbia has announced it has a plan to stop them.

On November 12, 2025, U.S. Attorney for the District of Columbia Jeanine Ferris Pirro announced the creation of the Scam Center Strike Force (鈥淪trike Force鈥�) in partnership with several law enforcement and Federal agency partners.[2] The Strike Force鈥檚 stated goal is to 鈥渟ecure America against Southeast Asian cryptocurrency-related fraud and scams鈥�[3] by recovering stolen assets used to evade sanctions and facilitate scams and returning those assets to victims.

Civil Forfeiture As A Long-Armed Enforcement Tool

The Strike Force will use civil forfeiture actions to reclaim not just the stolen funds but also the infrastructure utilized to facilitate the scams, such as satellite terminals used for internet connection.   While the seizure of property does require judicially authorized warrants, subsequent civil forfeiture actions do not require any initiation of criminal proceedings. These actions are against the property itself and do not require the property to be owned or in the actual custody of the perpetrators of the alleged criminal activity at the time of the seizure.  The government must only explain in the warrant by a preponderance of the evidence, or more likely than not, that the property is linked to criminal activity. If the government can meet this low burden, law enforcement officials have the authority to seize and take control of the property for eventual forfeiture.

The DOJ鈥檚 civil forfeiture authority is extremely broad and can pose significant complications for those whose property is seized.  Property owners with no actual knowledge of the alleged criminal activity may still lose possession of their items, which can be difficult and time-consuming to contest, as the property owners must both establish ownership of the property and in some instances prove that the property was not connected to a crime. However, proponents counter that civil forfeiture is an essential tool in combating organized crime as the seizure of criminal enterprises鈥� assets and proceeds materially disrupts their operations. 

Despite their arguments to the contrary, foreign-based cryptocurrency exchanges are not beyond the reach of U.S. jurisdiction in the context of civil forfeiture. Statutes empowering the Strike Force to engage in civil forfeiture, such as the terrorism subsection of the Civil forfeiture statute, [4] explicitly extend to foreign and domestic assets. DOJ has strong policy and enforcement incentives to use civil forfeiture proceedings under this statute against TCOs, particularly those designated as Foreign Terrorist Organizations.

Targets and Trends

The Strike Force is identified and focused on Chinese-organized crime affiliates with operations in Cambodia, Laos, and Burma as key leaders of these cryptocurrency investment schemes. The Strike Force has already conducted operations in Myanmar, Indonesia, and Thailand, and has seized and forfeited over $400 million dollars in scam-obtained cryptocurrency funds. As part of U.S. Attorney Piro鈥檚 November 12 Strike Force announcement, she noted the Strike Force has initiated civil forfeiture proceedings seeking another $80 million in stolen funds.

Though the Strike Force is focused on Southeast Asia, the rise of cryptocurrency investment scams is a global trend. For example, on November 14, 2025, the Department of Justice announced five guilty pleas and over $15 million in civil forfeiture actions against the Democratic People鈥檚 Republic of Korea for 鈥渕ultimillion-dollar virtual currency heists at four overseas virtual currency platforms in 2023,鈥� among other charges.[5] In addition, on October 14, 2025, the DOJ announced the largest ever forfeiture action against approximately $15 billion in Bitcoin tied to a multinational business conglomerate鈥檚 alleged involvement in cryptocurrency investment fraud schemes run through forced labor compounds.[6] The Bitcoin was previously stored in unhosted digital wallets whose private keys the chairman and founder of the conglomerate had in his possession.

Moreover, the Strike Force is aligned with a broader shift in U.S. strategy for addressing cryptocurrency scams. In April 2025, U.S. Deputy Attorney General Todd Blanche published a memorandum titled 鈥淓nding Regulation by Prosecution,鈥� which outlined the DOJ鈥檚 approach to digital asset enforcement under the Trump Administration.[7] Blanche stated that the DOJ would 鈥渇ocus on prosecuting individuals who victimize digital asset investors, or those who use digital assets in furtherance of criminal offenses such as terrorism, narcotics and human trafficking, organized crime, hacking, and cartel and gang financing.鈥�[8] Further, DOJ prosecutors would start prioritizing cases 鈥渢hat hold accountable individuals who (a) cause financial harm to digital asset investors and consumers; and/or (b) use digital assets in furtherance of other criminal conduct.鈥�[9] The Strike Force is a clear step in this direction.

How To Prepare for the Strike Force鈥檚 Increased Enforcement

Corporations operating in sectors related to cryptocurrency or any companies dealing in large sums of digital assets on foreign exchanges should consider the creation of the Strike Force a warning sign that their assets may be at risk of being frozen even absent direct criminal exposure. Notably, the laws authorizing the Strike Force鈥檚 activity can be applied to persons that arguably facilitate violations or are strictly liable, including situations where the person 鈥渟hould have known鈥� that they were facilitating a violation.

Given the heightened enforcement risk, those in the cryptocurrency space should engage in the following best practices:

• Implement robust anti-money laundering (AML) and know your customer (KYC) programs to ensure regulatory compliance.  
• Maintain detailed records surrounding trades, transactions, and internal communications to assist in challenging government-initiated forfeiture actions. 
• Consider utilizing blockchain analytic tools to ensure compliance with regulatory measures and establishing relationships with cryptocurrency forensic experts in order to ensure adequate preparation for contested forfeiture proceedings should there be a need to challenge government tracing methodologies or to assert 鈥渋nnocent owner鈥� defenses.  
• Establish mechanisms for responding to any U.S. or foreign government inquiries and legal process demands, as cryptocurrency-related investigations frequently involve international cooperation among law enforcement and government agencies. This is particularly true for non-U.S. companies.

If you have questions or concerns about the issues raised in this article, please reach out to any of the authors or your 番茄社区; Lardner attorney.

The Foley聽International Government Enforcement Defense & Investigations聽Team is monitoring all international trade, government enforcement, and regulatory developments, which we are posting as they occur on our聽Tariff & International Trade Resources聽blog. For additional resources surrounding the mitigation of risks posed by the Administration鈥檚 crackdown on FTOs and the DOJ鈥檚 utilization of civil forfeiture authorities, our article on聽鈥淔oreign Terrorist Organization Designations Provide DOJ With New Civil Forfeiture Authorities and Opportunities/,鈥� provides additional compliance assessment information. If you would like to see future updates on related topics, please sign up for our Tariff & International Trade blog 鈥斅�

---

[1] Press Release, New Scam Center Strike Force Battles Southeast Asian Crypto Investment Fraud Targeting Americans, U.S. Secret Serv. (Nov. 12, 2025), .

[2] The Strike Force is a collaboration between the U.S. Attorney鈥檚 Office for the District of Columbia, the Department of Justice (鈥淒OJ鈥�) Criminal Division, the Federal Bureau of Investigation (鈥淔BI鈥�), USSS, the State Department, the Department of Treasury鈥檚 Office of Foreign Assets Control, and the Department of Commerce. Id.

[3] Id.

[4] See 18 U.S.C. Section 981(a)(1)(G).

[5] See Press Release, Justice Department Announces Nationwide Actions to Combat Illicit North Korean Government Revenue Generation, U.S. Dep鈥檛 Just. (Nov. 14, 2025), .

[6] See Chairman of Prince Group Indicted for Operating Cambodian Forced Labor Scam Compounds Engaged in Cryptocurrency Fraud Schemes, U.S. Department of Justice (Oct. 14, 2025),

[7] Memorandum from Deputy Attorney General Todd Blanche, Ending Regulation By Prosecution (Apr. 7, 2025), .

[8] Id. at 1.

[9] Id. at 2.

Key Takeaways:

• Align project delivery model with business priorities: Choosing the right project delivery structure (Design-Bid-Build, CM@R, Design-Build, or EPC) is critical to balancing cost, speed, design control, and risk management in reshoring projects.
• Select pricing to match project goals: Fixed Price, Cost Plus, and GMP contracts each shift risk differently; manufacturers must weigh cost certainty against flexibility to avoid costly surprises.
• Plan for volatility and disruption: Contracts should proactively address material price escalation, tariffs, procurement timing, and force majeure events to safeguard budgets and schedules in today鈥檚 unpredictable environment.

Manufacturers reshoring or expanding in the U.S. often devote the bulk of early planning to where to locate 鈥� analyzing workforce markets, incentive packages and transportation links. But once the site is selected, an equally decisive factor comes into play: how the facility will be designed and built. In today鈥檚 climate of volatile material costs, unpredictable supply chains and evolving market demands, the construction phase is one of the most risky and challenging elements of the reshoring process. Every decision, from project delivery structure to pricing model, will determine whether the facility comes online on time, on budget and ready to serve for decades. Treating construction contracting as a strategic business function, rather than a routine procurement exercise, is essential to protecting and maximizing the return on your investment.

1. Think Ahead: Match Delivery Model to Business Goals

An early and fundamental decision is selecting the right project delivery model 鈥� the framework that dictates who designs the facility, who builds it and when those roles overlap. This choice can have dramatic consequences for cost control, schedule certainty and risk allocation.

Under the traditional 诲别蝉颈驳苍鈥慴颈诲鈥慴耻颈濒诲 model, the manufacturer hires a design team to produce complete plans, then competitively bids the work to contractors. This approach can yield competitive pricing, but the sequential process often stretches the schedule and creates fertile ground for change orders if the design needs to shift to meet evolving operational needs.

Another option, construction manager at risk (CM@R), brings the builder in early during the design process to provide constructability reviews, budgeting and scheduling input before constructing the project. This approach can strike a balance between price certainty and design flexibility.

By contrast, the 诲别蝉颈驳苍鈥慴耻颈濒诲 model engages a single entity for both design and construction, fostering collaboration and often compressing schedules. That speed can be invaluable in a reshoring race, but it requires the manufacturer to clearly define performance and quality standards up front to avoid surprises or misalignment later in the process.

For process鈥慽ntensive facilities, an engineer鈥憄rocure鈥慶onstruct (EPC) structure consolidates design, procurement and construction responsibilities under one roof. The contractor delivers a turnkey facility, taking on significant performance risk, but this concentrated responsibility may come at a higher starting price and with less direct control over design details.

There is no universal 鈥渂est鈥� delivery model. The right choice depends on whether speed, cost certainty, design control or risk transfer is your top priority. Too often, manufacturers default to the model they used last time, rather than selecting the one that truly matches their reshoring objectives 鈥� a decision that can prove costly later.

2. Price It Right: Choosing the Model That Fits Your Risk Tolerance

Once the delivery model is set, the construction contract becomes the manufacturer鈥檚 primary tool for allocating risk, preserving schedule and containing costs. In any construction market 鈥� but especially one defined by material volatility and labor constraints 鈥� the way you structure pricing will dictate much of your financial exposure.

Under a Fixed鈥慞rice (Lump Sum) contract, the contractor agrees to deliver the project for a set price based on a clearly defined scope. This provides strong budget certainty, but only if the scope is fully documented and stable. In the current market, where design changes may be needed to accommodate rapidly evolving production requirements or unanticipated site conditions, that certainty can quickly erode through change orders. Fixed鈥慞rice agreements place the risk of cost overruns squarely on the contractor, which they may hedge by building premiums into their bid.

A 颁辞蝉迟鈥慞濒耻蝉 model reimburses the contractor for actual labor, materials and other allowable project costs, plus a fee or percentage for overhead and profit. This arrangement can be attractive when the design is incomplete, the scope is evolving or the manufacturer wants greater flexibility to make changes mid鈥慶onstruction. However, it provides minimal cost certainty and requires strong auditing rights and disciplined project management to prevent cost overruns which can quick balloon without such protections in place. While the owner retains more control over design and changes, they also assume nearly all of the financial risk.

Many manufacturers find the middle ground in 颁辞蝉迟鈥慞濒耻蝉 with a Guaranteed Maximum Price (GMP). Here, the contractor is reimbursed for actual costs plus a fee, up to a capped 鈥渕aximum鈥� amount. Beyond that cap, the contractor absorbs additional costs. This model offers flexibility for changes in scope and design, while establishing a ceiling on cost exposure. GMPs often include allowances and contingencies, so contracts must tightly define how these can be used and who retains any savings. In volatile markets, GMP agreements can balance adaptability with budget discipline, particularly when paired with escalation clauses that fairly address market鈥慸riven price spikes.

The choice among these models should be deliberate and directly tied to the manufacturer鈥檚 priorities. If your project demands an unmovable budget, Fixed鈥慞rice may be worth the upfront premium. If adaptability during construction is vital, 颁辞蝉迟鈥慞濒耻蝉 may be the best option, provided it is coupled with strong cost controls and stringent owner oversight. And if you need both flexibility and a cap on exposure, 颁辞蝉迟鈥慞濒耻蝉 with GMP often offers the best compromise.

3. Plan for the Unplanned: Managing Volatility, Tariffs, and Integration Risks

Even with the right delivery and pricing model, today鈥檚 market requires contracts that anticipate volatility. One approach to address material pricing volatility is to agree upon  an approach to price escalation in the contract before such issues arise as the project progresses. Such clauses may provide relief to the contractor for cost increases that exceed an agreed鈥憉pon threshold and could not reasonably have been anticipated at the time the contract was signed. The contractor should be required to substantiate any claim with detailed evidence of the original committed price and the actual cost increase. This ensures relief is granted only for exceptional, documented changes and not routine fluctuations.

The same principle applies to tariffs. Even when production is in the U.S., critical materials or equipment may come from abroad. A well鈥慸rafted tariff clause should allow adjustments only for new or significantly increased tariffs imposed after execution and should bar recovery for tariffs that were known or reasonably foreseeable. As with escalation, the contractor must demonstrate both that the tariff applies to the project鈥檚 materials and the extent of its direct cost impact.

Material procurement strategies should also be carefully considered. Specialized materials and equipment frequently have long lead times for delivery, making early procurement provisions essential. Contracts should clearly address title transfer, risk of loss, insurance obligations and storage responsibility to avoid disputes.

Finally, force majeure clauses should be updated to reflect modern realities, including supply chain disruptions, extreme weather events and public health emergencies, rather than relying on boilerplate provisions from more stable times.

The Right Construction Contract Builds Stronger Reshoring Success

Reshoring success isn鈥檛 simply about breaking ground quickly; it鈥檚 about delivering a facility that launches on schedule, on budget, and with the flexibility to grow. Achieving that outcome depends on aligning your project delivery method with your business priorities, selecting pricing structures that match your risk tolerance and building contract terms that anticipate volatility while hardwiring adaptability into the design.

Where you build will always matter 鈥� but how you contract to build will determine whether your investment thrives or falters.

On April 2, 2025, President Trump implemented the steepest American tariffs in over a century. The implications for numerous multinational companies 鈥� including importers, manufacturers, distributors, and retailers 鈥� will be immense. As an aid to the importing community, we are providing: (1) a summary of the April 2 鈥渞eciprocal tariff鈥� and other trade-related proclamations, including how these tariffs fit within other tariff pronouncements and the prior Section 232 and 301 tariffs; (2) an overview of multinational companies that could be most impacted by the reciprocal tariffs; and (3) the implications for importers trying to manage these drastic changes to the cost of importing goods into the United States.

At its core, the reciprocal tariff announcement consists of a baseline 10% tariff on all exports to the United States, with significantly higher duties on approximately 60 nations. In essence, countries that maintain a trade surplus or roughly equal trade in manufactured goods were hit with a 10% tariff, while countries that maintain significant trade surpluses 鈥� including China, the European Union (EU), Japan, Cambodia, and Vietnam 鈥� face steep new levies. China, the primary target of Trump鈥檚 trade war, now faces tariffs exceeding 50% on nearly all goods, and tariffs approaching 89% for many imports. Moreover, the tariffs are almost as great on countries that generally have formed the 鈥淐hina +1鈥� strategy of many multinational companies, such as Cambodia, Vietnam, and Malaysia. The net result is an average tariff rate that has climbed from a historic average of under 3% to around 23% 鈥� the highest level in over a century.

Details of the Reciprocal Tariff Plan

A statement from the U.S. Trade Representative confirmed that the Trump administration calculated tariffs primarily based on trade imbalances rather than an analysis of trade barriers, as was initially telegraphed by the administration. Countries with neutral trade patterns or even trade deficits with the United States face a minimum 10% duty (the global tariff), while all other major trading partners (with the exception of Canada and Mexico) will be subject to sharply higher rates (the reciprocal tariffs). Tariffs will be imposed using the following timetable:

• Implementation Timeline: The 10% global tariff takes effect at 12:01 a.m. on April 5, 2025. The higher reciprocal tariffs will take effect at 12:01 a.m. on April 9, 2025. It is not clear if Customs is already equipped to handle collecting these special tariffs, which likely will require implementation in the Automated Commercial Environment (ACE) portal that Customs maintains for importers to submit import-related information and to pay tariffs.

• Notable Exemptions: Prior Trump administration tariffs were carved out:
  • 25% Steel and Aluminum Tariffs:The tariffs on steel and aluminum, and identified derivative products, remain undisturbed at 25%.
  • 25% Canada and Mexico:Canada and Mexico also are exempt from this round of tariffs, although separate 25% tariffs imposed due to the Trump administration鈥檚 concerns regarding unauthorized immigration and fentanyl imports remain in place. These latter tariffs continue to be partially suspended for United States-Mexico-Canada Agreement (USMCA)-compliant goods.
  • 25% Automotive Tariffs: The reciprocal tariffs also exclude all automobiles and automotive parts, subject to the additional 25% duties imposed in Proclamation 10908 (鈥淎djusting Imports of Automobiles and Automobile Parts into the United States鈥�) on March 26, 2025. The automotive tariffs, which became effective on April 3, impose a 25% sectoral tariff on sedans, SUVs, crossovers, minivans, cargo vans, and light trucks up to 8,500 pounds, with a payload capacity up to 4,000 pounds. The tariffs also extend to automobile parts such as engines, transmissions, powertrain parts, and electrical components, beginning on May 3, 2025. Again, this tariff construct is left untouched.
  • Sector-Specific Exclusions: Certain products, such as copper, pharmaceuticals, semiconductors, lumber, critical minerals, and energy products, are unaffected by the April 2 reciprocal announcement. It is expected that these products will be subject to future tariffs, thus making this an 鈥渆xemption鈥� to allow for future action, rather than indicating no tariff imposition.
  • Future Sectoral Tariffs: The proclamation states that it will not apply to any future special tariffs that might be imposed under Section 232.
• U.S.-Origin Content: The proclamation states that 鈥渢he ad valorem rates of duty set forth in this order shall apply only to the non-U.S. content of a subject article, provided at least 20 percent of the value of the subject article is U.S. originating.鈥�

Finally, President Trump also announced the end of duty-free shipping for many small parcels using the 鈥渄e minimis鈥� exemption. This further tightens trade restrictions, particularly on goods from China, which most commonly used the exemption.

U.S. Multinational Companies and Importers Hit Hardest Hit by the New Tariff Announcements

The new tariffs are likely to hit U.S. multinationals hardest in the following areas:

• Companies that Import from China: China, which runs the largest trade surplus with the United States, continues to bear the brunt of duties. Goods from China now have to pay: (1) the normal Chapter 1-97 duties (generally 3%鈥�6%); (2) the 20% additional duties imposed earlier this year by the Trump administration, related to Chinese government鈥檚 alleged failure to prevent fentanyl precursor exports; (3) a 34% reciprocal tariff rate; and (4) for about half of all Chinese imports, the 2018 Section 301 tariffs, which range from 7.5% to 25%. All of these tariffs stack, meaning that imports of Chinese-origin goods now face duties of 55%鈥�60% and potentially up to 89%. There are no exceptions for goods produced by U.S.-owned subsidiaries.

• Companies that Pivoted from China, Using a 鈥淐hina +1 Strategy鈥�: In response to the tariffs imposed on China during the first Trump administration, many multinational companies 鈥� with the encouragement of both the Trump and the Biden administrations 鈥� pivoted to a 鈥淐hina +1鈥� strategy. This involved generally moving production out of China and into other countries (the +1) to minimize tariffs and geopolitical risks and to reduce dependency on Chinese production. But the countries that most popularly used this strategy 鈥� Cambodia, Vietnam, Thailand, Malaysia, and India 鈥� now are facing high tariffs of their own, upending the benefits of the China +1 strategy.

• Companies that Import from the EU: Companies importing goods from the European Union will be impacted more than anticipated by the reciprocal tariffs, with the Trump administration imposing a 20% duty on EU-origin products.

• Automotive Companies: Automotive companies will be hit particularly hard in the new tariff environment, as they face increased costs on multiple fronts. Automobiles and automotive parts that fall under the specific automotive tariffs will see significant duty hikes, raising the cost of manufacturing and assembly. Additionally, reciprocal tariffs on all other imported components will further strain supply chains and profit margins.

Moreover, the following countries and sectors, while not a focus of the new tariffs, are at heightened risk for future tariff increases:

• U.S. Importers Already Hit by High Reciprocal Tariffs: According to administration officials, the currently announced tariffs are the 鈥渃eiling鈥� 鈥� unless other countries retaliate. To this end, many countries (and the European Union) have announced plans to develop retaliatory tariffs. The currently announced tariffs could thus increase even further if other countries implement their own retaliatory tariffs.

• Canada and Mexico: Canada and Mexico were carved out from the April 2 tariffs, but this exemption is largely because of previously implemented tariffs on certain imports from these countries. For some importers, it may seem encouraging that USMCA-compliant products from Canada and Mexico remain duty-free. This relief, however, may be temporary. The USMCA is set to be reviewed by 2026, creating uncertainty about future trade terms.

• Lumber, Pharmaceuticals, and Copper: While lumber, pharmaceuticals, and copper were excluded from the new reciprocal tariffs, this exemption is not expected to provide long-term relief for importers in these sectors. Instead, it is widely anticipated that these goods will be targeted by separate sector-specific tariffs in the coming months.

• U.S. Companies Selling U.S.-Origin Goods into the EU, Canada, Japan, Korea, and Other Countries Hit by High U.S. Tariffs: While the Trump administration has cautioned countries from retaliating, all of the countries listed above are known to be preparing retaliatory tariffs, which potentially will be done on a joint basis.

Implications of the Tariff Announcements

The April 2 tariffs exceed initial expectations, both in scale and impact. The average U.S. tariff rate was just 2.7% at the outset of the first Trump administration, with earlier increases confined to one country and a couple of products. It now stands at 23% or higher, a nearly fourfold increase. The U.S. government is projected to collect $600鈥�700 billion in tariffs annually, up from $95 billion per year 鈥� with importers of record (generally, U.S. companies) paying these tariffs. Further, unlike prior tariffs, the administration has signaled that few, if any, exemptions will be granted.

The April 2 tariffs also introduce significant compliance and cost-allocation challenges for U.S. importers. In this new trade environment, we expect CBP will increase its enforcement efforts considerably, focusing on high-tariff goods. Further, while previous tariffs generally were focused on one country (China), tariff-related risks are now spreading out to a large number of countries, especially those that once benefited from U.S. efforts to reduce reliance on China such as Cambodia, Vietnam, Thailand, and Malaysia.

Multinational companies thus should carefully and thoroughly reevaluate their import and customs programs in light of the new tariffs to ensure compliance and to mitigate potential financial risks. Below are several items that merit a special Customs and tariff compliance focus:

• Country of Origin Determination: The level of tariffs is now most heavily influenced by the country of origin of imported goods, making accurate country of origin determinations a top (if not the highest) priority. Incorrect origin reporting could result in penalties, back duties, and potential legal consequences. To help prevent these outcomes, importers should focus on the following:
  • Importers should conduct thorough origin analysis by reviewing raw material/component sourcing, manufacturing processes, and assembly locations to ensure compliance with CBP transformation requirements.
  • Importers should consider working with customs compliance specialists or trade attorneys to assist with complex origin determinations and to avoid unexpected tariff liabilities.
  • Importers should prepare reasonable care memorandums to document the methodology and evidence used in determining the country of origin, providing a defensible position in case of an audit.
  • Importers should consider requesting advisory opinions regarding gray areas relating to the country of origin.

• USMCA Compliance: USMCA-compliant goods may be exempt from many of the newly imposed tariffs, including the April 2 reciprocal tariffs. Accordingly, we expect Customs will focus heavily on ensuring all goods claiming preferential status under the USMCA in fact meet all requirements. Items for a probing compliance review in these areas include:
  • To take advantage of duty-free treatment under the USMCA, companies must have valid and complete USMCA certificates of origin at the time of entry. Post-entry certification is not permitted.
  • CBP is expected to closely scrutinize USMCA claims, so importers should immediately confirm all originating status claims are well documented. This includes conducting product-specific audits to verify that products meet regional value content (RVC) and tariff shift rules, ensuring eligibility before making a claim.

• Anti-Dumping and Countervailing Duties (AD/CVD): In addition to reciprocal tariffs, we expect CBP to continue its strict enforcement of AD/CVD orders, particularly on imports from China and Southeast Asia. Importers should take steps to ensure compliance and minimize exposure to unexpected duty liabilities, including:
  • Importers should closely review Commerce Department scope determinations to confirm whether their products fall within the scope of existing AD/CVD orders.
  • Customs entry documentation (CF-7501) and supplier contracts should be carefully reviewed to ensure proper classification and duty payment. Importers should be prepared for enhanced CBP audits and verifications.

• Chinese Parts and Components: We expect that the presence of Chinese-origin parts and components in finished goods will continue to be an area of particular CBP scrutiny. Consistent with the above point regarding country-of-origin determinations, the presence of Chinese-origin parts and components raises concerns about substantial transformation claims, which determine whether a product鈥檚 country of origin is considered China or another jurisdiction. Importers should consider putting reasonable care memorandums in place to document the analysis supporting substantial transformation claims, including descriptions of manufacturing processes and component alterations and supporting CBP advisory rulings.

• Direct and Indirect Supply Chain Costs: Companies should take a holistic approach when evaluating the impact of tariffs, considering not just the direct cost but also indirect costs associated with supply chain adjustments, contract renegotiations, and compliance risks. Steps to consider include the following:
  • Importers should review supplier contracts to determine how tariff costs are allocated between buyers and sellers.
  • Importers should consider that supply chain disruptions due to increased tariffs may lead to delays in production and ordering, higher transportation costs, and the need to identify alternative sourcing options.
  • Companies should conduct cost-benefit analyses to evaluate whether shifting production to low-tariff jurisdictions or USMCA partners would provide long-term savings, despite short-term transition costs.

The message from Washington is clear: We are entering what will likely be an extended high-tariff, high-enforcement environment. The current trade landscape has vastly multiplied the need for multinational companies to understand the new importing rules and emphasize full compliance. The Foley International Trade & National Security Practice is monitoring all tariff-related developments, including any modifications, clarifications/guidance, or additional measures introduced by the Trump administration, including an expected series of new instructions from Customs on the implementation of these new tariffs. As new information becomes available, we will provide updates and analysis to help importers navigate the evolving trade policies effectively.

If you have questions or concerns about this article, please feel free to reach out to any of the authors or your 番茄社区; Lardner attorney. If you would like to see future updates regarding 鈥淲hat Every Multinational Company Needs to Know鈥� about operating in today鈥檚 complicated international trade world, please sign up for our biweekly email list. .

To view all articles in our 鈥淲hat Every Multinational Company Needs to Know鈥� series, click here.

As long-time readers of our biweekly series know from our last Thanksgiving’s compliance parody, Paul Simon originally planned to become a lawyer and even attended Brooklyn Law School for a semester. So, in honor of the career that might have been 鈥� Paul Simon鈥檚 work as a leading lawyer and compliance specialist 鈥� we thought we would celebrate the 50th anniversary of the release of Simon and Garfunkel鈥檚 first album with some further musings on Simon鈥檚 life as a compliance specialist. But first, here are a few little-known facts about Simon & Garfunkel鈥檚 first hit song:

• 鈥淲ednesday Morning, 3 AM,鈥� which included a song you may have heard of, called 鈥淭he Sounds of Silence,鈥� was released in October 1964 and was a flop, selling only 3,000 copies and receiving no airplay. This led to both musicians temporarily abandoning their hopes of becoming recording artists, with Art Garfunkel going back to school to pursue a teaching degree in math and Paul Simon leaving the country.

• Totally unknown to either of the musicians, a producer at their record label decided to record an overlay of electric guitars, bass, and percussion for 鈥淭he Sounds of Silence,鈥� to take advantage of the growing popularity of electronic folk music. An amazed Paul Simon first found out when he bought a copy of a music magazine at a newsstand and saw that the number-one song was 鈥淭he Sounds of Silence.鈥�

• Although the song was originally released under the title of 鈥淭he Sounds of Silence,鈥� when it was re-released on Simon & Garfunkel鈥檚 second album, it was titled 鈥淭he Sound of Silence,鈥� which was a bit confusing because the album itself was titled 鈥淭he Sounds of Silence.鈥� But new research reveals that the title was all along intended to be 鈥�

The Missing Sound of Compliance

Hello, compliance, my old friend,
No one came to train again.
Compliance standards softly slipping,
Missing rules we鈥檙e not keeping.
And the warnings, that were written in our Code,
A useless bode.
The missing sound, of compliance.

In corporate halls I walk alone,
Internal controls left unknown.
鈥楴eath the halo of a dim desk light,
Our lack of training is a blight.
And my eyes were stabbed, by red flags all ignored,
Why bug the Board?
The missing sound, of compliance.

And in the light of day I saw,
Ten thousand workers, maybe more.
People working without knowing,
Compliance failures, all growing.
People signing certs they didn鈥檛 care to check,
What the heck?
The missing sound, of compliance.

鈥淔ools,鈥� said I, 鈥測ou do not know!
Non-compliance makes trouble grow.
You brush aside every regulation,
As if it鈥檚 just an irritation.鈥�
But my words, like silent red flags fell,
Whistleblower death knell.
The missing sound, of compliance.

And this lawyer bowed and prayed,
To the standards that I made.
Our Code flashed warnings loud and clear,
Through every audit that I revered.
And my emails said, 鈥渢he rules are covered on our ethics calls!鈥�
Ignored by all.
The missing sound, of compliance.

So it finally came to me,
This compliance reality.
Compliance needs backing from the top,
If they don鈥檛 care, it will all flop.
Employees take cues from management and the Board,
Get them aboard.
From them there can be, no silence.

Looking for more articles on the lighter side of compliance? Try out There Must Be Fifty Ways to Leave Your Agent, Internal Investigations Are a Poe Substitute for Compliance, The Grinch Who Stole Compliance, Peter Rabbit Discovers Compliance!, and The Compliance Mash! And if you would like to sign up for our biweekly series on 鈥淲hat Every Multinational Company Should Know About鈥� various international trade and regulatory issues, .

As we previously wrote and reminded readers, in April 2024, the Department of Labor (DOL) issued a final rule (the 鈥�2024 Rule鈥�) increasing the standard salary level necessary to qualify for one of the executive, administrative, and professional (EAP or 鈥渨hite collar鈥�) exemptions to the Fair Labor Standards Act (FLSA).

However, on November 15, 2024, Federal District Court Judge Sean Jordan of the Eastern District of Texas ordered vacatur of the 2024 Rule that saw the first increases to the salary basis requirement in decades. Now, the FLSA salary basis reverts to pre-2024 levels, and the impact on employers, many of whom were already adjusting to the new salary levels, is significant.

The 2024 Rule included three different increases. The first, which took effect on July 1, 2024, increased the minimum salary basis for an EAP exemption from the former level of $684/week ($35,568 annual) to $844/week ($43,888 annual). The second planned increase, scheduled to take effect on January 1, 2025, would have increased the salary basis from $844/week to $1,128/week ($58,656 annual). The 2024 Rule further specified that the salary basis would increase thereafter triennially based on contemporary earnings data, with the first triennial increase scheduled to take effect on July 1, 2027.

Now, all of these increases have been struck down by the Eastern District of Texas as unlawful. The District Court鈥檚 vacatur includes a roll back of the July 2024 increase that had already become effective nationally, but which is now vacated along with the entirety of the 2024 Rule. This means that there is no longer an increase to the salary basis for the EAP exemptions in 2024, and the salary basis for those exemptions, as of today, reverts to the pre-2024 Rule level of $684/week ($35,568 annual).

As part of its order, the District Court ordered the DOL back to the 鈥渄rawing board鈥� and to reconsider the rule altogether. In explaining its decision the District Court wrote at length about the historical basis and framework for setting a salary threshold, holding that the salary basis was historically intended to be 鈥渄eliberately low鈥� merely to weed out those who obviously would not meet the duties test for exemption and that the salary basis standard was never intended to replace the duties-based portion of the test. The District Court held that the DOL deviated from this historical framework beginning with its 2004 rule and determined that the 2024 Rule constituted an unlawful agency action, thus resulting in its vacatur.

Employers across the country must now grapple with what to do next. Many employers instituted salary increases when the July 2024 increase went into effect to ensure continuing exemption status for workers. These employers are now asking what they should do in light of the November 15 ruling, such as whether to claw back previously granted salary increases or to hit the pause button on future increases until salary levels catch up. Even with the ruling, making decisions such as clawing back already-granted increases or pausing future increases can be a complex situation. It is therefore critical that, before taking any action, employers speak with experienced employment counsel. Any action taken as a result of the order is likely to have significant ramifications for your workforce.

For employers that may now seek to claw back raises given out earlier this year, understand that said action risks negative impacts on employee morale, employee retention, and/or claims of adverse treatment. Conversely, employers considering leaving salaries at their post-July 2024 levels but ceasing future raises or inflation-based adjustments, should know that this option, too, carries many risks associated with employee morale, retention, and inflation-based hardships.

It is also important to note that the November 15 order does not in any way impact state salary thresholds for any state or local rules similar to the FLSA鈥檚 EAP salary test, many of which meet or exceed the thresholds required under the 2024 Rule. If you are an employer in a state with a state rule that exceeds the FLSA requirement, you will still be required to meet the state mandated minimum thresholds to continue to qualify for the exemption.