This op-ed was originally published in The Seattle Times on December 26, 2018.
In March 1979, the American-flagged ship Letitia Lykes sailed into Shanghai harbor, where it was festooned with flowers and greeted by diplomats. Seattle attorney Stan Barer developed the legal strategy to break the 30-year freeze on shipping between our nations which had existed since “Red China.” A month later, where did the first Chinese ship arrive in the United States? The Port of Seattle.
In September 2015, President Xi Jinping paid his first visit to the United States as President of China. Besides Washington, D.C., what other city did he visit? Seattle. What’s the closest international airport in the “lower 48” states from Shanghai or Beijing? SeaTac Airport. What major American deep-water port is closest to China? The ports of Seattle and Tacoma.
What other nation will buy more Boeing-made commercial aircraft in 2018 and potentially for the foreseeable future? China. Which U.S. public university has established a joint cross-disciplinary technological institute with Tsinghua University? The University of Washington.
It’s early days in the administration of President Trump, but already public reporting companies are considering how best to capture potential risks to their businesses as they draft their annual reports on Forms 10-K and 20-F. Risk factors are an important part of an annual report that help a company to communicate potential risks to its shareholders and prospective shareholders. Risk factors can also give a company some protection from suit in the event of unwelcome occurrences or unfavorable market conditions. Generally speaking, broader risk factors can help limit surprises, but the more specific a risk factor, the more protection it is likely to give a company. Although risk factors are required in all annual reports of non-smaller reporting companies, they must also be updated in quarterly reports to reflect any material changes since the last annual report.
At this early stage of the new administration, it is somewhat difficult to say which specific risks might require disclosure for any given company. However, some strong trends are emerging. Companies that are reliant on the Affordable Care Act should certainly consider including a risk factor related to the recent legislation preparing to repeal the Act. Similarly, companies with manufacturing and other supply chains or trade arrangements outside of the United States should likely consider adding or supplementing a risk factor on the potential impacts of new import/export legislation and revisions to existing treaties, particularly with regard to NAFTA. Such current event-driven reporting is not new, and many reporting companies have recently noted Brexit and climate change-related issues in their risk factors. But, given the amount of significant economic changes proposed by President Trump both before and after the election, and the overall uncertainty surrounding how those proposals might be achieved, reporting companies should be extra careful in monitoring and updating their risk factors in 2017.
Foster Garvey’s International practice group comprises a cross-disciplinary group of attorneys practicing in areas ranging from business transactions, immigration, maritime, government regulatory work, transportation and logistics and estate planning. The group members include bilingual and multicultural attorneys who are well-versed in handling these subject matters in a cross-border context. A number of attorneys have been actively practicing in the international arena since the early 1970s.