If a company exports, facilitates exports or engages in other controlled activities, a working knowledge of the U.S. export control laws and regulations and their application is necessary. Exporting goods and services from the U.S. to other countries is a privilege, not a right. Failure to have a corporate export compliance program, adopted at the highest level of the corporation, can have drastic consequences. The U.S. government can, and has, denied export privileges, fined individuals and corporations, and criminally prosecuted violators of export laws and regulations.
A corporate export compliance program is an internal management system which can assist the company and its employees in understanding and complying with all relevant U.S. trade, export and embargo statutes and regulations. A compliance program serves two key purposes: (1) to educate and assist employees in understanding the relevant laws and regulations; and, (2) to serve as a management system to organize, monitor and document company export-controlled activities and compliance. A key daily objective of an effective program is to be able to detect and react to information that raises questions about the legitimacy of a customer or export transaction.
Some key questions to help identify your company’s needs in the export compliance arena:
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In what type of international business activities is the company engaged?
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What resources are dedicated to effecting export transactions and what internal controls are in place, i.e., written procedures, oversight delegation of authority, etc.?
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What does the company export?
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Where are the company’s customers located?
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What are the Export Control Classification Numbers for the products exported? Is a license required for export of the products to customers’ destinations?
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Does my company hire foreign nationals or allow visits by foreign nationals where U.S. controlled technology may be released?
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Does the company perform contracts, services or employment that it knows or has reason to know will assist in the design, development, production, or use of missiles or chemical or biological weapons or nuclear-related activities?
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What is the business nature of your customers and what is the stated end-use for your products?
A comprehensive, written and verifiable compliance policy must be accompanied by an ongoing program of education, training and oversight of employees. An effective day-to-day management and compliance program will:
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Reinforce senior management policy to comply with U.S. export laws and regulations.
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Provide management structure and organization for the processing of export transactions.
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Ensure accountability for export control tasks by identifying who is responsible for performing each part of the process and who is responsible for overall effectiveness of the system.
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Provide a map of the order processing flow and export control safeguards to ensure consistent compliance with export decisions.
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Provide written instructions for employees to “screen” export transactions against general prohibitions of exports, reexports and selected transfers to certain end-uses and end-users.
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Provide personnel with tools to help ensure they are performing their export control functions accurately and consistently.
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Identify transactions that could normally be exported without a license, but because of the end-use or end-user, require a license.
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Streamline the process and reduce time spent on compliance activities because employees have written instructions, tools and ongoing training.
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Provide training and awareness programs to help employees understand and comply with the laws and regulations.
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Protect a company, through implementing an ongoing compliance program, against violations of laws or regulations.
The establishment of a comprehensive export compliance program can greatly reduce the risk of inadvertently exporting to an unauthorized party or for an unauthorized end-use. The establishment of a program, in and of itself, will not relieve an exporter of criminal and administrative liability under the law if a violation occurs.
A compliance program is not a legal requirement under any existing U.S. export or trade laws, and there are no legally mandated standards for compliance programs. The relevant U.S. agencies, however, strongly encourage companies to adopt a formalized company-wide compliance program. Such a program can serve as evidence of a company’s good faith effort to educate employees and comply with the law. Furthermore, the relevant agencies and the Department of Justice have recognized that the existence of a compliance program can be justification for mitigating penalties in the event of any violation. For example, evidence of a compliance program can be valuable in any enforcement action to defend against any claim that a company did not use reasonable care in complying with the law or that actions did not reach the level of “willingness” required to be proven for certain criminal convictions.
If your company engages in exports, your goal should be to establish a corporate culture of legal compliance. Failure to establish such a culture could result in severe consequences. For example, in March 2007, ITT Corporation agreed to plead guilty to two felony charges, pay $100 million in penalties and forfeitures, subject itself to independent monitoring and an extensive remedial action program, and acknowledged that it illegally transferred classified and/or sensitive night vision technology to foreign countries. The culpable business division of ITT was statutorily debarred from exporting for three years.