When it comes to configuring an export control compliance program, the goal is to raise awareness of common risks and build in steps to mitigate them early in the program design phase. Otherwise, a focus solely on getting orders out can create vulnerabilities that negatively affect your business.
Here’s the list of the Bureau of Industry and Security’s most common risks and how to mitigate them.
Export with a license – most items do not require a license, but if you are the exporter, then you have the responsibility to obtain a license if you need it. Build into your order review process, a focus on new users, Export Control Classification Number (ECCN) controls, end-use and end-user information, require documentation, etc. Then, determine if a license exception is available.
Unauthorized release of sensitive information/controlled technology – focus on trade shows, email, demonstration or hiring foreign nationals here or abroad, as each could have required a license prior to releasing your technology or it could result in a deemed export. Catalog your technology and employees. Hold trainings. Attend engineering meetings to better understand projects and potential compliance issues.
Servicing items located outside the U.S. – you may need to obtain a license to service parts that have already been exported if the parties or activities are prohibited, your service activities are controlled, the equipment wasn’t exported properly, or the necessary spare parts are for prohibited end-use or end-users.
Weak or no compliance structure – Ensure sales force have compliance responsibilities and that they have a direct line of communication with management to report and address issues. Ensure you have adequate resources and then decentralize management and delegate to different offices/facilities with general oversight to act independently.
Lack of internal communication – Ensure that export compliance is a topic at meetings and trainings, and follow up with email updates to keep the message strong. Encourage open questions and answers at every opportunity.
Poor relationships with export facilitators – If you have outsourced your Electronic Export Information (EEI) filings, export classification, licensing, and other tasks to lawyers, consultants, freight forwarders, etc., perform audits to ensure that filings, classifications and regulatory requirements are performed accurately and timely. And of course, document your due diligence when selecting a third party vendor to protect your organization, particularly where your customer has instructed you to use a particular freight forwarder.
No/Underdeveloped export clearance procedures – Create specific export clearance procedures for shipping departments and have strong hold/release procedures in place in case an export is questionable. Ensure accuracy and completeness of shipping documents, properly notate export authorizations, investigate unusual shipping routes, ensure valid methods of transport, screen and clear all parties, and watch for red flags around requests for unusual labeling or shipping.
Unknown end-user or end-use – Verify end-user legitimacy by checking address using google maps, websites, email addresses, complete the Export Control Intake Certification to obtain and end-use statement, screen parties against the consolidated screening list, ensure export language is in your contracts and shipping documents, and identify all parties to determine if a license is required. Verify end-use legitimacy obtaining any backup documents required under the Export Administration Regulation (EAR), paying particular attention if the customer refuses to provide such backup documentation, and inquire if it is intended for military use or subject to a license requirement.
Unaware of diversion risk – Diversion, even inadvertent, undermines our national security. Be aware of shipments to known transshipment hubs, such as Dubai, China, Russia and Central America. Always secure and end-use statement through the Export Control Intake Certification. Consider including in your contracts provisions for your customers to agree that they will not re-export the product without obtaining your consent, and a provision that the customer indemnifies your company (including attorney fees) arising from unauthorized diversions.
Violating anti-boycott laws – be cautious if customer agreements require your company to refuse to do business with Israel or blacklisted companies, or require you to discriminate against people based on race, religion, sex, nationality, or require you to provide letters of credit with such terms.