EXPORT COMPLIANCE IN 11 WORDS:
Introducing a Twelve-Part Blog Series on Export Compliance Essentials
If you’re a newcomer to the world of U.S. export controls and you’ve just been charged with setting up an export compliance program for your firm, we wouldn’t at all be surprised to hear that you’re feeling a little overwhelmed right now. Does “bewitched, bothered, and bewildered” describe your state of mind as you struggle to make sense of the export laws and regulations and sort out which ones apply to your company? Are you wondering where to start?
If you’re finding export compliance to be a daunting task, rest assured that you’re not alone. The ever-changing complexities of U.S. export laws and regulations, licensing requirements, economic and trade sanctions, arms embargoes, and other legal and regulatory constraints present unique challenges to U.S. exporters as they strive to meet their business objectives while remaining compliant. Actually, taking on those challenges successfully without the proper training and support is more than just daunting, it’s impossible.
At Export Compliance Solutions, we’ve gained quite a lot of experience over the years helping our customers — small and medium-sized businesses and organizations of all kinds, and some of the big guys, too — identify, analyze, resolve and mitigate the regulatory issues and risks of selling in the international marketplace. Based on that experience, we’ve prepared a brand-new blog series for you, in which we share the most important lessons we’ve learned, condensed and summed up in 11 key words. The twelve posts (including this one) that you’ll be reading over the next several weeks will by no means cover everything there is to know, nor will they answer all your questions about export controls. What this series will do for you is lay a solid groundwork for understanding how to protect your business against export violations. “Export Compliance in 11 Words” will provide you with a sound starting-point for formulating an intelligent and practicable export compliance plan tailored to the needs and realities of your business.
Here’s an overview of what’s ahead:
ANALYZE – Because every business is different, there is no such thing as a generic, all-purpose, one-size-fits-all corporate export compliance program. Processes and procedures that are critical components of another company’s compliance strategy may be impracticable in scope and inappropriate in subject matter for yours. A program that doesn’t fit your needs will waste time, money, and personnel, and may even weaken your competitive advantage, while providing little or no protection against violations, fines, and penalties in the areas where your business is actually most vulnerable. But you can’t design a program that effectively addresses the real risks your company faces until you are confident you know what those risks are. That’s why conducting a strategic risk analysis of your business from an export-compliance standpoint — preferably alongside an outside expert — is an indispensable prerequisite to everything else. The company’s past, present, and future export customers, products, and services; the likelihood of certain kinds of violations; the controls and personnel already in place; the current regulatory environment and trends; the potential severity of fines and other consequences — all these issues and others need to be discussed in detail, analyzed, and evaluated before written policies and procedures are formulated and put in place.
EDUCATE – The oversight and management of corporate export compliance in today’s world requires substantial and ongoing professional training, including — but by no means limited to — a thorough familiarity with all the applicable U.S. Government laws and regulations. Once you’ve acquired the necessary training and knowledge yourself, your number one priority as a compliance officer should be training others in your company. The goals of this training should be (1) instilling and maintaining a high level of export compliance awareness company-wide and (2) ensuring that management and employees at all levels understand their export control responsibilities and have the appropriate competencies and skills to carry them out effectively, so that exports are made in compliance with both U.S. laws and regulations and the company’s best interests.
CLASSIFY – Export compliance personnel must know their company’s products and services, clearly identify, flag, and classify those categories of products, services, or technical data which are subject to export controls, and fully understand which regulatory requirements apply to each category. They must also know their company’s customers and be able to pinpoint risks and vulnerabilities from a regulatory standpoint.
SECURE – Responsible information-handling practices are critical to export compliance. You are responsible to protect your company’s controlled technical data and information against access by unauthorized persons, both on the ground and in the cloud, not only inside your facilities, but wherever your business and its workforce interfaces with the global marketplace. Your employees need to know that if they’re sharing technical data, such as plans and blueprints, even within the U.S., or if they’re allowing the visual inspection of ITAR-controlled articles by foreign nationals, they’re exporting technology; and if they’re doing these without proper authorization, they’re committing an export violation.
SCREEN – “Screening” is the process of checking and cross-referencing the parties involved in an export transaction against the many, continually updated lists of restricted or denied parties maintained by various governments and government agencies. If you’re a frequent or regular exporter (or are actively seeking to market your goods and services more widely overseas) and you aren’t routinely using some kind of Restricted-Party Screening (RPS) software to screen your customers, consignees, suppliers, employees, etc., you’re a fool. But you’re an even bigger fool if you are relying on RPS software alone to flag high-risk transactions and detect potential compliance problems. Even with the necessary screening software in place and properly configured to your company’s needs, the dictum remains true: your company’s employees are your ultimate line of defense — which is why their training and motivation is absolutely critical to compliance.
DOCUMENT – Certain specific recordkeeping for export transactions is mandated by the EAR, the ITAR, and the various OFAC Sanctions programs. But an effective corporate compliance program ought to be tracking and documenting much more than that bare minimum. Not only do transaction and licensing records need to be complete, accurate, and secure, they also need to be readily accessible in case of a compliance audit or other investigation.
COMMUNICATE – Proper communications are essential to export compliance. Critical compliance communications include the timely filing of the multiple reports mandated by U.S. export laws and regulations, enforced by the regulatory agencies, as well as having procedures in place for making prompt voluntary disclosures when violations or possible violations are discovered. It also means developing a communications strategy for keeping management, employees, suppliers, and customers in the loop about regulatory changes and all other compliance-related concerns and issues, as needed.
MONITOR – Even the most carefully formulated policies and procedures are meaningless if actual, real-life compliance with them is not checked and verified, and if instances of possible or actual non-compliance are not reported and promptly addressed. Moreover, if the monitoring of internal compliance processes is only sporadic, occasional, or random at best, it is not likely to be effective, and consequently the risk of violations occurring will be high. But reliable, continuous monitoring and control of processes and procedures necessitates building and maintaining an appropriate infrastructure.
ASSESS – A corporate export compliance program is properly focused on identifying and mitigating risks and vulnerabilities. To evaluate the effectiveness of your compliance efforts, frequent internal assessments and audits of processes and procedures are indispensable. So are periodic independent outside reviews of your overall compliance policies and program. It is critically important that the findings and recommendations of these reviews be reported to top management. Short-term and long-term follow-up on the implementation of corrective measures and program improvements should be an integral part of the review process.
ADAPT – Regulatory, technological, and business environments are rapidly and continually changing, and those changes are unavoidably impacting your company. “Innovate or die” is a common adage in the business world, and, while it may sound a bit melodramatic, it expresses a simple truth. If your company is surviving — and, we hope, thriving! — it’s safe to say you’ve made some significant changes over the last couple of years, and that’s all to the good. But if your export compliance program isn’t changing and adapting along with the rest of your business, your company’s survival may be at risk.
OWN – An effective export compliance program requires buy-in, visible involvement, and credible commitment on the part of top management — communicated, among other ways, by the allocation of adequate personnel and resources to the compliance function. When this sort of management commitment is perceived, when employees see that management is taking compliance seriously, company-wide engagement and employee motivation are likely to follow. Your compliance standards and policies, as well as the rationale behind them, should not only be spelled out explicitly in writing, but also well understood and acknowledged by each employee. Individual export compliance responsibilities need to be clearly articulated and included in job descriptions to ensure personal accountability and ownership. Moreover, your employees need to know that rules and procedures will be strictly enforced. The predictable result of not clearly assigning ownership of a process is a failed implementation of the process.
It is often said that without a top-down, pervasive corporate culture of compliance, no export compliance program will ultimately succeed. That may sound trite, and perhaps a bit corny, but it is nonetheless true, and its importance should not be underestimated. The human element remains the key to compliance. If you’re training your employees so they know how to do the right thing and motivating them so they want to do it, you’re on the way to creating a risk-aware corporate culture of compliance—the necessary foundation for any effective export compliance program.
Sound like information you need to know? If you’re new to export compliance responsibilities, or if you’re already dealing with U.S. export controls and would appreciate an update and review of the basics, you won’t want to miss a single one of the posts in this series. Sign up today for a free subscription to “An EAR . . . to the ITAR” and we’ll notify you of each new installment during the weeks ahead.
(None of the information is intended to be authoritative official or professional legal advice. Consult your own legal counsel or compliance specialists before taking actions based upon this blog or other unofficial sources.)