This article follows up on Part V of this series (Mergers and the FCPA
[August, Aftermarket Business World]). This article moves to a new area of regulation of key concern to companies in the automotive sector: export controls.
Export controls requirements have been around for years but are taking on increasing prominence. In light of increased U.S. government enforcement activity, automotive corporations that sell and operate abroad need to pay increased attention to export controls and sanctions compliance.
Establishing and implementing an effective compliance program
The basic compliance task from an export control perspective is that there be no exports of goods, services or technology unless it has been established that:
• there is the general authority to make the export to the intended recipient in the intended country of destination or to engage in the transaction;
• the export or transaction is authorized by U.S. government regulations, whether by general authority, specific license applicability or exemption;
• all required documentation is prepared; and
• all relevant records are kept for the required period.
The most important risk-management tool to accomplish these goals is a good compliance program.
Creating a culture of compliance
According to the U.S. Sentencing Guidelines Manual, an effective compliance program requires an organization to “exercise due diligence to prevent and detect [wrongful] conduct” and “otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.” Compliance seldom accomplishes these aims unless there is a top-down initiative to underscore the importance of the program. Export controls compliance goals are effectuated by close attention to the following:
• Giving compliance internal status. Creating a culture of compliance starts with education. Companies should make compliance a funding priority so there are sufficient resources to run the program. The person in charge of compliance should have the authority to stop transactions and shipments, without question, until red flags are satisfied. Compliance also should be administered independent of sales or business generation to prevent pressure to overlook red flags. Most important, companies should have a well established chain of communication to ensure important compliance-related concerns get the ear of top management, whether through the General Counsel’s office or otherwise.
• Tailoring compliance. In times past, it was common to find compliance programs that were similar from company to company. The better practice, however, is to tailor the program. Companies should review all facets of the business, including the goods sold, the technology exported and the technology used in production. Company-specific factors dictate the best compliance for each company.