Export control and sanction requirements have been around for years, but are taking on increasing prominence. As a follow-up to Part VI of this series (Basic export control compliance principles [September, Aftermarket Business World]), this article highlights some of the considerations that go into implementing an effective compliance program for export controls regulations.
Establishing and implementing an effective compliance program
Shipping goods abroad directly confronts the myriad controls on shipment of goods. Although many goods can be shipped EAR99 (no license required, except for suspect users or controlled destinations), exporters still need to carefully ensure that their goods are properly classified so that they can determine the appropriate way to proceed. Ensuring compliance with export control regulations has seven basic steps:
• determining whether the shipment or sale raises concerns about embargoed destinations, suspect users or re-export risks;
• determining which agency has jurisdiction and which set of export-control regulations is applicable;
• determining the proper classification of the product and what type of export authorization is required;
• determining whether there are destination or end-use controls that would prohibit or restrict export;
• determining whether special export authorization is required and obtaining same;
• monitoring the export to ensure that it is completed in accordance with the terms of authorization; and
• maintaining all required records for the required period or longer.
In implementing these steps, a company should:
• Promulgate a clear policy that takes away decision-making in “gray areas” from employees who are not experts in export controls and gives it to people, either at corporate headquarters or in the general counsel’s office, who are well versed in the laws and regulations.
• Provide comprehensive training, which should be given to all new hires and regularly supplemented, at least for key employees who are more likely to confront export control issues, such as people involved in contract negotiations, sales and shipping.
• Require employees to sign an acknowledgement that they have received training and are committed to compliance with all applicable regulations and company export-control policies.
• Prepare a written compliance policy that includes both a recitation of the law and real-world examples that are relevant to the industry and business.
• Create routine systems that catch most errors while avoiding mechanical over-reliance on systems where common sense would indicate further inquiry.
• Prepare procedures in advance for dealing with questions about potential problems.
• Develop procedures to ensure the retention of all due diligence compliance actions.
• Set up a structure for deciding whether potential problems exist, with resolution by people who are independent of the transaction and who have no pressure to approve suspect transactions.
• Establish procedures where employees can, without fear of retaliation, confidentially report suspected problems.
• Establish procedures to evaluate potential violations and to investigate them.
• Preserve a record of complaints received and how they were resolved.
• Set up a system to discipline individuals who have willfully violated the compliance program and put in place procedures to prevent recurrence of the issue.
• Conduct periodic self-assessment of risk and audit procedures to flag areas for improvement.