Information Governance

Trade Compliance – What You Don’t Know CAN Hurt You

Dual-use items are any items that can have both military and commercial applications. These items may appear to be innocuous but, in the hands of the wrong people, can be used for destructive purposes. Examples of dual-use items include communications equipment, machine tools, handcuffs, information security, electronics, lasers, and encryption software. In addition, there are thousands of metals, compounds and chemicals that are controlled because they can be used for military applications.
Many firms whose primary business is not considered ‘sensitive’ are unaware of their obligations under the EAR. Companies are proud to export U.S. products overseas but many have never given much thought to the consequence of these activities.
The penalties for violations of export laws can be severe. Companies considered household names have paid significant fines for violations of U.S. export laws. Many smaller companies have been penalized as well. Recent examples include a Florida company having paid a $1,102,200 civil penalty for illegal exports of fingerprint equipment and other crime control items and a New Jersey-based freight forwarder was sentenced to a $250,000 criminal fine and five years probation as well as a $399,000 administrative penalty for the shipment of items to India without the required export license.
The penalties for violations have recently been increased in an effort to improve compliance with the BIS regulations. On October 16, 2007, President Bush signed into law the International Emergency Economic Powers (IEEPA) Enhancement Act. The Act provides for civil penalties amounting to the greater of $250,000, or twice the value of the transaction that is the basis of the violation, that may be imposed for each violation of IEEPA. Willful violators can expect criminal penalties including fines up to $1,000,000 and/or up to 20 years in prison.
Questions Every Exporter Must Ask
• Have we had all of our items, technology and software classified by the BIS or other competent expert?
• Do we know our customer (i.e. do we check our customers against the government lists of denied parties, specially designated nationals, and other required databases)?
• Have our employees involved in export transactions received the necessary training to ensure compliance?
• Do we have adequate recordkeeping practices in the event of a BIS enforcement audit?
• Do we have a formal export compliance program in place to ensure compliance to U.S. laws and regulations?
Maintaining control of your exports is not a cost of doing business. Aside from being the ‘right thing to do’, it can save money, avoid negative publicity and improve export shipment flows. What you don’t know can hurt you.
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