Export Compliance Programs

By: Olga Torres and Luis Torres
Date: 07/27/2016

Compliance with the U.S. export control regulations is a significant issue for companies and their legal and compliance teams. The U.S. export regulatory agencies have increasingly adopted a more aggressive enforcement approach designed to deter potential violations and increase accountability. The Obama Administration’s overhaul of the export regulatory regimes under Export Control Reform (ECR) was specifically intended to build higher walls around fewer, more critical items. Companies should expect the agencies to step up enforcement and should be aware of the potential ramifications associated with non-compliance. The U.S. Government agencies regulating exports have repeatedly stated that a good compliance program is considered a “great weight” mitigating factor in the settlement of administrative cases and in their penalty determinations.

A good compliance program establishes a road map that company personnel can easily follow to maximize compliance with regulations that are highly technical and complex. By clearly outlining the requirements under the export regulations, your company’s risk for reputational damage is also decreased. It is not uncommon that companies refrain from doing business with companies that either have a history of non-compliance or are being investigated for potential violations.

An effective compliance program will also improve your visibility into the company’s import/export process, leading to additional benefits such as improved costs, better controls, and a better allocation of resources. It will also improve your company’s management of service providers, leading to reduced shipment costs, and increasing your supply chain security. 

In the case of violations, a compliance program also increases accountability within the company. Employees cannot claim ignorance of the law, or blame corporate for lack of resources.

How to get started?

The Bureau of Industry and Security (BIS) has issued export program compliance guidelines outlining the key elements that BIS considers necessary in an effective export program. Similarly, the Directorate of Defense Trade Controls (DDTC), which regulates defense item exports, has also issued compliance program guidelines that can assist companies in developing their own internal compliance programs.

Generally, an effective export program as outlined in BIS’s website has the following elements:

  1. Management Commitment: Senior management must establish written export compliance standards for the organization, commit sufficient resources for the export compliance program, and ensure appropriate senior organizational official(s) are designated with the overall responsibility for the export compliance program to ensure adherence to export control laws and regulations.
  2. Continuous Risk Assessment of the Export Program
  3. Formal Written Export Management and Compliance Program: Effective implementation and adherence to written policies and operational procedures.
  4. Ongoing Compliance Training and Awareness
  5. Pre/Post Export Compliance Security and Screening: Screening of employees, contractors, customers, products, and transactions and implementation of compliance safeguards throughout the export life cycle including product development, jurisdiction, classification, sales, license decisions, supply chain, servicing channels, and post-shipment activity.
  6. Adherence to Recordkeeping Regulatory Requirements
  7. Internal and External Compliance Monitoring and Periodic Audits
  8. Maintaining a Program for Handling Compliance Problems, including Reporting Export Violations
  9. Completing Appropriate Corrective Actions in Response to Export Violations

If you do not already have a compliance program in place, you should consider developing and implementing a strong program for all of the above-referenced reasons, including mitigation of penalties in cases of violations. You should abstain from using cookie cutter compliance programs that are not specifically tailored to address your specific company operations. A good compliance program must take into account the size of your corporation, type of industry, business locations, and company culture.