As an attorney focused on ethics and compliance, companies often talk to me after they have discovered an export compliance problem. In the best cases, the issue can be resolved through speaking with the freight forwarder or updating administrative procedures.
In the worst cases, the company may need to make a Voluntary Self Disclosure to government enforcement personnel. In this era of massive anti-corruption headlines, many companies have ignored or down-played potential export compliance risks.
Companies need to adopt a new mind-set, a proactive compliance strategy that embraces export compliance company-wide to mitigate the real and significant risks of violations.
Companies who gloss over the underlying circumstances that led to a problem in the first place will usually find themselves dealing with another problem in the not-too-distant future.
It is common for companies to think that they do not need an export compliance program. Some of these companies rarely export products or services. Others only export “benign” products or services that generally do not require a license, while still others hire a single trade compliance expert and think their job is done. These are risky mistakes.
Even companies with very little export activity must have a basic compliance program in place or they will be constantly managing (and dodging) potential violations and problems. You could be the most knowledgeable export compliance expert, but if you haven’t implemented a compliance program to communicate with operational employees you will find yourself without eyes and ears.
Forward thinking companies realize that the best time to implement a basic export compliance program is before a problem arises. This will save you time and headache down the road. Most companies can prevent 99% of problems with a few basic steps. Of course, if your company is exporting military-grade equipment to countries all over the world, you will need much more than the basics. But, for most of the clients I work with, their export compliance programs consist of the following five components.
1. A clear and simple policy
Export rules and regulations are mind-numbingly complex. Definitions can be hard to find. That level of detail is not useful for your operational employees. Your export compliance policy should consist of a single clear message: think about what you are exporting, who you are exporting to, and where it is going.
Of course, you will also want to include an explanation of the policy, definitions, reporting lines, non-retaliation policy, and other components you see in most compliance policies, but the underlying message should fit in a single paragraph. Once people become aware of the “what, who, and where” you will have focused attention where it should be.
You do not need your employees to be able to tell you from memory what type of license is needed to export your widgets to Country B – they just need to know enough to ask you.
2. Defined roles and responsibilities
This is where the rubber meets the road. You need to have clear roles and responsibilities defined for who is going to perform export compliance checks. That can include screening counter-parties for sanctions compliance or reviewing export transactions to consider if a license is needed. Either way, those operational personnel need to know that export compliance is part of their job. In terms of your policy, it isn’t enough to say this is what the company has to watch out for – you need to identify the specific person(s) who will actually make sure that potential issues are flagged.
3. Regular training
This component varies by organization. Some companies who export frequently should provide basic export compliance training to all their employees on a regular basis. Companies that export infrequently may not need such a comprehensive program and can be effective with a shorter message to everyone. Regardless, the individuals who are responsible for your export compliance – those we just talked about above, need to be thoroughly trained about their areas of responsibility.
Individuals performing sanctions screenings should know why red flags arise and what it means to be on a sanctions list. Targeting those employees results in the best return on your training investment.
4. Meticulous recordkeeping
All the hard export compliance work your employees do will be worthless if they are not creating an audit-ready record. Someone may think they have a good memory, but when issues arise it is often weeks, month, or years later. No one remembers if a screening was conducted, or why certain red flags were resolved. Make sure your employees know the importance of documenting each step taken in the export compliance process.
5. Auditing and monitoring
The last component is making sure that the procedures you put into place are being followed. I recommend starting with more frequent, less intensive audits of your export compliance procedures. This allows your operational personnel to become familiar with the types of requests and information that may be sought in audits down the road. Not to mention, if an issue does arise, your employees will be ready to go with the information you need to fully assess the facts and circumstances.
These five simple components of an export compliance program will go far to ensure that your employees are ready to prevent your company from making export compliance mistakes.