Risky Business

C-level executives all understand risk management and protect their organizations accordingly. They make sure insurance policies are in place for all possible contingencies and retain legal counsel for further protection. Unfortunately, export compliance is rarely treated as the risk that it represents. There are several reasons for this:

Inertia- initial steps are taken to develop an Export Compliance Plan but progress stalls as more urgent tasks need attention.

Management believes that company is too small or doesn‘t export enough to need a formal ECP.

Lack of upper management commitment and willingness to put in the time.

Management doesn’t want to spend the money or devote resources to create an ECP.

Compliance is managed at lower levels with limited authority to get the project done.

Reliance on Logistics Service Providers for compliance. While LSPs are valuable business partners, the exporter is ultimately responsible for compliance.

The best insurance against export fines and penalties is an up to date Export Compliance Program. Both upper management commitment and front line training are essential parts of an ECP.

Fines and penalties for violations should make export compliance a basic part of risk management. Best practices, including an ECP, will reduce exposure to steep fines and penalties as described by BIS (Bureau of Industry and Security) on their website https://www.bis.doc.gov/

Penalties- Violators of the Export Administration Act of 1979, may be subject to both criminal and administrative penalties. When the EAA is in effect, criminal penalties can reach 20 years imprisonment and $1 million per violation.

Privileges – A denial of export privileges prohibits a person from participation in any transaction subject to the EAR.

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