Last week’s post emphasized the importance of an Export Compliance Program as a risk management tool. Unfortunately, most small/medium companies do not have full ECPs. Whether your company has a formal Export Compliance Program (ECP) or not, it is critical that you have procedures in place to screen orders for Red Flags.
Many companies rely on their busy shipping department to manage export compliance. I believe that this is a mistake because shippers are under time pressure to get shipments off the dock, they often don’t have training or expertise, and usually don’t have authority to stop shipments. In the absence of a formal Export Compliance Program, clear protocols for escalation and resolution must be in place when Red Flags appear.
Here is a list from the Bureau of Industry and Security (BIS) website of things to look for in an export transaction. Make sure you are not doing business with the bad guys. A little due diligence up front saves a lot of trouble later on.
The customer or its address is similar to one of the parties found on the Commerce Department’s [BIS’] list of denied persons.
The customer or purchasing agent is reluctant to offer information about the end-use of the item.
The product’s capabilities do not fit the buyer’s line of business, such as an order for sophisticated computers for a small bakery.
The item ordered is incompatible with the technical level of the country to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country that has no electronics industry.
The customer is willing to pay cash for a very expensive item when the terms of sale would normally call for financing.
The customer has little or no business background.
The customer is unfamiliar with the product’s performance characteristics but still wants the product.
Routine installation, training, or maintenance services are declined by the customer.
Delivery dates are vague, or deliveries are planned for out of the way destinations.
A freight forwarding firm is listed as the product’s final destination.
The shipping route is abnormal for the product and destination.
Packaging is inconsistent with the stated method of shipment or destination.
When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export, or for reexport.
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