Why Export Compliance Matters
U.S.businesses that sell goods and services in a global market are required to comply with export control regulations that are published by several U.S. departments including the Department of Commerce, the Department of Treasury, and the Department of State.
Export compliance does not only apply to big companies. Any U.S. business that sends products, services or technology/technical data to foreign countries is subject to export control regulations.
Adhering to these regulations is critical. Export compliance is the law and the government takes it seriously. The penalties for non-compliance can be severe and devastating to a company. Penalties can include hefty fines, debarment, and even prison time. In addition, export violations are public record which could affect your company for years to come.
Knowing and applying the regulations not only protects your company from harsh penalties, it also protects our nation’s interests by ensuring that certain products, technologies, and software do not fall into the wrong hands.
Companies are responsible for their own compliance, ensuring that they comply with the regulations and have put best practices in place to prevent any export violations.
Conducting an Export Compliance Assessment that Drives Results
Assessing your export program is a vital step on the path towards compliance. An export compliance assessment is a central part to ensure you comply with export regulations. It serves as a roadmap that will help your company rest assured that you are safe from unwanted penalties that come with trade violations.
We take your export compliance seriously, and this is why we follow a scientific approach to each export compliance assessment that we conduct.
It can be a valuable tool in identifying your program’s strengths and weaknesses, allowing serious gaps that may leave your company vulnerable to violations to be identified and fixed.
While an assessment may seem like a daunting task, following a tried and true process can get you well on your way- whether you conduct the assessment on your own or you hire an outside company, like Export Solutions, to assist you with it. Here is an overview of the methodology Export Solutions uses to conduct an assessment.
1. Initial Discovery and Plan
These are the most important aspects of an assessment. Every client that inquires about an assessment has a reason for doing so- whether it is a suspected or actual violation or a tool to measure the effectiveness of an existing program.
Why a company wants an assessment shows us how we should be focusing our attention and what is important to that particular client. Initial discovery typically occurs via a phone call, where one of our consultants talks to the client through the steps of the assessment.
Our team will approach your export compliance assessment with a unique set of knowledge to understand the main issues and walk you through our process. Most importantly, we become familiar with your business so we can individualize the means to meet your needs.
2. Gathering Information
Once we have a handle on your company, we begin gathering information. The main goal of this step is to determine where your company is in terms of export compliance. The quality of information collected is key to a successful assessment, and our trade consultants will work with you to make sure we collect all the necessary information needed for a complete assessment.
If information is lacking, it is hard to get a complete picture or measure of compliance, hindering Export Solutions from uncovering any critical gaps or areas of non-compliance. We gather information using these three steps:
Determining the Functions to Interview
Interviewing the Export Compliance Officer is just a small piece of the puzzle. There are so many functions that contribute to export compliance, and it is essential to identify any touches these functions have.
Our team will conduct interviews to collect necessary information and the interviews ensure that we receive input from all company stakeholders to create a complete picture. We typically interview sales, engineering, human resources, security, logistics, and more. A standard assessment will consist of 10 or more interviews depending on the size of the company.
Ensuring that we have the right group of interviewees identified aids us in covering all functions that export compliance touches, even those functions people don’t often realize.
Interviews last between 30 and 60 minutes each, and each interview will be modified based on the person who we are talking with, specific questions required for your export compliance assessment, and other factors. We start with getting an idea of job function and then analyze how responsibilities intertwine with export.
For example, when speaking with engineering, we get a feel for how a new product is developed, how collaboration happens, who is involved in the process. We look at how information is shared in order to determine if deemed exports may be an issue. We ask about new products to find out when an item is classified for export or if export compliance is a part of this process.
We use an export compliance audit checklist of questions as a guide and strive to create more of a discussion than an interrogation. Our personalized approach to export compliance assessments means that your business will receive quantitative information along with a qualitative insight into your business operations.
A big part of the interviews is often education and relationship building. It is our desire that every client becomes a long-term client. We take the time to explain why we are asking certain questions and really try to understand how the company interrelates within.
We take detailed notes and use this information as our primary source of information for the report. All of these notes and insights are compiled into a larger document, and our team will use this document to get a deeper understanding of your company’s operations while also seeing the larger picture to help your business position itself for trade compliance moving forward.
Interviews tell us the story, but documentation shows us the story. We collect documentation at different stages throughout the assessment. Prior to any interviews, we ask for specific data and documentation. This information will help us paint a whole picture of your company’s operations along with the personnel who work in each department.
This allows our trade consultants to have more directed questions and to go into interviews with a snapshot of the export program.
Examples of what we ask for include the export compliance manual, any related processes and procedures, examples of shipping documentation, and a log of exports that have taken place over a specified period of time.
During the interviews, we may also request additional documentation based on information received. For example, we may find during our interview with Security that they have a visitor log and so we would ask for an example of this.
Reviewing these things allow us to validate the information we receive from the interviewee, as well as to identify where documentation or a process may be missing or need improvement.
Some companies may be starting from the very beginning and have no processes or documentation- that’s ok! Knowing this allows our team to identify where we can provide advice or procedures to get the program started.
We have been conducting export compliance assessments for companies just like yours for many years, so we know how to ask the right questions and get the right information in an efficient manner.
3. Analyzing Data and Information
After the information has been gathered, the next step is to analyze that data. During the interviews, we begin to piece together exactly where a company is in terms of export compliance.
As we examine the data, we look at information gathered during interviews, and we look at the documentation received. We validate the information from the interviews with the documentation.
During this stage, we group the information into a variety of categories or functional assessment areas. Our assessment report typically has up to 15 functional assessment areas ranging from screening to audits and many categories in between. Categorizing data is just one way that our team ensures that your export compliance assessment ties in all areas of your operations and will have a lasting impact for years to come.
As we review the data, we divide and group into these categories and begin putting the puzzle together as to where gaps may be. We look at areas of compliance as well as non-compliance.
At Export Solutions, we think it is important for companies to not only know where they can improve but to know what they are doing well. In addition to reviewing the data against the regulations, we also review it against industry best practices.
We want your company to be as compliant as possible, not just meet the expectations of the regulations. We also keep in mind the feasibility of each recommendation.
Our goal is not to create a cookie-cutter report, but to tailor it to your company’s specific needs. A small company may not benefit from robust automated export software, but it might be a great asset to a company with a large exporting program. We look at each company individually and create our recommendations accordingly.
We also listen to the interviewees, asking where pain points are and where they see areas for improvement. These things are important to us. Often, an assessment report can be a great tool for ECO’s to show to their executives, and adding in pain points can be a great help for them down the road.
4. Writing The Assessment Report
Now that we have gathered the information, reviewed documentation conducted interviews, and analyzed the data, we can begin writing the report. Because we have already grouped and sorted information, this step consists mainly of putting all of that information into a format that is easy to read and interpret. Our reports consist of four main sections:
This section gives a general overview. It outlines what functions were interviewed and key takeaways. We briefly outline the main areas of non-compliance identified.
In this section, we also describe the methodology we use in determining risk factors. The goal of this area is to provide a general guide for the reader as they review the report.
Summary of Recommendations
This section gives the reader a more detailed picture. It is an executive-level overview which outlines what the company is doing well and our overall general impressions. The report criteria are divided into up to 15 functional areas, and each one is assigned a risk color.
In the Summary of Recommendations, we break down the risk levels. This section also provides the reader with a personalized, high-level overview of recommendations.
Functional Area Assessments
This is the meat and potatoes of the report. This section provides specific observations, gaps, potential vulnerabilities, and recommended best practices we have documented for each functional area assessed. For each area, a level of risk is assigned, ranging from minimal risk to high risk. In addition, each functional area has three sections:
- Relevance: We explain why this functional area is important in terms of export compliance.
- Findings: This portion outlines what we found. Here we highlight things that are being done well in addition to areas of improvement. We describe gaps found during the interviews and documentation review. These are 1-3 sentence bullet points designed to highlight to the reader what we found during our analysis.
- Recommendations: Here, we give practical advice on closing gaps and becoming more compliant in each functional area. This could range from developing a procedure to something more specific, like adding export compliance checkpoints into the product development process. Each recommendation is given with the individual client’s situation in mind and tailored specifically based on the information Export Solutions has gathered.
Appendices and Risk Scoring Guidelines
This section varies based on the findings. Here we may provide an example of an export compliance policy or a classification matrix. We also provide a guide in this section to how we score risk.
Export Solutions uses Risk Assessment Scoring Guidelines in order to determine the risk associated with any identified gaps or areas of improvement. Risks are identified and prioritized based on three variables: severity, probability, and risk level.
They are highlighted in each functional area per the corresponding color. Green indicates a low risk, yellow indicates a medium risk, orange indicates high risk, and red indicates a very high risk. Lastly, this section gives an example of a project plan with recommendations. This leads us to the last step of our assessment process.
Our holistic approach to export compliance assessments means that your company will have both a broad view of your entire operation, while also having detailed insight into how each component of your trade compliance is met within the company.
5. Reviewing the Results and Creating an Action Plan
At Export Solutions, we believe in not only recommending areas of improvement but giving you tools to help you make those improvements. After all, a report can only go so far. Our goal is for you to be compliant, and in order to do that, an action plan is necessary.
This action plan is drafted directly from the findings and recommendations of the assessment report. It is finalized only after the report has been reviewed, discussed, and accepted by the client.
The plan provides each client with what we found and what we recommend divided by functional area. The client decides who the action will be assigned to as well as due dates. Export Solutions works together with the client in completing the plan with regular check-ins and calls.
We provide practical advice on how to close the specific gap identified and assist by providing and personalizing any templates and procedures necessary. This step is the report put into a practical project plan.
Working with Us to Start Your Export Compliance Assessment
You made it through all of the steps, and now you know exactly how we conduct an export compliance assessment. As you can see, we follow a very detailed and methodical approach based on years of experience.
While we follow a step-by-step approach, we also ensure there is enough flexibility built in to deliver a product specific to our individual clients. It is not a one-size-fits-all solution. While to a novice, these steps may appear daunting, to Export Solutions, they are part of our everyday job.
Our consultants are experts in the regulations and are able to quickly pinpoint trouble areas and offer practical solutions. If you think you could benefit from an export compliance assessment, we are ready to help! Please contact us for a free consultation to get started today.
Emmalie Armstrong is a Trade Compliance Consultant with Export Solutions – a firm specializing in U.S. import/export regulations.