Complying with export regulations can be hard! Knowing where to find the regulations, how to interpret them and apply them to your business in a constantly dynamic and changing environment is challenging to say the least; not to mention that regulations are not static. This means what was okay last week, may not be okay this week, placing the burden on industry to always stay abreast of their company’s international trade footprint as well as remaining up to date and vigilant with export regulations. Let’s look at some scenarios that can get a company in trouble:
Ignoring Red Flags
No one wants to be the person to stop a shipment when you know that the company’s revenue is at stake. But it’s also key to remember that complying with the law is not optional and avoiding an export violation by identifying Red Flags is key to compliance to avoid fines and penalties.
The US Government expects industry to address Red Flags and not to ignore them which means that there is a duty to follow up on the suspicious circumstances and inquire about the end-use, end-user, or country of ultimate destination. Businesses cannot “self-blind” and must continue with their due diligence to determine if the Red Flags are valid or not.
Not Knowing Your Customer
It’s important to not only screen entities against the publicly available lists to ensure that they are not restricted, but also to understand who they are. Have they violated export laws in the past? Are they located in a country known and identified by the US Government as a diversion or transshipment risk to sanctioned or embargoed countries? Are they a distributor/reseller which would indicate that they are not the end user?
It is also important to remember that even long-standing customers need to be re-evaluated from a due diligence perspective. This means rescreening against the restricted lists prior to export as the lists are not static and change daily, reviewing their orders to ensure that the end-use aligns with their business, checking in with Sales and Customer Service to see if any Red Flags have been identified, for example.
Exporting to High-Risk Countries
There is no one size fits all when it comes to export compliance. This means understanding the difference between exporting to a low-risk country such as Canada, versus to a high-risk country such as China. The due diligence required for China must be robust to comply with and more importantly, to understand, military end user vetting, as an example. International shipments require companies to comply with all US export regulations which are cumbersome and sometimes confusing to understand. Taking on the risk of exporting to high-risk countries means also enhancing current processes and procedures for carve outs for certain countries which have specific rules and regulatory requirements specific to those countries.
Exporters need to be very careful to comply with all the relevant laws and regulations to avoid serious consequences. Violations can lead to monetary fines, criminal charges, administrative penalties, loss of export privileges and of course, reputational damage.
It is crucial for exporters to stay informed about the regulations and ensure that they have a robust compliance program in place.
Do you need help with setting up an import compliance program or maybe evening auditing your import entries? Schedule a no-charge consultation with one of our team members today.
Kristine Kelleher is a Trade Compliance Consultant for Export Solutions -- a full-service consulting firm specializing in U.S. import and export regulations.