Export compliance regulations apply to businesses of all sizes and violations are taken seriously. According to the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), fines for export violations can be up to $1 million each in criminal cases, and violators can be sentenced for up to 20 years in prison. Penalties can be devastating for any business, however, the right export compliance control strategy will help a business to properly manage the export process, while still abiding by international and country-specific import and export regulations.
Why is Export Compliance Important?
Export compliance can be defined as all of the regulation activities around the export of certain items. The trade of controlled goods, exchange of regulated information, or providing services to restricted parties are all subject to compliance regulations. Any individuals or businesses that are exporting goods or services are required to ensure complete export compliance otherwise might fall subject to fines or even jail sentences. Different organizations are responsible for regulating export control laws, but companies and businesses must ensure compliance on their own level as well.
Businesses that engage in exporting need to make sure they are compliant. The features of a good export compliance process should have the following:
- Create an Export Compliance Strategy
Every company that exports should have a written compliance plan that is documented. A comprehensive export management and compliance plan will ensure that regulations are being followed and each shipment has a procedure in place. This can help save companies on fees and penalties. For a plan to be effective, it must be supported by management and shared with all employees that are involved in exporting. An effective export compliance program also includes training of all company personnel as well as continual updates on any changes to the rules and procedures.
- Properly Classified Products
Most exporters know how to use the Harmonized System (HS) or Schedule B codes to classify their products. However, many are not sure of the requirement that determines whether the products are controlled by the Department of State or Department of Commerce. The Department of Commerce’s BIS controls the export of most commercial products, most of which do not require a license. Factors such as the product’s destination country, characteristics, and end use determine whether a license is needed or not as dictated by a specific Export Control Classification Number (ECCN).
The State Department regulates products or services related to defense such as weaponry and military equipment. The U.S. restricts companies from exporting certain products to countries for national security reasons. There may also be embargoes on certain countries for political reasons.
- Document Compliance
Exporting goods to another country requires documentation in order for the shipment process to be completed correctly. Companies need to prove that all export regulations have been met with proper documentation. The export forms that have been produced with each shipment must be retained for five years in the event of a compliance audit. This documentation becomes especially important in the case of a violation and can be used as evidence of an attempt to comply. Manually checking documentation against all export regulations can be time-consuming, but automating the process will allow the results of compliance checks to be completed in seconds.
- Restricted Parties are Off Limits
Some countries have embargoes or sanctions that prohibit goods from being shipped there. The U.S. government in conjunction with other governments publishes a list of restricted parties that require a license to trade with. The denied parties list includes businesses and individuals that have been flagged because of certain activities, for example, drug trafficking or terrorism. It is a violation to export to anyone on the list. Otherwise, a violation could result in a hefty penalty. There are a variety of export compliance tools that are able to identify sanctioned countries, so goods are not shipped there.
- Know How the Product Will Be Used
Products may not always be used as intended so companies are responsible for knowing how goods will be used when they are exported. Some of the uses of a product are prohibited entirely while others require a license. The BIS publishes a list of Red Flag Indicators to help export managers decide if the use of a product is prohibited. For example, an exporter should question an order for a customer who declines installation or testing when included or when normally requested.
Verizeal for Export Compliance Strategy
Companies of every size need to take responsibility for their exporting processes. Verizeal helps with export compliance from documentation checks and storage of information. Verizeal also automates much of the export compliance process. Our comprehensive platform will check all transactions for compliance, reducing manual work and the chance for errors. In fact, users of Verizeal’s platform reported being able to go from 3 full-time employees to ¼ of one full-time employee after partnering with us, allowing their employees to focus on other important tasks. Verizeal supports your entire staff with information and documentation to make the entire export process quicker and easier.