When Was Your Last Internal Compliance Audit?

Now that you have written your compliance manual and trained your team you are "compliant", right? While that is a great start, an effective Export Management and Compliance Program (EMCP) requires internal and external trade compliance monitoring and periodic audits. In fact, the BIS considers the existence and result of an internal/external audit to be one of the nine principles of effective compliance programs for great weight mitigation in BIS's administrative cases.

When was the last time you had a thorough review of your trade compliance program? Was it performed by an unbiased, independent person or by the same individual who is responsible for the success or failure of the program?

Your company's accounting auditors would have no credibility unless they performed an independent and unbiased audit of a significant sampling of your financial transactions. By the same token, you should not accept the credibility of your trade compliance program without a similarly competent and thorough audit of your import and export transactions.

Iron Man 2 Needs Commodity Jurisdiction from State Department

Iron Man 2 has something for everyone, including 'trade compliance geeks' like me. There is an interesting scene where Iron Man Tony Starke (Robert Downey Jr.) is grilled by U.S. Senator Stern (Garry Shandling) where the Senator insists that Starke surrender the Iron Man suit to the U.S. government. Starke insists the suit isn't a weapon but rather a high tech prosthetic device. Starke goes on to say that "I am Iron Man, the suit and I are one. You can't have it!"

Aside from the obvious issue of government seizure of private property, this would be the place to apply for a commodity jurisdiction (CJ) from the Dept. of State where there would be a determination as to whether or not the suit was specifically designed, developed, configured, adapted or modified for military application and; does not have a predominate civil application and; does not have a performance equivalent to those of an article or service used for civil applications.

In the movie, Tony Starke (Iron Man) insists that he has effectively privatized world peace by interfering with rouge regimes' military operations. In the real world this would be considered a defense service and, therefore, the suit would not be considered a predominately civil application. Sorry Iron Man, this item falls under the jurisdiction of the Department of State and you'll need a license to export the suit. As for the confiscation of the suit by the U.S. government, you will need the help of your hottie lawyer Natalie Rushman (Scarlett Johansson).

Top 5 Mistakes Exporters Make

We all make mistakes, but let's face it, some mistakes are costlier than others. It seems like almost anything you do wrong as an importer or exporter of record can cost you thousands of dollars or land you in jail. This is, in fact, the case because someone in your company is certifying that the information on your documentation is true and correct. Any deviation could be construed as a material misrepresentation of fact. But again, mistakes happen so what are the five big mistakes that an exporter can make?

1) Ignorance. We've all heard the old saying, "ignorance is no excuse for the law". The old saying is very applicable in export trade compliance. Therefore, exporters must know their business which means knowing their products and customers. Simply knowing that your products are EAR99 is not enough. Do you know who is buying them? Do you know what they are doing with them and to whom they are distributing them? Of course, you are not expected to be the world's policeman but you have a duty to understand your business and any attempt to "self blind" or cut off the flow of information normally associated with your transaction will likely be perceived as a aggravating factor in an enforcement proceeding.

2) No Management Commitment. All the knowledge in the world will not benefit you or your company if top management does not support efforts to maintain a compliant business. With knowledge comes responsibility and everyone in the company (even Sales) must be on board with your commitment to export compliance (no offense Sales guys!).

3) Lack of Training. This goes hand-in-hand with management commitment. It is not uncommon for companies to have bases no. 1 and no. 2 covered but presume that their employees are being beamed podcasts of regulatory compliance training while they sleep. Training will not only empower employees to make the right decisions to run the business but studies have shown that employees who receive high levels of training are more productive, have higher levels of job satisfaction and are less likely to leave their employer.

4) Absence of an Export Management Compliance Program (EMCP). This is not simply the culmination of items 1-4. It is a system of checks and balances, internal and external audits, etc. to ensure that there is a 'system' in place to prevent mistakes. It ensures that processes and documentation changes as the business changes. A good EMCP can adapt as the company's product, people, markets and structure changes. Many reputable firms have paid stiff financial penalties for mergers or acquisitions of companies that operated for years without a compliance program. A good EMCP will ensure that your company does its due diligence as its business grows.

5) Acting with Intent. This is the single biggest mistake a company can make. Acting "with knowledge", "having known" or "should have known" are all references to acting with intent. This is detailed in more detail in General Prohibition 10 - Proceeding with transactions with knowledge that a violation has occurred or is about to occur. These violations are not the norm for most companies but are certainly the worst nightmare for those that commit them. These are the same companies that generally try to cover up their mistakes with additional lies which become the steroid-laden food of the enforcement agencies and prosecutors. Acting with intent generally brings with it criminal penalties and covering up is an aggravating factor.

Don't be disappointed if you were looking for specifics in the "five biggest mistakes" listed above. You might try and look again at how you are addressing items 1-4 above. If you do, you will probably already know what the five biggest mistakes your company is at risk of making.