Your sales person says she just got an order from France, Canada or the UAE. Can you ship your product tomorrow? How do you decide? How do you know if you are right? What paperwork do you keep?
Here is a simplified version of the steps you must take (and document!) to ensure you are not violating U.S. laws. To do this you need a compliance program and training so that you understand and consistently apply these steps. Obviously, there are all kinds of exceptions and qualifications. The good news is that once you classify your products you don’t have to do it again unless you change the design (or if they are moved from the U.S. Munitions List (USML) to the Commerce Control List (CCL)).
STEPS TO EXPORT
- Ensure the buyer is not on any of the government lists of denied or restricted persons. There are more than 50 lists of government restricted persons that should be checked before exporting. Online services are available to assist you with this process.
- Consider what you are selling. Is the item designed, modified, adapted or configured for a military use? If so the State Department’s International Traffic in Arms Regulations, called the ITAR, will control the export and you probably need to be registered and need a license to export unless an exception applies. If the ITAR regulations do not control, then you need to look at the Commerce Department ‘s Export Administration Regulations, called the EAR. This process of determining where and how your product is categorized is called classification. Once you’ve classified your item under the EAR, then you need to determine if you need a license to export to your potential buyer. To do that you need to look at the CCL and the Commerce Country Chart and determine if a license is required or a license exception exists for your classification number. One short cut is to contact the manufacturer (if you did not manufacture the item) and see if it has already classified the product. Some companies have this information on line and you simply check the requirements for export to the country in question.
- Check the end use of the product for each sale. The U.S. government restricts certain end-uses based on objectives such as nuclear non-proliferation.
- Check the embargoed country and sanctions regulations of the Office of Foreign Assets Control (OFAC). Do you know which countries a U.S. company can’t ship to? Some countries have full embargoes while other sanctions only limit certain aspects of trade.
- Consider if there are any red flags telling you that you need to do more due diligence on the buyer or transaction. Do you know the buyer? Is he in the line of business that would use the product? Is he in a transshipment country? Do you know the end-user? Does it makes sense that they will need this product in their line of business? Are there any strange payment requests?
- Keep documentation to support your decisions as part of your export compliance program. This is a must!
Exporting can really help your business grow but you must have some procedures in place to protect the company and its officers from civil and criminal violations. Even large companies with extensive compliance programs can make mistakes. For example, FedEx recently agreed to pay the Bureau of Industry and Security (BIS) at the Department of Commerce $370,000 in connection with six charges from between 2004 and 2006. See the order and settlement agreement on the BIS website.