United States: Uh Oh. So, You Think You May Have An Export Problem

Last Updated: July 17 2017
Article by Andrea Fraser-Reid

Perhaps the information came from a colleague or a customer or an anonymous tip left on your company's "tip line."  Or it could have been a comment made during a presentation at a professional meeting.  Something caught your attention and triggered the realization that you may have a U.S. export controls violation.  Whether or not you have experienced that sinking feeling, prudent compliance requires that you be prepared to take appropriate action at the first sign of trouble. 

So, what to do if you have concluded that there may have been an export control violation?  Managing a possible export control violation means taking on the situation directly.  A systematic and comprehensive response will enable your company to most effectively deal with the situation.  The response actions fall into three parts.

The first part of the response focuses on establishing the scope of the violation(s).  If ongoing, the conduct that has given rise to the suspicion of a violation must be stopped at once.  The investigation into the possible violation(s) will require the cooperation of all the operationally involved parts of the company.  Accordingly, a credible internal investigation is characterized by demonstrable support from senior management, including a commitment to supply the necessary financial and personnel resources to mount the investigation.

There are many factors to consider when shaping the investigation process. Important considerations include: (1) the possible points of contact associated with the violation(s); (2) the nature of the goods, technologies and services; and (3) the recipient countries.  

Evaluating which points of contact may have contributed to the violation will help establish the scope of the problem.  To use an extreme illustration:  The failure of an individual employee to ascertain the correct product classification suggests a different problem than would a general lack of awareness of applicable EAR or ITAR controls.  Similarly, it is important to know at what point in the customer relationship the violation occurred.  For example, was the violation in the context of a sale to a new customer, a transaction with an existing but recently listed/sanctioned customer, or through technology transfer in the context of post-sale customer support?  Uncovering the violations and tying them to operational activities assists in establishing the scope of the violations and may assist in identifying appropriate compliance fixes. 

The nature of the company's activities will also guide the course of the investigation. Companies engaged in manufacturing must consider supply chain exposure as well as exposure created by the exports. Transacting in sensitive technology (whether EAR or ITAR-controlled), which may involve transmitting information without a "box," creates specific compliance risks.  Note also that compliance obligations include not only the shipment or transfer of goods and technology to the customer (such as proper classification, know-your-customer diligence and licensing assessments/acquisition), but also reporting and recordkeeping requirements.

The structure of the investigation is also influenced by the countries involved.  A concentration of business with countries subject to tighter controls or subject to U.S. embargoes increases the likelihood of violations in the absence of a robust compliance effort. 

The second part of the response to an export violation focuses on corrective action.  As noted, the conduct at issue should be terminated as soon as possible after the potential violation is detected.  But corrective action should extend beyond termination of the specific conduct to include taking steps to prevent the recurrence of the violation.

Any corrective action must start with the compliance plan.  If the company does not have compliance policies and procedures, a plan must be created and implemented as soon as possible.  If a plan is in place, the flaws in the plan that allowed the violations in question must be corrected. The investigation of the scope of the violations may identify appropriate fixes. Going forward, ongoing monitoring may speed up the detection of violations and simplify the compliance program improvement process.  In any event, the compliance plan should include regular internal reviews or audits designed to catch plan flaws before violations are committed.

Further, a critical component of any comprehensive compliance strategy, and any response to a violation, is training.  A robust compliance plan will respond to changes in compliance obligations as well as changes in the company's operational and business activities, ideally prior to committing a violation.  Training for new personnel in implicated operational positions as well as ongoing refresher training for current employees will ensure that those with compliance responsibilities are equipped with the current knowledge necessary to properly execute their responsibilities.  Further, keeping those directly responsible for compliance fully engaged in the process improves the likelihood that the compliance plan will be properly executed and empower personnel to identify and raise concerns before a violation occurs.

Whether to voluntarily disclose the suspected violation to the appropriate U.S. government agency or agencies is the third part of the response, but the question itself hovers throughout the process.  The U.S. government encourages disclosure.  Companies may disclose a suspected violation as soon as it is detected and then submit complete reports once the investigation is completed.  A company's decision-making concerning a possible disclosure may change over time (based, for example, on information uncovered during the investigation) but may touch on many factors, including the scope and sensitivity of the violation and the likelihood of ongoing, similar conduct.  Other factors may include the company's appetite for the potential fallout, in terms of negative publicity and penalties, and tolerance for risk, including the likelihood that the relevant government agency would learn of the violation through means other than self-disclosure. A company investigated as a result of a tip from a business competitor, a former employee, or notification from another government agency would be denied self-reporting penalty mitigation and may face an increased risk of criminal penalties.

The complex web of laws and regulations that govern U.S. export controls is rendered more challenging by the volatility of the current regulatory and trade environment.   Conducting business in this environment requires a full commitment to compliance, incorporating a comprehensive understanding of developments and current requirements, in order to minimize the risk of potentially expensive and embarrassing violations. Securing the assistance of experienced trade counsel can position your company to detect and manage possible violations and to develop a comprehensive compliance strategy. Torres Law provides assistance with all aspects of import and export regulatory compliance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
12 Oct 2017, Webinar, Dallas, United States

The past year has been a busy one with regards to U.S. policy towards sanctioned and embargoed countries. The U.S. has strengthened or expanded sanctions targeting Iran, Russia, North Korea, and Venezuela and has additionally begun the process of rolling back some of the relaxation of the Cuba embargo that had occurred during the Obama Administration.

23 Oct 2017, Seminar, Texas, United States

Olga Torres to speak on “Top 10 Export Errors to Avoid”

 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.