Compliance Considerations

Compliance Considerations of External and Internal Events

There is nothing more constant than change. This paradox is true in business and certainly true in the world of export control. Whether positive or negative, external or internal, businesses must prepare for, and adjust to, an ongoing barrage of minor and major changes. To maintain compliance, leaders must include export control considerations during their various times and types of transition. We will discuss these details in this two-part blog, beginning with critical external changes that businesses encounter and how they adapt to them.

  1. Emerging & Foundational Technologies: In the past few years, these terms have come to the forefront of export control. They involve sectors like Artificial Intelligence, Quantum Computing, and Autonomous Vehicles—all categories that will be critical to future evolution of business and society. The U.S. government wants to control them, partly for classic export control purposes but also for national competitiveness and security reasons. The request for public comment resulted in an avalanche of responses, much of it concerned that any new regulations would hamper innovation and restrict business growth in key areas. The sensitivity of these issues shines a white-hot spotlight on the convergence between export controls and national/industrial security policies. The drama is hardly over either; we’re only in Act I.
  2. Changing regulations and Control lists: As the government identifies new risks and reevaluates long-standing ones, regulatory modifications are inevitable. These changes are most evident with emerging technologies and software but, on the other end of the spectrum, some items see their controls relaxed or removed as they become commonplace or obsolete. There are also ongoing reforms in U.S. export controls, as evident in multiple recent changes to both the ITAR and EAR, notably the migration of less sensitive items from the USML to the CCL. While these changes are good, they bring with them new challenges for executives and compliance managers who must stay abreast of new requirements and procedures. How to do this? Maintaining awareness is key: attend industry events like the BIS Update conferences; join associations of compliance professionals like the Society for International Affairs (SIA); subscribe to export compliance newsletters like The Daily Bugle or Export Practitioner; and join social media groups dedicated to export control topic. Equally important, you must be continually vigilant regarding the export classification of your product line through self-classification, third-party professional determinations, or official request to the U.S. government.
  3. Sanctions, Embargoes & Political Change: As diplomatic relations between the U.S. and other countries evolve, so do America’s trade policies. When things turn particularly sour, we often hear talk of possible sanctions and embargoes on specific countries. Usually, these stories will be headline news and hard to miss but too many companies ignore the clouds until the storm hits. This is a strategic shortfall. If your current or future business plans are in contentious areas, you should be monitoring those developments closely and developing contingency plans. In recent years, we have seen numerous examples in Iran, Crimea, North Korea, Cuba, Syria, and Sudan and more recently there is new concern regarding countries such as Hong Kong, Venezuela, Russia, and Burma. What should you do? Again, follow the news, do your homework, prepare contingency plans, and prevent your exports from entering a contentious country during transit, or from being delivered to a customer there, without proper authorization.
  4. Newly Added Denied Parties: While sanctions and embargoes are usually major news, the government’s numerous watchlists are consistently updated with restricted companies and individuals and are therefore much harder to track. What are your screening options? The International Trade Administration maintains a Consolidated Screening List (CSL) that is free to use. Investing in a subscription to a Restricted Party Screening (RPS) software gives you a big boost in ease of use and screening features. How often should you screen? Ideally, if you have an RPS software subscription, you can screen the parties to all your transactions multiple times, just to ensure that they don’t appear on a watchlist at a later date. This is a valuable tool that works in the background. The RPS software enables you to screen regular customers, employers, collaborators, suppliers, shippers – virtually everyone who is in contact with your business on a monthly, weekly, or even daily basis. Regular screening is considered a best practice since no one wants to incur a violation by dealing with a known bad actor.
  5. International Sales & Marketing Events: International sales and marketing opportunities arise for companies in the form of trade shows, product demonstrations and facility tours. It is exciting and perhaps advantageous to display or discuss the new features of your products but be cautious. Do your homework first. Assume there will be Foreign Persons in the audience so you absolutely should know what information you can share without creating an unauthorized “deemed export” violation. If you have technical meetings or demonstrations planned with Foreign Persons, whether live or virtual, apply for a license in advance which will stipulate what you can, and cannot, discuss or demonstrate. Be aware also of all handouts, models, or samples to ensure that they don’t convey licensable information.

As with all these changes and more, comprehensive and integrated policies and procedures as well as a culture of compliance will guarantee that employees are informed about their responsibilities and can raise awareness of red flags, or will know where to search for answers within their company.

Please check back for our follow-on article outlining how companies can remain adaptable to internal transitions.

To learn more about building and maintaining your compliance system, please visit our web site, review our Compliance Services, or request a no-obligation exploratory call.

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