Exploring US export controls. And why they matter.

How U.S. regulations affect your business

I’m accompanying several very interesting global trade projects at the moment involving risk management of dual-use goods (goods with both commercial and military application) and military goods – and technologies associated with these. Compliance with U.S. export control regulations is one of the most challenging areas for these companies. Many businesses do not know this, but importers, exporters, freight forwarders, academic institutions, and many other businesses and organizations can be impacted by U.S. regulations regardless of where they are located in the world.

I’d like to write more about U.S. controls in my upcoming posts because it is important that companies are aware of their obligations and seek the relevant authorizations – even if they are not located in or directly ship to the U.S. Key to remember is this: U.S. export control regulations have extraterritorial reach – this means they also apply outside of the country’s borders.

Penalties associated with non-compliance of U.S. regulations are not just a theoretical risk to non-U.S. companies; they are very real. One European company I’m working with has entered into a Consent Agreement with the U.S. Department of State that comprises significant civil penalties and a commitment to undertake extensive remedial compliance measures. So, there is definitely no room for complacency – even if your company is not based in the U.S.

Worst case: prison

Violations of U.S. export control regulations – unwittingly or intentional – are subject to severe criminal and/or civil penalties. These include serious fines and even imprisonment for responsible parties such as managing directors or members of the managing board. You can find press releases about such violations on the website of the U.S. Department of Commerce, Bureau of Industry and Security (https://www.bis.doc.gov/index.php/about-bis/newsroom/press-releases).

Latest entries from June and July this year reflect a good mix of violations in terms of the range of areas they affect: exporting prohibited items to sanctioned individuals in Iran, smuggling sensitive electronic components to Russia, conspiring to violate laws against the proliferation of weapons of mass destruction, or engaging in wire fraud, identity theft, or misuse of the automated export system – for example.

They also reflect a common theme: these rules apply to everyone everywhere, enforcements of laws are strict, people really go to prison for it, and monetary fines often show no less than 7-9 digits. It’s really a topic to be taken seriously.

Changes you need to know about

The picture becomes even more complex if you consider that major changes are currently being made to the U.S. regulations, moving some goods that are at present controlled under the International Traffic in Arms Regulations (ITAR) to control under the Export Administration Regulations (EAR). The Export Control Reform (ECR) will result in significant changes for many companies that operate in a wide range of industry sectors including aerospace, automotive, defense, information technology, telecommunications, and software.

To start on this challenging topic, I’ll dispel some commonly held myths in my upcoming posts. Bear with me on this – I know it’s about laws and legislation and you might think it’s boring. See it this way: Awareness and compliance in this area secures not only your supply chain, but your staff, business partners, and customers. And, it also opens up the potential to improve global trade processes and increase efficiency – as you know, this all goes hand-in-hand in global supply chains.