The mandatory checks and balances for export compliance are fairly standard, and most global US corporations are aware of them. However, only 62% of exporters surveyed in a study by Amber Road actually have a full export compliance program (ECP) in place. This leaves many organizations vulnerable and at risk of noncompliance. Penalties and fines have been on the rise and all organizations, large and small, are susceptible to committing infractions when not exercising due diligence.
The 6 Components of an ECP
1. Management Commitment
The ultimate success of an ECP begins and ends with the support of the senior management team. However, in an Amber Road survey of over 300 exporters, it was found that only 48% of organizations’ management teams were very involved in their compliance programs.
2. Organization Profile and Risk Assessment
Profiling your organization for export risk requires a solid understanding of your distribution models and product lines. What you sell, who you sell to, where you ship, and how it will be used are all factors used in deriving risk.
Pay careful attention to these points when first assessing your organization’s risk profile. All these elements will determine your compliance program’s requirements and the level of sophistication your program may need. This does not mean that business must be halted — only that extra precaution should be taken when exporting.
3. Cross Organization Accountability
Accountability and a clear understanding of export controls by every department are imperative to the success of an export compliance program. One illegal shipment makes an organization non-compliant, so it is important that all resources that touch the international supply chain are aware of their responsibilities.
4. Automated Compliance Process Control
Compliance processes are the tasks and protocols used to implement an export compliance program on a day-to-day basis. These processes must be in place and executed accurately and consistently for all international shipments.
There are many compliance processes and each has their own merits, best practices, and limitations. In general, however, the processes you use should broadly cover:
- Understanding and having access to accurate trade content and regulations
- Screening your trade partners for restricted party concerns
- Classifying your product and part database with the correct HS and ECCN/USML data
- Determining the license requirements for export authorization
- Producing and maintaining accurate and timely documentation
5. Communication and Training
Once export compliance processes have been developed and the appropriate responsibilities assigned, it is time to train teams and individuals within the organization. Training for individuals helps drive awareness and accountability, and also teaches employees what to do in certain situations. All teams and individuals that are expected to execute compliance management tasks or touch the export process should attend a training session.
6. Audit and Continuous Assessment
Continuous auditing and document archiving are compliance program staples. Audit trails record key events during the compliance processes, including decisions, status changes — such as HS classification — or a transaction flagged for a license requirement. The person that performed the event or decision and the date and time it happened are equally important. A detailed transaction history is necessary during a compliance audit, and could mitigate violation penalties if there is transparency in your overall program.
The record keeping requirements for US exporters can be found in part 762 of the EAR. It describes what you need to retain, requirements for producing audit records, format requirements, and retention periods. When dealing with third parties such as brokers or freight forwarders, language around record retention should be clearly defined in the contractual agreement for services.
Assessment of and reporting on your compliance process will attest to positive gains from having implemented an export compliance program.
It may seem like an ECP would slow down the export process by requiring additional validation steps. But implementing and building an export compliance program in conjunction with technology solutions can actually increase processing speed, reduce errors, and improve data quality.
