mass export center oct 2011 build your export compliance manual

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Mass Export Center OCT 2011

BUILD YOUR EXPORT COMPLIANCE MANUAL

• Roles• Program elements• Audit tips

Natascha FinnertyDL Exports International, Inc

http://www.dlexports.com/

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BIS/DDTC RECOMMEND AN ECMP

• Published guidelines for establishing export management system– Nunn-Wolfowitz report google nunnwolfowitz– BIS/DDTC Compliance guidelines Programs are on their websites– DDTC guidelines

• BIS updated their guidelines in 2010 and have 9 elements– Includes managerial tasks– Administrative requirements


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IMPLEMENTING A PROGRAM TAKES ...

• Management commitment • Export Policy• Regulatory understanding• Resources• Time• Training

AB Tech

EXPORT POLICY


GOOD FOR BUSINESS• In successful companies,

compliance is part of the corporate culture

• It can be a competitive asset and should be listed on your website

• Small investment can save big over new penalties

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WHERE TO START?

• Establish an Export Steering Committee

• Nominate a Focal Point• Engage kick off training• Review business and applicable

regulations


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• Conduct a risk assessment – see BIS guidelines

• Establish/revise policies & procedures that address cradle to grave of hardware and technology release life cycle – integrate into quality SOPs, other compliance programs

• Train personnel• Implement & audit


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EXPORT COMMITTEESuggested Members •Finance

•Legal

•HR

•IT

•Security

•Sales & Marketing

•Sales Admin.

•Contracts/Accounting

•Order Admin

•Manufacturing

•Traffic


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NEW CONSIDERATIONS• Effect of Sarb-Ox• Higher fines and penalties• New mitigating and aggravating factors• Export reform - Mixing of ITAR and EAR

rules?• Securing of IP from foreign parties or

customers• Are contractors or outsourced

companies screened?• Anonymous reporting?


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SARB-OX

• Upper Management needs to be informed and verify compliance as part of corporate governance

• Penalties could adversely affect financial position of company, whether public or private

• Could stop a sale or acquisition• Disclosure requirements


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Does SOX apply to your export issues?

• What percentage of your business is exports? Are you publicly held?

• What percentage of your suppliers is foreign?

• Is your company a related company?

• Do you export to resellers? If yes, whom do they sell to?



COMPLIANCE PROGRAMS

• MUST PREVENT AND DETECT VIOLATIONS– DOES YOURS?

• HOW DO YOU USE METRICS TO MEASURE IT?



TEMPLATE FOR PROCESSES

• Are they written in the active voice?

• Do they describe the responsible personnel?

• Do you detail the records that are created by the process?

• Is there a risk assessment and control process?



REVIEW CURRENT BUSINESS PRACTICES



RISK MITIGATION FOR EXPORT ISSUES• Level of technology, ITAR?• Is end-user known?• Dealings in countries of

concern?


RISK ASSESSMENT contd• Any potential misuse of product

(EPCI)?• Multiple shipping sites?• Do you control distribution

channels?• Do you require licenses and

need to adhere to qty, value, provisos?

• AES compliance?




REVIEW APPLICABLE REGULATIONS

• EAR (& Antiboycott)

• ITAR

• OFAC

• Foreign Trade Regs

• NISPOM

•CUSTOMS

•CONSENT AGREEMENTS


RISK ASSESSMENT• DO YOU EXPORT CONTROLLED

HARDWARE OR TECHNOLOGY? (ITAR/EAR)– Need export license application

procedures, processing, license management, closing

• Product classification• Classification of new products• Purchased Products



RISK ASSESSMENT

• Do you know your customers?– Or sell thru distributors?– Or you find out about them later

• sw registrations • repair




PROCEDURES• Compliance Policy and Org chart with

responsibilities– Time to get management support– List back-ups to each key position– Central focal point

• Product matrix– Ongoing, tie it to new product release

• Country charts– Automate, where possible

• Denial list screening and managing hits



EXPORT MANAGEMENT SYSTEM

• Duties are cross functional

• Employees receive training on export procedures

• Use an Action Plan until completed



DOCUMENT THE PROGRAM• Borrow from your company’s

procedures templates and use flow charts– ISO, TQM, Industry Quality standards,

Sarbanes Oxley

• Upload an International Compliance website– Policy, training slides, product matrix,

FAQs

• Coordinate with other compliance efforts: Quarterly reports to management


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22

SampleOrder Rec’d

Conductscreening

Product matrixLic determ

Order OK?

•DPL, Entity, SDN-Country-High Risk

•Proliferation

Apply for lic.Cancel OrderContact ECM

Prepare DocsShip

Y

N



Export Compliance and Management Program

1. Administrative Elements:– Management Commitment– Responsible Officials– Record Keeping– Training– Internal Reviews– Notifications



Screening Elements

– Denial Orders– ECCN Classification/License

Determination– Diversion Risk– Nuclear End-Users/Uses– Chemical & Biological End-Users/Uses– Antiboycott Compliance– Add’l US Gov’t Agency Requirements


STANDARD SCREENING PROCESS

Check all exports against:• Restricted Parties and updates• Product Matrix/Classification• License requirements• Restricted/Embargoed Countries• Antiboycott


RESPONSIBILITY #1Product Matrix

• You need to review all products to determine if an export license may be required

• This is done export compliance manager with the help of IT

• Controlled items can be hw, sw, technology relating to – computers, – software with encryption, telecommunications

products, lasers– Industrial equipment and chemicals


PRODUCT MATRIX

• This process is ongoing, and requires regular updates as new items are developed or upgraded.

• You need to determine the export commodity classification number (ECCN), countries that may require a license, and customs numbers (Sch B).

• The Product Matrix list is included in the Export Compliance Program.


RESPONSIBILITY #2Denied Parties

• You need to ensure that you do not sell to prohibited parties identified by the US Government and, potentially, other gov’ts.

• Most companies need to get Compliance Screening Service for this purpose

• These lists are updated regularly by the government.

• We must determine who is the end-user, what is the end-use, who are the parties to the transaction

• Screening must occur before the items are shipped for exports supporting particular projects


Need to establish a policy for hits

• Need enough information to clear hits – what agency, what are the requirements

• Determine if it is a false hit• Contact government agency or

get certification from the person

• Keep records of hits


RESPONSIBILITY #3High Risk Profile

• We need to ensure that we recognize any unusual circumstances or “Red Flags”

• Each employee is responsible for taking appropriate actions if a transaction seems suspicious

• Report any unusual activity throughout sales and to the

Export Compliance Manager

WHEN IN DOUBT, CHECK IT OUT!


RESPONSIBILITY #4Country EmbargoesDO NOT SHIP TO THESE COUNTRIES WITHOUT A

LICENSE!• The following countries are under General

Embargo:Cuba Iran North Korea Sudan Syria

• The following countries are highly-controlled:

Iraq Libya

There are many denied parties in these countries: Banks, Entities (Companies) and Individuals

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OTHER COUNTRIES OF CONCERN

Country Groups D

• Military & Terrorist

Rwanda Angola Libya

• Countries of Concern

China Taiwan India Pakistan Middle East Former Soviet Bloc


RESPONSIBILITY #5 ANTIBOYCOTT LAWS

• US companies and their subsidiaries may not participate in the Boycott of Israel

• Watch for any statements that include:- you must “comply with Arab League Boycott of Israel”, or- request for certification that Goods are “not of Israeli Origin”

• Must report all such statements to DOC


RESPONSIBILITY #6 RECORD KEEPING

• We must keep records for 5 years• Transaction Records include:

– Purchase Orders– Quotes– Commercial Invoices– Bills of Lading & Air Waybills– AES records– Banking documents & letters of credit– Export checklists– Screening results– Correspondence and contracts

Comm Invoice


Compliance Records• Acknowledgment of the Compliance

policy• Notices in contracts with resellers

and websites• Training records• Audit Records• Export licenses and classifications• Encryption reports


OUR INSURANCE POLICY

• Apply Due Diligence• Know your customer• Follow the system for approving exports• Contact the Export Compliance Manager

with ANY QUESTIONS!

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DEVELOP

COMPLIANCE PROCEDURES

• The entire organization must implement procedures

• Export Compliance Manager acts as a focal point

NO WHITE KNIGHTS


TRAINING OF RELATED PERSONNEL

• Export Coordinator & back-up - annual external sessions

• Upper management• Related employees - In-

house annually• New employee training• Specific training for

each department


Training and Audits are a must!

– Per the govt – audit, audit , audit!

– Is there a schedule?– Records?– Internal or External– Copies of hand-outs?– Using the latest technology?


BE SURE!

Ensure that your subsidiaries have controls at their site!

•Denied parties screening•Antiboycott•Embargoed countries

ABC GmbH

ABC Sarl

mass export center oct 2011 build your export compliance manual

Documents

mass export center

compliance programsmust

risk mitigation

ecmppublished guidelines

trainingreview business

related company

sarboxupper management

review current business