One of the more frustrating parts of this job is seeing the costly mistakes small- and mid-sized exporters make when it comes to export compliance.
Because they aren’t “one of the big guys,” some U.S. companies think export compliance regulations don’t apply to them (or they won’t get caught if they don’t follow the regs). Instead, they ignore the regulations, or they breeze through their company’s compliance process and neglect to cross all the T’s and dot all the I’s.
Alternately, many small- and medium-sized businesses either don’t know or don’t understand the requirements until it’s too late.
This is wrong—and reckless. Even the smallest U.S. business that sends its products to customers outside the country is subject to a variety of export regulations and could face substantial penalties for violating them.
Pulling on the Export Compliance Thread
According to a speaker from the U.S. Office of Export Enforcement (OEE) I heard at a Bureau of Industry and Security (BIS) update conference, you can compare the OEE investigative process to pulling a loose thread on your favorite sweater. Pulling the thread slowly exposes more and more thread and, if you continue, can destroy your sweater.
When the OEE begins an investigation of a potential export violation, it may start with a specific company’s activities. But as they dig deeper into their investigation, they begin looking at the different parties that company has worked with, including freight forwarders, transportation companies, vendors and others, to see if they may be complicent in export violations. As they continue to pull on that thread, they may start looking at other customers of that forwarder, transportation company or vendor. It doesn’t matter how big or small those other companies may be; it depends on who they do business with.
So there’s no way to get around it: Exporters of all sizes must understand the regulations that govern compliance. The good news is, once you’ve taken time to understand the regulations, implementing compliance is easy with trade compliance software solutions.
Your Best Bet for Export Compliance: Trade Compliance Software Solutions
International trade compliance solutions like those offered by Shipping Solutions make it easy to integrate export controls into your exporting process.
- They help you make more informed decisions about who you’re shipping to.
- They give your team a repeatable process anyone can follow.
- They provide an audit trail that shows you’re doing your due diligence.
It’s not only the easier way to be a successful exporter; it’s the best way.
How Trade Compliance Software Works
Shipping Solutions offers several trade compliance software solutions, which we call Trade Wizards. These Wizards help exporters and importers ensure they are following regulations for everything from product classification, to license determination, to denied parties screenings, and more.
Because your export and import compliance needs may differ from what other companies need, we’ve made our menu of tools à la carte, so you can subscribe to only those services you actually need. Here’s a little bit more about them:
Product Classification
Shipping Solutions’ Product Classification Wizard helps your company identify the correct Schedule B or Harmonized System (HS) code for your products, both of which are required on your export documents and import paperwork.
It also searches the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR) to see if the government identifies your product as a controlled item; once identified, it then helps you determine the proper Export Control Classification Number (ECCN) or the U.S. Munitions List (USML) category required for export license determination.
Export Controls
The Export Controls Wizard allows you to use the ECCN or USML code you just found to see if your product requires an export license and if there are any potential license exceptions you can use for your particular item.
Restricted Party Screening
With our Restricted Party Screening Wizard, you can check all the U.S. lists—as well as the United Nations list, European Union list and lists from several other countries—at one time and in just seconds. That’s 140+ lists you can check against your customers with the click of a button. (It even works when government websites do not—like in the case of a government shutdown!)
Shipping Solutions Professional Export Software
This software helps you create and manage compliant, accurate export documents and meet your AES filing requirements; it even has the Restricted Party Screening and Export Controls Wizards built in. With Shipping Solutions Professional, you have access to a shipment log that enables you to record and keep track of all your compliance efforts, so you are prepared in case of an audit. It is an essential part of your export documentation process.
Request a Free Demo
Request a free demo to see how Shipping Solutions software will help you ensure compliance.
If you’re not ready to take your exporting compliance to the next level, and you’re just interested in learning more about the process you should follow for each export transaction, keep reading.
The Export Compliance Process
1. Determine Jurisdiction
The first step in export compliance is to determine who has jurisdiction over your goods. While most items are controlled by the U.S. Department of Commerce under the Export Administration Regulations (EAR), your items may not be, especially if they have a direct military application. In that case, they may fall under the jurisdiction of the State Department’s Directorate of Defense Trade Controls (DDTC). We’ve detailed the process for determining the correct jurisdiction of your export goods.
2. Classify Your Product
You then need to determine a USML or ECCN classification for your products. Depending on the classification, you will also need to determine whether or not you need a license to export that item. You can get the step-by-step guide for product classification in our free white paper How to Determine if You Need an Export License.
3. Check for Restricted Parties
Restricted parties are individuals, businesses and other organizations that have been identified as engaging in activities related to the proliferation of weapons of mass destruction; are known to be involved in terrorism or drug trafficking; or have had their export privileges suspended. All exporters should check all the parties in every export transaction against the various denied party screening lists to prevent incurring penalties.
To make it easier to stay in compliance and save precious time, try our Restricted Party Screening Wizard for free so you can be sure that you are accessing the most current information available. You can also do this manually via the Federal Register, but be aware that the number of lists you need to check is large and the task time consuming, but you could face jail time if you are found to be in violation of these regulations.
4. Check for Red Flags
Even products that seem harmless can sometimes be used in unintended ways. Companies are responsible for knowing how their products will be used once they leave the country. Some of these end uses are prohibited, while others may require an export license.
For example, companies may not export to certain entities involved in the proliferation of weapons of mass destruction (e.g., nuclear, biological, chemical) and the missiles to deliver them without specific authorization, no matter what the items are.
It is an exporter’s responsibility to watch for warning signs—red flags—that may indicate their goods may be used in a prohibited way. For example, a potential customer may want to purchase a product without the installation that is typically included, or they want it buy an unusually large number of infrequently used parts. BIS publishes a list of red flags that may be indications that the use of a product may be prohibited.
5. Document Your Compliance
A properly implemented Export Compliance Program (ECP) will help ensure your company is following all processes and procedures correctly and reduce the chance of violating export regulations. In the event your company accidentally violates export regulations, a well-written ECP can substantially reduce penalties, as long as you can document that you regularly follow the written ECP procedures. The BIS considers that a strong mitigating factor when determining penalties.
6. Use Software to Tie It All Together
Instead of using multiple tools, manual processes and more, use trade compliance management software like Shipping Solutions to manage every aspect of your exporting. You’ll be able to oversee all aspects of exporting including:
- Creating more than two dozen export documents to print or email.
- Filing through AESDirect on the ACE portal.
- Running export compliance screenings.
- Importing orders seamlessly from your ERP system.
- Documenting the steps in your export compliance program.
Using one tool for all your exporting needs shows that you are serious about becoming a successful exporter. To see how Shipping Solutions can help your company meet its export requirements, just click below to arrange a free online demo of the software.
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