TACKLING FOREIGN EXPORT CONTROL REGIMES

TACKLING FOREIGN EXPORT CONTROL REGIMES

Traffic managers working for companies 'going global' for the first time often find themselves having to become foreign 'export' control managers overnight. Whereas exports to one overseas customer might not present inordinate regulatory challenges, exports to multiple customers from one or more other countries (some of which may be customers and/or locations with some level of foreign control associated with them) can present significant resource and system challenges.

The three most common globalizing, country-to-country scenarios include foreign acquisitions, establishment of subsidiaries, and development of distribution channels.Depending on the type of distribution channel, it may serve the exporter's designated market, or buy product on behalf of its own customers.

In all three scenarios, U.S. as well as foreign export controls may attach to the product. Assuming the export manager has U.S. controls under his or her belt, how should foreign controls be approached?

The first step is to 'map' U.S. ECCN (Export Control Classification Number) to counterpart classifications in all relevant jurisdictions. For example, many European countries as well as countries such as Australia and New Zealand, utilize levels of control equivalent to those mandated by the U.S. and require mutual export reporting through the Wassenauer Agreement. Where the item is controlled for U.S. purposes, it may be controlled by Wassenauer signatories as well, which are identified in the EAR. Information concerning equivalent classifications is typically obtained from the country's consular commercial section in the U.S. or directly from the government export authority.

Based on country-specific classifications, use and end user criteria (among others), the second step is to develop a set of export control procedures governing country-to-country shipments, including documentary and fee requirements, and restrictions such as embargoed destinations. Depending on the control requirements, it may be necessary to secure and maintain licenses, permits and other export clearance vehicles.

CONTROL PROCEDURES VS. SALES TARGETS

Ideally, U.S. export control managers can rely on competent corporate counterparts abroad in subsidiaries and acquisitions to address these control issues. All too often however, sales priorities dictate the extent to which controls are adhered to: in countries where government audit remains a threat rather than a reality, local corporate entities may be less than reliable when it comes to playing by the rules. In some cases, selling or exporting to government or military end users is a matter of corporate pride and a valuable sales credential, even if it happens to violate that particular exporting country's laws or those of the U.S.

One way of resolving this potential conflict is to determine whether U.S. controls also apply to the item in question as it moves from country to country. U.S. controls may apply, for example, where a U.S. subsidiary is exporting from the offshore location, or where U.S. hardware, technology or data otherwise controlled for U.S. purposes is involved. Since BXA and the State Department conduct audits abroad, the element of U.S.-required control may gove the U.S.-based export control manager corporate leverage to ensure that all control regimes are satisfied.

In addition, making global control procedures quick and accessible through the corporate website can also be a valuable tool for convincing offshore entities to adhere to the regulatory requirements.

Finally, export managers should consider conducting periodic offshore internal audits of procedures and recordkeeping, where control levels warrant it. Such audits can be made a part of the subsidiary's overall reporting responsibilities to the U.S. parent company and can be facilitated through HR training modules as the company expands its operations.