Export Compliance

Slew of enforcement actions stark reminder to businesses about importance of export compliance

The U.S. has issued a stark reminder to businesses that however they adapt their operations to cope with the coronavirus pandemic, they cannot waver in their commitment to follow export compliance and denied party screening laws. 

This is evidenced by recent enforcement actions by the Departments of State, Commerce, and Treasury. In the past month alone, these actions covered China, Russia, Africa, the Middle East, the U.S., and Central and South America. 

While COVID-19 has caused financial hardships for many industry sectors at home and abroadexport controls have not been relaxed. But this should not be seen to be a negative. Compliance, as explained later in this blog, empowers corporate leadership to wheel and deal with confidence. And the bonus is that we can all strive together for a safer world. 

Export Compliance Violations 

The following is a list of major U.S. export enforcement actions meted out last month as part of Washington’s ongoing efforts to prevent business dealings with denied, debarred, and blocked parties (individuals, companies, and countries): 

  • United States: The Treasury Department’s Office of Foreign Assets Control (OFAC) settled with a cookware coating manufacturer, who agreed to pay a penalty of US$824,000 for entering into business dealings with the sanctioned country of Iran. The company assumed it could do business with Iran as long as there were no direct connections between it and the Mideast nation. The manufacturer self-disclosed the violations which occurred between 2012 and 2015, and has instituted remedial export control measures to ensure similar breaches do not occur in future. 
  • United Arab Emirates: The Justice Department and OFAC settled with a cigarette filter and tear tape manufacturer, who agreed to a fine of US$665,000 for exporting its products to North Korea (another country under international embargo) through front companies in China between September and December 2018. 
  • China: The Department of Commerce’s Bureau of Industry and Security (BIS) added 11 Chinese companies to the Denied Party Entity List for alleged human rights abuses in the northwest province of Xinjiang. That move came as Commerce, along with State, Treasury, and Homeland Security issued a Xinjiang Supply Chain Business Advisory highlighting the risks of becoming involved with entities engaged in forced labor in Xinjiang. 
  • Sudan, Hong Kong, Thailand: The State Department sanctioned three companies and an individual because of their apparent links with Russian businessman Yevgeniy Prigozhin, himself sanctioned under the Countering America’s Adversaries Through Sanctions Act (CAATSA) since 2018. 
  • Turkey, Syria, Afghanistan: OFAC designated six targets (including one operating under the guise of a welfare organization in Afghanistan) because they were said to be financial facilitators for the ISIS terrorist group. 
  • Russia: The State Department designated the head of the Chechen Republic of the Russian Federation with human rights violations dating back to more than a decade.  
  • China: OFAC designated four Chinese nationals and a biotechnology company under the Foreign Narcotics Kingpin Designation Act for their alleged role in an international drug trafficking ring. 
  • Venezuela: The State Department and OFAC designated two brothers for supporting the corrupt activities of the Maduro government. 
  • Nicaragua: The State Department and OFAC designated the son of President Daniel Ortega and two companies on money laundering charges. 

How organizations should be complying with Export Compliance laws 

The most effective way to stay on the right side of export compliance laws is to screen for denied and restricted parties against lists maintained in the U.S. as well as internationally, because maximizing compliance means maximizing business opportunities. (International lists include those from the European Union, or country-specific and world bodies such as the United Nations, the World Bank, and Interpol to name just a few). 

Businesses should also be classifying their goods against export control lists to check for license requirements. In the U.S., for instance, there is the Export Control Classification Number (ECCN) and the United States Munitions List (USML). Other jurisdictions, such as the EU, have their own systems that must be complied with. 

All this might sound daunting, however, there are export control software solutions that can significantly help with compliance while taking the pain out of the process. An example is Visual Compliance, which can assist an organization with effectively addressing their export control compliance requirements 

Benefits of Export Compliance 

Export compliance—and everything it entails from screening to classification to technology transfer controls—is not generally seen as a means of enabling business.

But given the world we live in, where export controls are becoming ever more prolific and stringent, having compliance strong points in the corporate structure is a huge strategic and competitive plus. And, it maintains new and existing business growth momentum. The better the strong points, the sharper the competitive edge. The alternative is getting in trouble with the law and putting the viability of the business risk.