By Jackson Wood, Director, Industry Strategy, Global Trade Intelligence, Descartes
Rapid advancement in the areas of controlled goods and technologies are driving these changes.
Just when you thought that export controls could not get any more challenging, along comes a statement from the U.S. government to nip that notion in the bud. U.S. Commerce Secretary Gina Raimondo said in a recent interview with CNBC that more controls are on the way, especially on technology exports to China, which “will be coming as needed”.
It’s uncertain what that means operationally for organizations in the foreseeable future. But what is clear is that the driving force is the rapid technological progress being made across many industries, especially where controlled goods and technologies are involved.
The U.S. Commerce Secretary acknowledged that these restrictions would make the business landscape more difficult for organizations. But she added that technological innovations in America are being achieved at an accelerated pace and stressed the need to protect these advancements for national security reasons.
Recent Export Control Requirements Heighten Accountability for Businesses
However, Raimondo’s words should not come as a surprise, as Washington has left a bread crumb trail of clues pointing to more controls over the past few years.
Remember the military end-use export control law along with the directional rather than explicit guidance provided that also covered the nebulous requirements of sanctioned ownership compliance? With these particular requirements, organizations have to navigate not only the regulatory context, but also the research and due diligence process necessary to comply. Compare that with just a few years prior when the norm was for businesses to comply with explicit instructions, such as exact directives to screen against set denied parties lists.
And add to this other recent developments, including strengthened controls on U.S. semiconductor exports, a more energized clampdown on forced labor in the supply chain, the rising tide of enforcement actions, and tightened international trade enforcement among the Five Eyes countries of the United States, the United Kingdom, Canada, Australia, and New Zealand.
Export Control Challenges in this Environment
In order to continue to engage in business and to grow their customer base, organizations need to proactively ensure that they can keep pace with emerging regulatory requirements. But in order to address these challenges, they have to exercise due diligence, which can be time consuming and resource intensive.
Consequences of Compliance Oversights
Governments in North America and Europe especially are vigorously enforcing export compliance laws on an ongoing basis. This article on unforced errors in the compliance world hits home this point as well as the fact that ignorance or complexity are not an excuse. There are serious repercussions for an organization not being able to manage regulatory complexity.
Strategy for Compliance and Growing Your Business
The best strategy in an environment where emerging regulations is the norm is to implement a centralized compliance program that is companywide covering international trade, finance, legal, sales, marketing, procurement, human resources, data security, among others. Any external facing function is at risk of being infiltrated by denied and restricted parties. Only in this way can companies simultaneously comply with export control laws and enable growth.
Seven Steps to Prosperity While Complying with Export Control Laws
Effective compliance is easier said than done. But here are seven steps to be compliant with emerging regulations, while minimizing the burden on staffing and resources.
|1. Select Compliance Champions
|Ensure management buy-in as well as continued top-level support. This also facilitates cooperation among various teams, departments, and divisions.
|2. Stay Focused on Emerging Rules and Regulatory Updates
|Understanding export compliance controls as they relate to specific products/services is important. Equally crucial is making sure the right people in your organization are empowered to evaluate the practical implications on your business and have the resources necessary to manage new compliance risks appropriately.
|3. Centralize the Compliance Process
|Increase the probability of success by breaking down the silo walls and make compliance a unified and high priority corporate endeavor.
|4. Widen the Compliance Net
|Screen against denied parties lists every entity you engage and transact with – business and trade chain partners, end users, contractors, visitors, new hires, mergers and acquisitions, and others.
|5. Calibrate Organizational Risk
|Engage in evidence-based internal discussions to make sure all stakeholders – sales, engineering, distribution, legal and others – are aligned on what the organization must do to keep revenue flowing without exposing the business to undue harm.
|6. Continually Assess Risk Over Time
|Continually rescreen trade chain partners over time, especially because the compliance status can go from green to red at any point in the business relationship.
|7. Leverage Technology
|In the more demanding new environment, proven technology solutions can strengthen compliance while saving time and budget. They will have the capacity and capability to address new compliance requirements proactively, allowing you to focus more time on core business objectives.
How Descartes can Help
Effective export control compliance requires a deep knowledge of the products being exported as well as who the customers are, where the ship-to market is and what is the intended end use. Apart from screening customers against denied parties lists, full corporate compliance also involves screening suppliers, new hires, contractors, even visitors to your facilities and offices.
The Descartes Systems Group has the expertise and technological know-how to deliver end-to-end solutions and data to organizations to help them remain compliant with compliance regulations from across the world while simultaneously enabling growth.
Our range of solutions include:
- Ad-hoc, web-based screening solutions that require minimal deployment times and training.
- Integrated screening solutions that can be embedded in an organization’s existing CRM, ERP, or other business systems.
- Providing extensive compliance datasets for organizations to deploy and leverage in their own workflows.
Descartes solutions can help provide comprehensive compliance coverage for organizations of all sizes and across industries.
To help companies manage their export compliance risk more effectively, there are solutions available for restricted and denied party screening, export classification, license determination and management, and sanctioned party ownership screening, all of which can help organizations ensure they are not falling foul of the new and existing export compliance regulations. Having proper and thorough export compliance processes in place can help organizations remain on the right side of the law, and avoid potential bad press, fines, and other financial and reputational damages that violation of export regulations may incur.
See also what our customers are saying about our range of denied party screening solutions on G2, a third-party business software review website.