Expert Advice on Complying with
U.S. Export Regulations

• A Foxborough company pays a $25,000 civil penalty for shipping heat-treating containers to an end user on the U.S. Department of Commerce’s Entity List.

• A Cambridge firm discovers that it shipped chemicals to Latin America and Southeast Asia without required licenses paying a civil penalty of $178,500.

• A top official at an Acton firm is sentenced to three years probation and fined $250,000 for exporting equipment with ballistic missile applications to India without a required license.

Fines, revocation of exporting privileges, and other harsh penalties have caught the attention of exporting firms. U.S. export regulations are complex and dynamic; enforcement of the regulations has redoubled in the years following the2001 terrorist attacks.

All exporting firms, regardless of size or product, are under the jurisdiction of U.S. export control laws. The key to compliance is to understand which elements of the regulations affect the exporter and the shipment, and institute appropriate checks and balances as the shipment is processed.

“All exporting firms, regardless of size or product, are under the jurisdiction of U.S. export control laws.”

U.S. export control laws are largely outlined in three sets of regulations. The Export Administration Regulations (EAR) is administered by the U.S. Department of Commerce Bureau of Industry and Security (BIS) (www.bis.doc.gov) and covers exports of commercial goods and dual-use goods (those goods that could potentially have a military application). The International Traffic in Arms Regulations (ITAR) covers exports of military goods or goods that have been designed, modified or altered for military use. Even non-exporting firms that supply products to military prime contractors may find themselves subject to the ITAR. The ITAR is overseen by the U.S. Department of State Directorate of Defense Trade Controls (www.pmddtc.state.gov). Finally, the Office of Foreign Assets Control (OFAC) regulations cover U.S. embargoes for international trade and investment (www.treas.gov/ofac).

There are a number of areas of control for exporters:

Denied Parties
The U.S. government maintains lists of companies and individuals throughout the world to whom U.S. exporters either cannot ship altogether or cannot ship with-out a license. Exporters must check their foreign customers against these lists which can be accessed through the BIS web site.

Embargoed Countries
Countries such as Cuba, Iran, North Korea, Sudan and Syria are generally off-limits for U.S. exporters. Exporters should also keep an eye out for possible illegal diversion of shipments to prohibited destinations. Full embargo information can be found on the OFAC Web site.

Product Controls and Licenses
Some products are subject to specific controls and may require licenses to be exported, usually depending on the receiving country or end user. Controlled commercial or dual-use products can be found on the Commerce Control List (available through the BIS Web site), and controlled military-related goods can be found on the U.S. Munitions List (available through the Directorate of Defense Trade Controls Website.

Anti-Boycott Compliance
U.S. firms are prohibited from complying with foreign government boycotts in which the U.S. does not participate; for example the Arab boycott of Israel. Exporters should keep an eye out for boycott-related language in letters of credit, requests for quotation and other correspondence from overseas buyers. Requests for compliance with illegal foreign boycotts must be reported to BIS.

Deemed Exports
The government also views the release of technical data and know-how to foreign nationals as an export transaction. Depending on whether the product is controlled, the nature of the disclosed technical information, and the home country of the foreign national, a company may need an export license.

Increasingly, many companies are choosing to develop and implement a formal export compliance program or Export Management System. Export Management Systems reinforce top management commitment to compliance, designate responsibility within the different areas of the company involved in export transactions, and institute specific processes and procedures to ensure export compliance.

For Massachusetts businesses seeking assistance with export compliance issues, government organizations such as the Massachusetts Export Center and service providers including consultants and lawyers provide specialized assistance in this area. With awareness, education and vigilance, any company can sell globally while remaining fully compliant with the law.

Paula Murphy is director of the Massachusetts Export Center, part of the Massachusetts Small Business Development Center Network. The Export Center provides a full range of support to the state’s exporting community, including counseling, technical assistance, international business development services and training programs. For further information, visit www.mass.gov/export.

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