Over 95% of the world's population lives outside of the US, which presents significant sales opportunities for US companies seeking to export. However, exporting comes with significant responsibilities as US exporters have a duty to adhere to US export control and sanctions laws. Export compliance ensures US businesses help protect US national security and avoid costly penalties and potentially even criminal liability.
This article will provide an overview of why you should have an export compliance plan in place, elements of an effective export compliance plan, and other essentials to include in your plan, including what to do when all goes wrong.
Why You Should Have an Export Compliance Plan in Place
The US Department of Commerce's Bureau of Industry & Security (BIS) encourages the development of an effective export compliance program because it is "an invaluable way a company can contribute to US national security and nonproliferation priorities while protecting vital company interests." An effective export compliance plan helps ensure that all employees understand the export regulations, reinforces internal policies and procedures, and demonstrates to the federal government that your business is proactive about export compliance.
Penalties & Criminal Liability
US export control and sanctions laws and regulations are administered and enforced by numerous agencies, including:
| Regulations | Agency |
| Export Administration Regulation | US Department of Commerce-Bureau of Industry & Security |
| International Traffic in Arms Regulations | US Department of State-Defense Directorate of Trade Control |
| US Sanction Programs | US Department of Treasury-Office of Foreign Assets Control |
| Anti-Boycott Act of 2018 | Bureau of Industry & Security-Office of Antiboycott Compliance |
| Foreign Corruption Practices Act | US Department of Justice & US Securities and Exchange Commission |
Failing to comply with US export control and sanctions laws can lead to heavy civil penalties, criminal liability, loss of export privileges, surrender of merchandise, and other consequences. Criminal liability can include imprisonment as well as heavy penalties.
Practice Tip: Penalties are inflation-adjusted periodically and can compound quickly depending on what constitutes a single violation-e.g., every exportation or transaction can constitute a violation and a set of exportations or transactions can result in the penalty amount growing quickly.
The following is a general breakdown of civil and criminal liability under each agency's enforcement actions.
| Federal Agency | Potential Civil & Criminal Liability |
| US Department of Commerce-Bureau of Industry & Security |
Civil: $300k/violation or twice the value of the transaction whichever is greater Criminal: $1M/violation or up to 20 years in prison |
| US Department of State-Directorate of Defense Trade Controls |
Civil: $500k/violation Criminal: $1M/violation or up to 10 years in prison |
| US Treasury Department-Office of Foreign Assets Control |
Depends on Program E.g., $90,743/violation for Trading with the Enemy Act, $13,910/violation for Clean Diamond Trade Act, etc. |
| US Census Bureau |
$14,194/violation other than a late filing $1,419/day for late filing violations-not to exceed $14,194 |
The penalty amounts above are routinely readjusted for inflation. For example, civil penalties under OFAC are readjusted by program type. On February 9, 2022, OFAC adjusted penalties for inflation, with new maximum amounts increased depending on program type. For example, the current maximum penalty for violations of the Trading with the Enemy Act is $97,529. Similarly, the current Census Bureaumaximum civil penalty for an EEI misfiling is $15,256.
Elements of an Effective Export Compliance Plan
The steps to achieve an effective export compliance plan include the following elements, as explained in BIS' Export Compliance Guidelines:
- ?Building & maintaining your export compliance plan
- ?Management commitment
- ?Risk assessment
- ?Export Authorization
- ?Recordkeeping
- ?Auditing & Internal Monitoring
- ?Training
- ?Handling export violations and taking corrective actions
Below is a chart of common export compliance risks, and the tools available to mitigate these risks:
| Common Risks | Example of Tools to Mitigate Risks |
| Exporting without a license |
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| Unauthorized release of sensitive information or controlled technology |
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| Servicing items located outside of the United States |
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| Lack of communication and/or written processes within an organization |
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| Unknown end-user or end-use |
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| Unaware of diversion risk |
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| Violating anti- boycott laws |
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Building & Maintaining An Export Compliance Plan
Originally published in Bloomberg Law
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
