2. U.S. Export
Compliance
Disclaimer: This presentation does not represent legal advice, simply a collection of U.S. Export
Compliance experiences. For legal advice regarding each organization’s specific situation,
expert legal advice should be sought.
3. Moderator
Steve Rubinson, MWTA Compliance Committee Co-Chair
Presenters – in order:
The Global Company… Why is Export Compliance
Important? – Linda Bourdo-Zuehlke, GE Sensing
Business Case - Steve Rubinson, JohnsonDiversey, Inc.
What are ITAR & Export Licensing? - Candace
Knuteson, Derco Aerospace
Fact or Fiction: Breaking Down the Substantive Export
Risk Areas - Joan Koenig, Drinker Biddle & Reath LLP
Q&A - all
5. Exporting…a little history
Exporting Good for Wisconsin
Good for the country
Post 911 CBP more organized, sophisticated
Also-Export Enforcement
Weapons of mass destruction, Terrorists, Terrorist Sympathies-Not just a US
import concern, global-just like everything else
Products with the capabilities of being used for something other than what
they were intended are crossing borders every day.
Denied Parties and entities are creative in obtaining the products that they
are looking for.
6. Sell Product Globally
Encourage Sales Teams
Establish Distributors
Product
Build a Customer Base/End User
Sales People
Training
Global
Customers Technology Upgrades
Company
Technology Proprietary Enhancements
Research & Development
Finances
Communications/Emails
Internet
Financial Transactions
7. Denied Party Lists
The regulations do not say how to screen against the
Denied Party Lists, or how often to screen against the lists.
The regulations basically say…..
You may not do business with anyone on the Denied Party Lists.
Distributors
End Users
DPL Banks
(dynamic lists) New Customers
Field Engineers
Other???
8. 1) Know your Product
ECCN/Country
2) Know your Customer
Distributors
End-Users
3) Screen Against Denied Party Lists
Screen to mitigate your company risk
-only affiliates
-global
-countries of concern
4) Export Management System
Written Internal Controls
-ownership
-established processes
-training
-record keeping
-audit and validation
9. Do you know your products?
• Export Control Classification Number (ECCN)
• Harmonized Code
• Country of Origin
Do you know your customers?
• End User
– Watchlist Screening
• End Use
• Country of Ultimate Destination
– Embargoed Country Screening
Export Control Classification Number (ECCN)
Export Administration Regulations
DPL Lists/Screening Tools
10. Legal Implications
Purposes of export control laws and regulations
• Prevent the proliferation of sensitive technologies
(not an exhaustive list)
– Advanced computer technology
– Military and dual-use items (military and
civilian)
– Weapons of mass destruction (nuclear,
chemical, biological)
• Implement sanctions as part of US foreign policy
• Implement multi-country sanctions (UN) to which
the US is a party
11. Potential Consequences of Non-Compliance
Fines and penalties ($)
• Corporate liability risk – up to $500K per incident
• Personal liability risk – up to $250K per incident
• Criminal penalties, including officers of
corporations
Sanctions such as loss of export privileges
Disruption of business
16. Process Understanding
JohnsonDiversey Global Value Chain Export Order Process – Micro – Version 3 – Dated 24 October 2007
(or JD Plant)
Customer
Order Product Record- Receive
Receive Order
Start Via e-mail, fax keeping Shipping
Confirmation
or ERP system (End) Documents
Regulatory
Work with
I/E to
Resolve
No
Export Dept.
Regional)
(Local or
Check Process Order Finalize and send
Release Order Book with Receive booking Record-
Regulatory OK? in ERP export documents
Yes to Warehouse Freight details and release keeping
Requirements System to Forwarder and
Forwarder shipment (End)
Customer
No
Warehouse
(Onsite or
Offsite)
Pick/Pack/Label Print BOL and
Customer
and advise details Confirm shipment
Routed?
to Export Staff against BOL
Yes
Forwarder
Freight
Receive Book with Carrier Receive
Booking and send details documents and
Request from to customer and prepare for
Customer JD Export staff. importation
Note 1: Export orders can be communicated in a number of different ways. Plant to plant orders between JD companies are not always placed via an ERP system. Best
practice for plant-to-plant orders on the same ERP system (SAP or JD Edwards) is to perform a “stock transfer” between JD entities. The receiving company sells the goods
to the local customer, who may be a distributor or an end user.
Import Process
Note 2: Sub-process to check regulatory requirements is primarily a manual process for many exporting locations, and is often incomplete, not covering all areas of
(Start)
regulatory concern. This is a process gap that must be addressed to meet Legal requirements.
Note 3: ERP systems cover a great majority of Import/Export transactions, divided between SAP in EMA and JD Edwards (2 instances) for the rest of the world. Some JD
subsidiaries still use legacy systems or non-standard versions of SAP, and will eventually switch over to one of the main ERP systems, depending on region.
Note 4: International Terms of Sale (Incoterms) vary from region to region. EMA sells primarily on an EXW basis, while NA has recently standardized on a CIF basis.
Should further standardization of Incoterms occur, this process flow chart would be updated to reflect any process changes that might occur.
17. Development of the Export Compliance Function
at JohnsonDiversey
2002 – Johnson Wax Professional (US) acquires DiverseyLever from
Unilever (Anglo-Dutch). Export compliance processes in infancy
2005 – Decentralized Regional Environment – North American region
implements automated restricted party screening
2006 – Licensed US Customs broker hired as Global Import/Export
department head within Value Chain function
2007 – Business case made to expand the use of automated restricted
party screening beyond North America
2008 – Expanding restricted party screening, moving towards centralized
oversight of export compliance processes, involving global staff
Senior Management Support was strong from the beginning, and
remains strong today
18. Interim Actions Taken While
Automating Restricted Party Screening
•Use existing resources to screen trade party lists of
regions outside North America
•Communicate US export compliance requirements
to foreign subsidiaries
•Communicate compliance vision as well as risk
reduction activities to senior management
•Develop training materials to expand general
awareness of global trade compliance
•Process exceptions
23. Other ITAR Correspondence
Commodity Jurisdiction (CJ)
Prior Notification
Prior Approval
General Correspondence
• Advisory opinion
• Retransfer
24. ITAR Licensing-Plan Ahead
ITAR licensing takes time so try to plan ahead, build in
flexibility, and have patience.
TAA/MLA approvals and DSP-5 for Foreign Nationals
can take over three months.
Licensing approvals involve inter-agency review
• DTSA
• DOD service branches
• Intelligence agencies
25. ITAR Violations
Failure to Register (Manufacturer/Exporter/Broker)
Exporting or attempting to export without required licensing
approval/authorization
Exceeding scope of license/approval/exemption
Failure to comply with license terms, conditions, provisos
Failure to comply with recordkeeping requirements
Failure to comply with notification requirements
26. ITAR Best Practices
“Flow Down”
• Functional areas
• Post authorization checklists/license reviews
Networking
• Councils or Trade Associations
Education/Training
• External
– IIEI and SIA
• Internal
– Brown Bag sessions and Survey Monkey
