• Deanna Clark-Esposito

Global Trade Compliance: 5 Tips to Avoid Engaging in an Unlawful Export


Whether a consumer good, software, or an emailed proprietary formula, no one wants to turn down a lucrative sale. When it comes to purchases by a foreign buyer however, there could be more at risk than simply that of nonpayment. Here are some recommended steps you can take to minimize the risk of accidentally engaging in an unlawful export.


1. Ask Yourself if There Are Any “Red Flags” to the Transaction

Depending on the good or service being exported, there may be restrictions or obligations that flow under the export administration regulations (EAR) or the Office of Foreign Assets Control (OFAC) which must be adhered to by an exporter regarding the end-use, end-user, or the ultimate destination of the export. To avoid accidentally facilitating exports that may be violative, i.e., could lead to penalties or even jail time, you should ask if there is anything suspect about the transaction, such as an unusual routing request, or a cash payment for a large sum that would ordinarily be subject to financing or a payment plan.


2. If “Red Flags” Are Identified, Inquire Further

While there is no obligation to unnecessarily pester your customer where no “red flags” have been identified, in the event one or more has been there is an affirmative duty under the EAR to make inquiries around the suspicious circumstances. This is because based upon this information, it is determined whether or not you can proceed with the transaction.


3. Don’t Have to “Selective Hearing”

People hear what they want to hear and conversely, don’t hear what they don’t want to hear. In the case of export compliance, cutting off the flow of information to avoid hearing certain details about a transaction should never be done or encouraged, as this could be considered an aggravating factor in an enforcement proceeding by the government. Be sure to leave the lines of communication open and not make statements that either expressly, or impliedly, suggest that limited information regarding the ultimate destination, end-use, or end-user is sought.


4. Have Written Protocols for Handling “Red Flags”

Having written parameters as part of your export compliance program on how to check for, deal with, and resolve transactions to which “red flags” are presented is key to avoiding unlawful shipments and the risks that can accompany them. Since one employee’s actions can be imputed to a company thereby making it liable for a violation, it’s important to have clear policies about export compliance and measures in place to prevent a breakdown in diligence.


5. Examine the Findings About a Suspect Transaction and Re-Evaluate

Where a “red flag” can be justified or reasonably explained, then the transaction may proceed. Where the information simply cannot be reconciled however, don’t allow it to proceed because in the event the shipment turns out to have been unauthorized under the EAR, the government will likely consider you as having had “knowledge” about the nature of the questionable status, but nonetheless allowed the transaction to happen anyway.

For more information, check out the Dept. of Commerce’s Bureau of Industry and Security office at www.bis.doc.gov and www.ofac.gov.


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