How to Avoid US Export Compliance Violations

Supply chain managers have many responsibilities, including ensuring that materials, goods, and products arrive at their destination in good condition and on time. When shipping internationally, additional rules must be followed to ensure that you and your company are compliant with all US export laws and regulations.

We'll cover the risks of not following these regulations, including the most common types of violations and how to avoid them.

Risks and Penalties Associated with Export Violations

The oversight of export regulations falls under the jurisdiction of several federal agencies. However, the Bureau of Industry and Security (an extension of the US Department of Commerce) maintains primary control. The BIS has a very detailed set of regulations that must be followed to ensure compliance and avoid the possibility of fines, product seizure, and even jail time. There are two primary types of violations — Criminal violations and administrative violations.

• Criminal Violations - These types of violations occur when the shipper intentionally or unintentionally breaks laws such as shipping illegal products or engaging in criminal behavior. The penalty for committing criminal violations can vary depending on the severity of the offense. Generally, the guidelines provided by the BIS outlines that an individual who has willfully violated export regulations can be fined up to $1,000,000 per occurrence and up to 20 years imprisonment. In addition, the government can impose sanctions on the organization or revoke trade licenses. The agency also has the authority to seize any property involved in the violation. In 2020 alone, the US government seized over $1.3 billion worth of goods.
• Administrative Violations - These violations are considered less severe but can still lead to hefty fines. Administrative violations can be a result of inaccurate paperwork or other issues that are not criminal in nature. These violations can come with fines up to $300,000 or twice the value of the transaction, whichever is greater.

Mistakes can happen from time to time. For this reason, the BIS has a process for organizations to self-report any violations they may have committed either by accident or on purpose. While this doesn't eliminate the risk of penalty or sanctions, it could help to reduce the severity of any negative consequences.

Common Export Compliance Violations

• Exporting Restricted Goods or Materials - Some goods are illegal to export, such as protected animal species and illegal substances. Always be sure you know the regulations around the specific good you are shipping and stop immediately if you have any concerns about it being illegal.
• Not Having the Proper Export License - About 95 percent of all the goods exported from the United States don't require an export license. However, some items need to have special permissions, especially those that could be used for military applications. Be sure to check Commerce Control List to see if your product requires an export license.
• Shipping Goods to Sanctioned Countries - Currently, the US government has a trade embargo against 29 countries and territories, including Cuba, Iran, and North Korea. The restrictions may vary depending on the destination, so be sure to look at that specific country's policy.
• Paperwork Issues - You need to make sure that you provide the necessary customs paperwork with your shipment. Incorrect customs classifications, missing information, incomplete descriptions, or unreasonable valuation of the product can cause significant delays, fines, or seizures.
• No Export Compliance Program - The Department of Commerce recommends that companies set up their export compliance program to ensure that they have safeguards and processes in place to reduce the chance of falling out of export compliance. This program should include inspection processes, robust record-keeping, and reporting guidelines. By not having a program in place, you could leave yourself open to the risk of inadvertently doing something that could result in penalties.

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