What are export controls?
Export controls are policies issued by governments to protect national security interests and promote foreign policy objectives. Export control lists regulate the export of goods, software, and technology that could potentially be useful for purposes that are contrary to the interest of the exporting country.
Federal export controls are enforced primarily through the Export Administration Regulations (EAR) issued by the Department of Commerce and the International Traffic in Arms Regulations (ITAR) issued by the Department of State. Additionally, the Treasury Department’s Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions to protect foreign policy and national security goals.
At its most basic, export compliance is an aspect of corporate compliance that includes the rules, regulations, and best practices of exporting to particular countries. It’s important that every part of your organization—including but not limited to sales, accounting, shipping, purchasing, and legal—is aware of their trade compliance responsibilities to ensure that all exports are in conformance with the laws and regulations of the countries involved. Companies that export internationally often need to comply with a complex regulatory framework imposed by multiple governing bodies within even the same country.
For exporters, the steps for ensuring trade compliance may include:
- Determining which government agency has jurisdiction over your products
- Identifying if there are restrictions on exporting those goods to certain countries, such as embargoes, sanctions, or license requirements
- Cross-checking lists of denied parties to prevent exports to banned individuals and organizations
- Preparing the appropriate export documents
Why are export controls important?
International trade compliance policies, including export controls, are essential because countries have the right to protect critical products, technology, or information from falling into the wrong hands or simply to safeguard competitive advantages in a global marketplace.
For exporters, there are consequences for not understanding and abiding by trade compliance regulations. Unfortunately, regulations are often not harmonized across trading countries and navigating these requirements amid a volatile global trade environment poses new challenges for compliance teams.
Regulatory and enforcement climates of export controls often change rapidly and in some cases with little warning. As countries update their sanctions lists to address the current state of foreign affairs, global trade compliance processes must also react accordingly. If done incorrectly, exports may face financial consequences, which can include higher interest rates, financial penalties, and more. According to the Bureau of Industry and Security (BIS), fines for export violations can reach up to $1 million per violation in criminal cases, and administrative cases could result in a penalty of up to $300,000 or twice the value of the transaction.
What is the latest in export legislation?
Export control lists are in a constant state of flux. Trade compliance teams need to be working off of up-to-date information.
In October 2022, the Bureau of Industry and Security (BIS) implemented a series of targeted updates to its export controls on shipping advanced computing and semiconductor manufacturing items to China. These updates came only months after the CHIPS and Science Act was signed into law, which allocated billions of dollars for semiconductor development and manufacturing with the condition of prohibiting funding recipients from expanding in China and countries that pose a national security threat. Heightened license requirements are now in place for certain advanced and high-performance computing chips and semiconductor manufacturing equipment, along with items destined for a supercomputer or semiconductor development in China
Another major global event for trade compliance professionals to watch out for is the Russian sanctions regime. In a response to Russia’s invasion of Ukraine, BIS imposed stringent export controls on Russia. Starting in April of 2022, all items on the Commerce Control List (CCL) require export licenses when destined for Russia or Belarus. These new license requirements also apply to in-country transfers within Russia and Belarus. Companies who do business internationally face the challenge of understanding different sanctions regimes from around the world to ensure all their exports remain in compliance.
How can I run efficient export investigations?
It would be impossible to remain in compliance with export control lists if you didn’t have all of the information on the associated importers, exporters, and buyers. A commercial risk intelligence platform, such as Sayari Graph, leverages global public records and graph technology to pre-compute complex, cross-border corporate networks, thus providing a clear picture of companies in both the public and private sectors, their infrastructure, and relationships. This comprehensive view provides importers with broader context surrounding their partners and counterparties. If you’re looking to stay in lock step with regulators, BIS also relies on Sayari Graph data for regulating trade.
U.S. regulators, including BIS, have emphasized the risks of doing business with Chinese military-industrial complex companies and state owned enterprises (SOEs). While there is an explicit list of Chinese military end users (MEUs) to avoid, this list is non-exhaustive and the burden to ensure customers are not military end users falls on the exporter.
Sayari Graph can help enrich BIS MEU, NS-CMIC, Section 1260H, and other regulatory lists with complete subsidiaries, joint ventures, branches, trade partners, and affiliates. This allows exporters to quickly uncover hidden trade counterparty connections, including transshipment risk and geographic proximity to designated entities. Additionally in Graph, users can upload counterparty lists for efficient bulk screening for entities located in a military innovation zone.
See the impact for yourself with a personalized demo of Sayari Graph. For inspiration, watch one of our in-house analysts perform an example investigation and learn how to identify potential Chinese military end users.