Export Compliance: Seven Trends to Watch

Dec 02, 2005 4:16 AM  By

As we approach the end of the year, it’s time to pull out the old crystal ball and try to figure out what lies ahead. Fortunately, the global trade experts at JPMorgan Chase Vastera have made divination easier, at least in the area of export compliance. According to Bernie Hart, global product executive at JPMorgan Chase Vastera, the following are seven developments that you should be monitoring closely in the year ahead:

1. More FBI involvement in export law enforcement. Hart predicts an increase in cases in which the agency joins forces with other government bodies to stop illegal exports. This year’s high-profile investigations include the indictment of two men charged with the purchase and export to Pakistan of U.S.-origin triggered spark gaps, items that can be used to break up kidney stones — or as nuclear weapons detonators.

2. Pressure to be ITAR-compliant. To their “shock and awe,” as Hart puts it, many companies are learning that what they had thought of as purely commercial or industrial products are now subject to controls under the U.S. government’s International Traffic and Arms Regulations (ITAR), which the export of defense articles and defense services covered by the United States Munitions List.

3. Expanded export controls in other countries. Developing nations in Asia, Latin America, and Eastern Europe will start levying new and more restrictive export policies. Corporate compliance managers will need to widen their scope and become experts in the trade requirements of other nations.

4. Big(ger) Brother. Yes, that means more government monitoring of corporations. With regard to export activities, firms must be able to demonstrate that internal controls and standards have been adopted companywide, with the involvement of senior management and the board of directors.

5. Government definitions of what an effective compliance program must look like. The U.S. government has now defined an effective ethics and compliance program for all obligations of the corporation. Each member of the board of directors has three clear obligations that are new under the Sentencing Guides. He or she must know the content of the compliance program, exercise reasonable oversight, and give compliance officers direct access to the board.

6. Less paper. More and more trade compliance transactions with government agencies are being conducted via the Internet. Among the tasks that have gone paperless are licensing, export declarations, recordkeeping, updates on policies and procedures, and training. The bottom line: Get online!

7. Outsourcing of trade compliance activities. Moving goods across international borders is a frighteningly complex task, and likely to become only more so. If you’re responsible for global operations and compliance, ask yourself whether you’re better off outsourcing the entire process.