Much like restricted party lists are used to avoid risk in your organization by controlling which individuals or companies you conduct business with, export and import controls are used to control which products and technologies can move freely around the world.
Export controls are country-based and are typically implemented with national security and foreign policy considerations in mind. For example, implements of torture or dual-use goods such as munitions are generally controlled for export to any country, while some exports, encryption items, for example, may only be controlled to terrorist regimes and globally embargoed nations such as North Korea.
Import controls are generally centered on the safety of citizens or a national economy, such as restrictions on the importation of harmful chemicals or toys with parts that pose a choking hazard to children. Economic import controls are often used to prevent widespread market penetration of foreign commodities when domestic production is vital to a country’s economy, such as dairy imports to New Zealand and wine to France.
Regulations, licenses and agencies
The government regulations stemming from multilateral export control regimes such as the Wassenaar Arrangement control the export of sensitive equipment, software and technology to protect global security. Through the system of nationalized export controls, governments can effectively limit access to sensitive technology, promote regional stability, support human rights and comply with international regulations enforced by the U.N. Security Council.
Most publicly-available goods can be imported and exported without any special permissions or requirements, but in some cases, exporters may need to acquire an export license. The need for a license depends on the type of goods, destination and end-users involved in a transaction. Most importantly, though, governments and customs monitor products that have numerous end-uses.
Under the current export control system in the United States, three government agencies have the authority to issue export licenses: The Department of State, The Department of Commerce, and the Treasury.
But many regulatory bodies help carry out an export control system. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS), for instance, administers laws, regulations and policies that oversee the export of commodities, software and technology. The purpose of the BIS is to advance national security, foreign policy and economic objectives by ensuring adequate export controls.
Essentials of an effective export control system
An effective export control program is a significant aspect of trade compliance and is fairly straightforward for a company to implement. The first step, of course, is to have one!
Government requirements are that an organization’s export control program is to be sponsored and championed by senior leadership, written and copies provided to all relevant employees. A properly staffed trade compliance person and supporting team, if export volumes warrant, must be employed by the organization and must be empowered to stop transactions when red flags are present. Written steps and details on managing red flag concerns need to be adhered to. Commodities slated for cross border transactions must be reviewed with any import and export control requirements noted and implemented. Parties to any aspect of the export transaction such as buyer, banking partner, supplier, forwarder, etc. need to be vetted against sanctions lists and denied or restricted party lists to ensure the export is not going to a debarred address, person or company.
Overview of import control systems and regulations
Companies and individuals who wish to import goods must adhere to statutory and regulatory guidance provided by agencies involved in the process. In the U.S., Customs and Border Protection (CBP) provides the primary oversight of imports, but many partnering agencies maintain separate regulatory guidelines, such as the Departments of Agriculture, Health and Human Services, Transportation and many others.
Customs agencies worldwide are also tasked with assessing and collecting tariffs or duties on imported goods. A key piece of legislation in the U.S., the Customs Modernization Act of 1993, introduced two key concepts: informed compliance and shared responsibilities between customs and the importer. Customs wanted to encourage voluntary compliance with import laws and tariffs, but in order to achieve those goals, they would need to proactively notify the global trade community of any regulatory changes well ahead of the implementation period for the change. Importers would now be required to fully share the responsibility for compliance, in essence, shifting the risk profile to the importer of record and away from Customs specialists.
The concepts of informed compliance created thousands and thousands of pages of regulatory documents, now required to be read and implemented by the importing community. This substantial knowledge burden created an industry for trade compliancesoftware in order to keep supply chains moving.
Import control risk can also be associated with various aspects of a transaction: such as the goods being traded, the buyers and sellers (and their affiliates), the cities and ports along the shipping route and the shipping vessels themselves. Import declarations are required at all ports of entry in order to be filed compliantly, so most importers utilize Customs Brokers specially trained in the declaration submission process.
Firms are expected to have well-honed audit and record-keeping processes and to perform due diligence on all business partners in order to both source imports and track the destination for their exports.
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