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Export compliance for shipments coming out of the United States and the re-exports of items containing U.S. content will continue to remain one of the manufacturing world's greatest challenges. The Bureau of Industry and Security's statistics for fiscal year 2005 show 31 criminal convictions, $7.7 million collected in criminal fines, 69 administrative or civil penalties and $6.8 million collected for those violations. When you look at the various cases, it is clear BIS is expanding enforcement to include conspirator liability between corporations in the supply chain, primary liability of re-exporters, those who store goods and those who facilitate their export, such as freight forwarders.

When things go wrong and companies find out they have done business with a prohibited destination, end use, party or a party that diverts the item, the first and most problematic question asked by regulatory officials is "do you have a file describing the due diligence you performed before the export or re-export?" If the answer is yes, there still may be a per se violation that will prompt the enforcement authorities to impose an administrative fine. If the answer is no, there are more serious civil and possibly criminal liability risks. The next steps are expensive, time consuming and reputation damaging.

Companies and individuals are obligated not to do business with illegal parties or entities, destinations and end uses. They are also expected to take steps to ensure they do not commit such violations. Due to our experience, we wish to share with you the key steps that should be taken to ensure compliance failures do not stop your supply chain in its tracks.

Obtain board-level commitment. Before any compliance program can be successful, buy-in from the board of directors and senior-level staff must be secured. The U.S. Government Sentencing Guidelines state that corporate officers and board members must be knowledgeable about the content of their compliance program, exercise reasonable oversight and give compliance officers direct access to the Board. Increasingly around the world, we see governments imposing a standard of care on the board and or senior management. Senior officers risk personal liability should your compliance program fail.

Assess processes. Hire outside trade experts to perform a compliance gap analysis on your current compliance processes. Then fill the gaps. What gates and stops have been and can be established? How are compliance records stored and located?

Embargoed countries. Your company is not allowed to trade with certain countries. Make sure that you have established a list of embargoed countries and created effective stop measures that ensure items are not shipped to those countries, directly or indirectly.

Electronically screen names and addresses in your master customer/partner files against the various government black lists. With more than 50 international restricted party lists in existence, it is important to work with a firm that organizes these ever-changing lists into a central database that is monitored and updated daily.