You Gotta Read the Small Print
By: Kelly Raia

We continually run across many companies that are aware of export controls. They obtain export licenses prior to shipment, train personnel as to compliance responsibilities and overall have quality programs in place to manage this process.

That said, some companies run into problems even though they have received authorization to ship in the form of a license from the federal government. Whether the license has been issued by Commerce, Treasury or State, the due diligence cannot end at the receipt of license.

Export Licenses are an authorization to ship a particular product to a particular destination, end-user and depending on the type of license may contain provisos. Provisos dictate restrictions on the licenses. The license itself may restrict a transaction between specific entities for a specific manner of business.

Regardless of whether the export license contains twelve provisos or one, the license and provisos must be fully understood by all involved in the export process.

Take the recent settlement by Coca-Cola in which Coca-Cola agreed to pay a $136,500 fine to OFAC. Coca-Cola exported financial and marketing services to its Sudan bottler. The services provided were in violation of the terms of the approved OFAC license.

The scope of an export license and any accompanying provisos must be reviewed by the corporate compliance manager and must include all parties to the export transaction. Overstepping license limitations or not managing the entire export process is frequently discovered in self-audits as was the case with Coca-Cola. Our corporate compliance programs need to cover all the bases that entwine global supply chains.

For example, the logistics manager makes a change to a forwarder and neglects to inform the contracts administrator responsible for the Dept of State export licensing. These types of errors can cause the freight to be detained and even seized by CBP. Had a conversation taken place between the traffic manager and the contracts administrator as to the fact that the traffic manager was making such a change, no delays!

How about a proviso stating: “an authorized employee of Company Z must visit the overseas site housing the said machinery every six months”. Sales is pushing the shipment out the door while the compliance manager is trying to solve how this proviso will be managed.

We all know the details in international business can make or break a company. Reading the small print, communicating licensing limitations, managing provisos can just as easily make or break a good compliance program. Pay attention to those details and make sure everyone is reading the fine print!