What is Export Compliance? New Insights for 2024 and Beyond

November 17, 2023
 By Joe Weaver
What is Export Compliance? New Insights for 2024 and Beyond
Last Modified: January 17, 2024
What is export compliance? This guide lays out what trade compliance entails. Learn how to make sure you’re following export regulations as a U.S.-based exporter.

What is export compliance? Essentially, it’s following U.S. laws that govern international trade. For exporters, this means dealing with complex regulations that vary greatly from one product to another. These rules are crucial, but following them isn’t easy due to their level of detail and changing nature. 

The U.S. Bureau of Industry and Security dictates that export compliance involves adhering to laws regulating the shipment of goods and technology from the U.S. to foreign destinations. These laws ensure trade security and legal conformity from exporters based in the United States.

If you’re an exporter concerned about compliance, we’re here to help. This guide will lay out what compliance is and the best ways you and your business can maintain it.

What is Export Compliance? Basics and Definitions

What is export compliance? It's something shippers, like the ones who booked the cargo ship viewed from overhead in this picture, must pay close attention to.

Export compliance includes any practices and actions a business uses to ensure it is following the rules and regulations governing the exportation of goods from the U.S. It’s not only a simple matter of being properly registered and licensed. 

Some responsibilities of an exporter include:

  • Finding the correct schedule B number
  • Avoiding exports to banned areas or individuals
  • Accurately filling out the bill of lading (BoL)
  • Acquiring any export licenses that may be needed

To get started becoming export compliant, we’ll  help you become familiar with several key agencies. Each one has some involvement in the import and export of goods in the U.S.

Learn more about products subject to export control here

Who Sets U.S. Export Compliance Regulations?

Export control laws cover a variety of products, so multiple agencies are involved in compliance.  Some of the most influential include the following.

  • Bureau of Industry and Security (BIS): Oversees commercial and dual-use exports. Responsible for oversight of the Export Administration Regulations (EAR).
  • Directorate of Defense Trade Controls (DDTC): Manages defense-related exports under the International Traffic in Arms Regulations (ITAR).
  • Office of Foreign Assets Control (OFAC): This office focuses on enforcing economic and trade sanctions.
  • U.S. Customs and Border Protection (CBP): Responsible for enforcing legitimate trade at the borders.

Each agency has a hand in crafting the regulations and ensuring they’re followed. They shape the way U.S. businesses take part in global trade.

Export Compliance Programs and Audits

A long-exposure picture of a port in the Pacific Northwest.

If you’re in the export business, you need an export compliance program. Without one, your business can easily lose direction and face punishing penalties and fines.

For an idea of how serious these consequences can be, take a look at these statistics from 2021.

BIS Penalties, Fines, and Forfeitures 2021

Civil Penalties$9,822,653
Criminal Fines$2,798,000
Prison TimeOver 93 years

Source: bis.doc.gov

With a compliance plan in place, you’re far less likely to incur one of these punishments. Let’s examine the steps of export compliance, including how to audit your plan. 

What Does an Export Compliance Program Look Like?

An export compliance program is a company’s blueprint for international commerce. It should lay out a step-by-step process for compliance checking that anyone involved in your export transactions can easily follow. Without one, it’s not hard to violate export controls.

Your needs will vary based on products or services you offer. However, when drafting a thorough export compliance program, focus on the following steps.

  • Develop Clear Policies: Write easy-to-understand policies. Address every part of export compliance that your business needs to follow.
  • Classify Products Correctly: Ensure that all products, technologies, or services are accurately classified. Reference the most current export control lists during this step.
  • Screen Partners: Vet your trade partners and destinations against denied party lists. 
  • Educate Your Team: Train all employees involved in export-related processes. 
  • Maintain Records: Keep thorough paperwork on all export transactions for a minimum of five years.
  • Audit and Assess: Do regular self-audits to check for compliance and make improvements as necessary.
  • Stay Updated: Stay informed to keep your program current. Regulations can change with little notice.
  • Manage Violations: Have a clear procedure for handling any potential violations. 

These steps are a starting point. Compliance experts can help you tailor these steps to your business’s needs. Adhering to these steps can safeguard a business against violations and the resulting penalties.

Export Compliance Checklist for Audits

A warehouse employee working on a tablet with the tablet's user interface superimposed over the image itself.

During an audit, you’ll see if your company is following regulations governing the export of goods. This process is crucial for identifying risks and avoiding citations. 

Here’s a checklist of steps generally involved in an export compliance audit:

  • Pre-Audit Planning: Define the scope and objectives of the audit. Gather relevant export compliance policies and procedures.
  • Review of Documentation: Check shipping documents, such as bills of lading and commercial invoices, for accuracy. Note any discrepancies.
  • End-User Verification: Ensure that end-use and end-user information is properly documented. 
  • Post-Export Reporting: Reports made to government agencies must be completed accurately and on time.
  • Audit Trail: Create a clear and traceable audit trail for all export transactions. You’ll need it during government audits.
  • Incident Management: Examine the process for handling compliance issues. Report any export violations or red flags that have been identified.
  • Audit Report: Prepare a detailed audit report and note any recommendations for improvement.

Following these steps is important to ensure a successful audit. They help identify areas where an exporter may be at risk for non-compliance and where improvements can be made.

Meeting U.S. Export Compliance Requirements & Avoiding Fines

Why go through all the trouble of meeting export compliance rules in the first place? Simply put, failure to do so leads to financially devastating fines and, in some cases, prison time. The BIS takes national security and the state of the U.S. economy seriously. Without these rules in place, dangerous items can land in the wrong hands.

Let’s take a closer look at where the buck stops for export compliance, and the punishments that come from failing to be export compliant.

Who is Responsible for Export Compliance?

The exporter of record if responsible for export compliance. Most of the time, this is the individual undertaking the exporting venture. It’s their responsibility to make sure paperwork is filled out properly and that no violations of BIS regulations have occurred. 

Simply put, whoever benefits most from the transaction will be the exporter of record. Even if you work with a broker or freight forwarder, compliance is the exporter’s responsibility.

Learn more details about who qualifies as an exporter of record here.

Common Export Compliance Violations

A fleet of semi trucks preparing to leave port with loaded trailers.

Export compliance violations come in many forms. Even minor oversights can have damaging consequences for businesses. 

Here are some of the most common violations encountered by U.S. exporters:

  • Misclassified Goods: Incorrectly classifying items on your paperwork can lead to delays and fines. Required information includes schedule B numbers and Export Control Classification Numbers (ECCN).
  • Incomplete Documents: Failing to provide complete and accurate documentation required for international shipments.
  • Omission of Information: Keeping certain information from federal agencies can be seen as an attempt to bypass export controls.
  • Failure to Screen: Not properly screening customers and business partners against the U.S. government’s denied parties lists.
  • Improper Use of Exemptions: Using license exemptions for which you don’t qualify.
  • Poor Record Keeping: Failing to maintain export records for the legally required duration. Usually, this is a five-year period.

The consequences of compliance issues range from administrative headaches to serious legal and financial damages, including:

  • Fines and fees
  • Criminal charges
  • Denial of export privileges
  • Damage to reputation
  • Delayed shipments
  • Increased scrutiny from regulators
  • Loss of export licenses

These penalties make it clear that following export compliance regulations isn’t just a legal requirement, but also a critical component of business risk management.

EAR vs ITAR Compliance: Knowing the Difference

Understanding the difference between EAR and ITAR is crucial for compliance with U.S. export laws.

The key details of these regulations are as follows.

  • EAR: Governs the export of dual-use items. Items subject to the EAR have commercial and potential military applications. 
  • ITAR: Concerned with the export of products and services found on the United States Munition List (USML). These types of goods have strictly military applications.

Learn more about the details of ITAR and EAR compliance in our detailed article.

If you’re unsure whether your cargo falls under EAR or ITAR, find out before filling out any shipping forms. Failure to accurately classify your export can lead to severe penalties. This potential risk highlights the importance of working with export compliance specialists.

Export Compliance Consultants and How They Can Help

For exporters in the U.S., an export compliance specialist can be a difference maker. These experts in U.S. cargo export regulations work with businesses to avoid fines and delays.

Export compliance specialists can also assist exporters with the creation of compliance manuals. Having such a manual is an important step toward following the complex regulations governing the export of U.S. goods.

Partner with Cargo Export USA for Export Compliance

Export compliance is expected from all exporters based in the USA. Unfortunately, the BIS doesn’t go out of its way to make complying an easy process. If you’re unsure about your export compliance status, we can help.

Cargo Export USA offers assistance with several aspects of exporting, including:

Take control of your export enterprise. Give us a call at (866) 301-0635 or contact our agents online today. We have the know-how you need to ensure consistent export compliance.

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