Commodity classification is critical. In fact, we call it Job #1 since most of your compliance requirements are based on these determinations. But classification projects are not all the same. Most companies use the “surge” approach, tackling the entire inventory all at once, be it dozens, hundreds or thousands of items. Other companies, for various reasons, can’t process everything at once and must rely instead on the “flow” method of classifying items only when they enter the Order Processing system. Both are valid and effective methods, giving companies the licensing requirements they need, but to help you pick your strategy, we’ll walk you through the pros and cons of wholesale “surge” classification versus the “flow-through” basis.
We all recognize risks, consciously and unconsciously. We are careful near cliffs or driving at high speed; we watch our diet and we manage our investments. We look out for our kids before – and sometimes after – they know how to care for themselves. We understand and manage risks in virtually all aspects of our lives by staying on the prudent side of our various risk perimeters.
The same is true in business. The nature of the risks are different, depending on your role in the company, but there are a wide variety of events that can put your business in jeopardy. Fire, theft, falling sales, rising costs, changing markets, aggressive competitors—all these are obvious. Not easy but at least apparent.
Compliance risks are not always evident or easily understood but, make no mistake, they can be damaging to your company. Export control compliance is a good example. This category of compliance provides plenty of cautionary tales involving companies and individuals who have suffered crippling penalties, fines and negative publicity for violating export control regulations.
While some knowingly and deliberately skirted the regulations, many more got in trouble out of ignorance, laziness, or both. They either didn’t understand the law well enough to recognize and rectify export compliance risks or they were insufficiently motivated to take the necessary precautions. Neither reason is prudent or defensible.
The “compliance risk perimeter” is a simple concept that is diversely useful in this context. Once executives and employees understand the concepts of export controls, they learn to recognize a risk before it becomes a violation. In the industry, these risks are referred to as “red flag scenarios.” If you encounter one or even if you’re not sure, stop and ask someone with more experience in export control compliance. If in doubt, check it out.
Topics: Export Compliance
If you can’t make the Update conference in DC next week, BIS is offering the next best thing. Assistant Secretary Kevin Wolf will conduct an Open Forum by teleconference next week to offer a summary of recent ECR developments. Access instructions are in the full BIS announcement, below.
There is a confluence of export control activities in Washington, D.C. The Society for International Affairs (SIA) recently completed their fall compliance conference earlier this week and the annual "Update" conference held by the Department of Commerce's Bureau of Industry and Security (BIS) is from November 2, 2015 until November 4, 2015. In addition, the State Department's Directorate of Defense Trade Controls (DDTC) recently announced that they are extending the timeline for the transition of items from the U.S. Munitions List (USML) to the Commerce Control List (CCL) as part of the Export Control Reform (ECR) initiative.
In coordinated announcements last week, BIS and DDTC proposed many new or altered definitions that attempt to harmonize comparable terms in the EAR and ITAR. The DDTC proposal includes, among many others, a new definition of “defense services.” For the legion of long suffering compliance practitioners who have struggled to reconcile the varying terminology, this is a long awaited aspect of ECR. The proposed rules can be found at: