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Export compliance regulations don't just apply to the big guys. Even the smallest U.S. businesses that send their products to customers outside the country are subject to a variety of export regulations and could face substantial penalties for violating these rules.
Unfortunately for many small and medium-sized businesses, company personnel may not know these requirements until it's too late.
According to the U.S. Department of Commerce's Bureau of Industry and Security (BIS), fines for export violations can reach up to $1 million per violation in criminal cases, while administrative cases can result in a penalty amounting to the greater of $250,000 or twice the value of the transaction. In addition, criminal violators may be sentenced to prison for up to 20 years, and administrative penalties may include denial of export privileges.
Penalties of this size and nature can be especially devastating to small and medium-sized businesses, which represent 97% of the approximately 300,000 U.S. companies that export, according to U.S. Census Bureau statistics. Small and medium-sized businesses may think they lack the time or money to train personnel in export regulations and the necessity of compliance screening. Even if they do have the necessary experience and training, export personnel may not have the support of senior management, who are often totally unaware of U.S. export regulations.
BIS has published a book, Don't Let This Happen to You, which outlines exporters' compliance responsibilities and includes real-life examples of penalties they have recently issued against individuals and businesses.
Businesses that are already exporting or are planning to start exporting need to follow some basic steps to ensure they are compliant with U.S. export regulations. While the following six steps are by no means all inclusive, they should provide companies with a starting point for implementing an export compliance plan.
Most exporters are familiar with the Harmonized System (HS) or Schedule B codes used to classify products for duty, quota and statistical purposes. However, exporters are often less familiar with the requirement that they determine whether or not their products are controlled for export by the Department of Commerce or the Department of State.
The Department of Commerce's Bureau of Industry and Security (BIS) controls the export of most commercial products. While only a small percentage of exports under BIS's jurisdiction require an export license, it's a product's technical characteristics, the destination country, the end user, and a product's end use that factor into this determination. (Products under State Department control are typically products or services specifically related to defense and are outside the scope of this article.)
The first step for deciding whether or not a product requires an export license is determining if it has a specific Export Control Classification Number (ECCN) by checking the U.S. Export Administration Regulations (EAR). If a product does have a five-character ECCN code, the EAR will also list one or more reasons why it is controlled. Companies use these reasons for control to help them determine if they need to apply for an export license based on the countries to which they are exporting (see step #2 below).
You can search for an ECCN code in a printed copy of the EAR or online at the BIS website. In addition, Shipping Solutions' Product Classification Wizard allows you to search for the correct ECCN code by typing in a short description of your products.
Products that do not have an ECCN code and are not subject to control by any other U.S. agency are designated as EAR99. Products classified as EAR99 are low technology consumer goods and usually do not require an export license. However, even EAR99 items require licenses for exporting to embargoed countries, to a restricted party, or in support of a prohibited end use.
There are several reasons the U.S. government prevents exports to certain countries without an export license. In the most extreme cases, the U.S. has placed embargoes on countries like Iran and Syria for supporting terrorist activities. In other cases, the U.S. restricts companies and individuals from exporting certain products to specific countries for reasons of national security, nuclear nonproliferation, chemical and biological weapons, or several other reasons outlined in the EAR.
Companies of all sizes need to be aware of their responsibilities as exporters. This article focuses on some basic steps that all export companies and their personnel should know, follow and document. It should serve as a starting point for creating a more comprehensive and written export management and compliance plan.
For any plan to be effective, it must be endorsed by companies' top management and shared with all employees involved in any part of the export process—from managers, to sales and administrative personnel, to the warehouse team. Such an effort can save companies thousands if not hundreds of thousands or even millions of dollars in fines, prevent restrictions on exporting that can cost companies millions of dollars in lost revenue, and even jail time for the most serious violations.
An effective export compliance program includes ongoing training of all company personnel involved in the export process including all management, sales and support staff. BIS sponsors a variety of seminars across the U.S. In addition, companies like International Business Training offer a variety of books, webinars and seminars on export rules and procedures.
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| EX 9 7CE3 bearing | 9 | 24 | 7 |
| EX 9 /NS 7CE3 bearing | 9 | 24 | 7 |