Any entity that sells any goods outside of the United States (including Canada) would be wise to prepare an export compliance plan that considers the U.S. and foreign country export laws and compares it to the organization’s activity.
U.S. laws and regulations require compliance with a plethora of laws and regulations. For example, if an ecommerce vendor ships goods from the United States, it may need a license issued by the United States Department of Commerce Bureau of Industry and Security (“BIS”). The U.S. Department of State, U.S. Customs and Border Protection and Immigration, the U.S. Office of Foreign Assets Control, AND the U.S. IRS.
Violations of these laws and/or regulations can lead to severe consequences, including civil and even criminal penalties. For example, basic BIS license violations are REQUIRED to be FINED NO LESS than $328,121. In addition, criminal sanctions can lead to 20 years imprisonment—scary stuff.
There is relative safe harbor as the U.S. government recognizes that if an exporting entity has in good faith complied and adhered to its export compliance plan, it will go a long way to absolving liability.
Creating a plan is relatively straightforward. Determine:
A) Who Are The Goods Exported?
- Consumers
- A Foreign Entity
- An American or Foreign Subsidiary
All of the above have their risks and considerations. Obviously, generally, an ecommerce seller would have no idea who the end-user foreign consumer is, so they need to plan for the worst. Second, shipping to a foreign entity (e.g., reseller of goods) may have its own issues, as they may be a banned entity with the U.S. or their own government, which would make the shipment(s) suspect. Third, if the sale is to the exporter’s own subsidiary, U.S. agencies may be scrutinizing that entity to determine, e.g., the taxation flow of such a transaction.
B) Where Are The Goods Being Exported To?
The United States is concerned with certain countries as opposed to others. For example, there are trade embargos with, e.g., Iran and Syria, making shipping to those countries next to impossible. On the other hand, the U.S. knows there are countries that have better trade relationships with those countries. So if there are a lot of sales to, e.g., Lebanon, that may be flagged for Syria, Jamaica for Cuba, etc.
C) What Is Being Sold?
All goods exported need to be classified with an Export Control Classification Number (ECCN) in the U.S. The number is used to identify items subject to export control. The list can be found at Commerce Control List (CCL) (doc.gov). Exporters USUALLY don’t have to have a special license and can be classified as such. However, even if the goods seem innocuous, e.g., contain certain chemicals, involve electronics or software, or are computer-related, they are subject to licensing rules. The point is that it is next to impossible to determine if and what licenses are required unless you compare the goods with the ECCN.
D) Document And Inform All Involved
Take A), B), and C) above and put together a policy. An example of a policy is as follows:
XYZ Corp. sells staplers and related accessories for binding across the world. It imports its white-label inventory from China, and a shipping record audit shows it has sent branded inventory to North and South America. If an employee or shipper believes it is shipping its inventory to an embargoed country, please let management know so it can take remedial action.
The Company’s goods are classified as EAR 99, items not specified in the EAR; there are no known controls. Therefore, there are no known export license exceptions. However, restrictions may apply for exports to certain countries and/or certain parties.
Export compliance is an excellent matter to promote. So, e.g., place your and the compliance in employee handbooks and independent contractor requirements.
In summary, most ecommerce sellers have no idea that when they export goods, be it occasionally or in a focused manner; there are numerous export laws to comply with. U.S. enforcement agencies put great weight on exporters’ awareness of the various laws and regulations and apply them to exported goods using an export compliance plan. However, implementing and memorializing one is relatively easy and not resource-intensive.
EmergeCounsel can help analyze particular situations and goods. Call us today to schedule your free consultation.
