29 May Companies that ship software overseas may be exporting trouble
Your company may be unintentionally violating a whole host of federal laws and regulations in some of its most common daily transactions – by shipping software to an off-shore data processing facility, by providing a foreign citizen access to your information technology infrastructure, or fulfilling a product order from a foreign business.
What if you learned that the civil penalties for these violations have, in the past year, been increased from a maximum of $50,000 per violation to the greater of $250,000 per violation or twice the economic value of the transaction? What if you learned that there are also criminal penalties of up to $1,000,000 and 20 years in prison?
The change in mentality that you probably experienced from reading paragraph one of this article to reading paragraph two is exactly the impact that was intended by the signing of the International Emergency Economic Power Enhancement Act. The Act was passed into law on October 16, 2007, and significantly increased penalties for violating the Export Administration Act and other export regulations.
The United States maintains a complex system of export regulations administered by the Department of Commerce, Bureau of Industry and Security. U.S. export requirements and regulations apply to almost every international shipment of goods and even to many activities that most businesses would not typically consider an “export” – such as the use of non-public U.S. software in foreign countries or by foreign nationals.
In fact, it is precisely because many businesses do not appreciate the importance of complying with United States export requirements and regulations that the International Emergency Economic Power Enhancement Act was enacted.
Companies without export controls or an export compliance program may be at significant risk of substantial fines and penalties. Even companies that do not actually ship product internationally may be at risk, as U.S. export regulations, among other things, deem the access to U.S. technology by foreign nationals an export.
A comprehensive export compliance program will both prevent violations and be a mitigating factor in determining the amount of any penalties that may be assessed for export violations.
Companies that engage in international commerce at any level, or that employ foreign nationals (especially in a technology role), should establish a thorough export compliance program in order to ensure that they are complying with the requirements imposed by U.S. export laws.
An effective export compliance program should include:
• Managerial resources responsible for monitoring export compliance.
• Instruction manuals and internal training seminars regarding export compliance.
• A documented export screening and approval process, including procedures for obtaining necessary export licenses.
• Record-keeping requirements for exports and for retaining export compliance analysis.
• Procedures for detecting and addressing violations.
Broad scope of exports
The scope of transactions considered “exports” by United States companies and individuals is far broader than most businesses are aware. The increase in penalties has been designed to increase this awareness and provoke greater compliance.
The time and expense to establish a compliance program now could save hundreds of thousands of dollars in the future.
The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC.
WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.