Global Export Control Compliance Growing Increasingly Difficult, Industry Officials Say

Companies seeking to implement global export compliance procedures should be careful to not base their compliance program on only U.S. regulations, especially as more countries introduce export control regimes, industry officials said. New export control regimes in the European Union (see 2105100013), the Philippines and other regions could create compliance challenges and add to resource constraints for global companies if not properly managed, they said.

“There's literally a whole world of export controls out there,” said Jay Nash, founder of Nash Global Trade Services, speaking during an Aug. 4 webinar hosted by Content Enablers. “It’s very difficult for anybody to be able to keep track of.”

Nash said one of his clients working in Southeast Asia was “dinged” by a local government during an audit for a bulk export license renewal because its compliance program was “too U.S.-structured and too U.S.-focused.” The country wanted the program to be more tailored to its own export regulations, he said. The company “used the U.S. template, they just didn’t localize it quite enough,” Nash said. “And they actually got dinged for that in the review.”

Kevin Cuddy, an export control executive with IBM, said companies sometimes have to be mindful of the “politics” of complying with non-U.S. export control laws. “You have to make sure [your program is] distinct. It can be modeled on, but it should be clearly distinct from, your U.S. [compliance program],” Cuddy said during the webinar.

Navigating different export control regulations can be a “headache,” Cuddy said, especially without the help of compliance officers stationed in different export jurisdictions around the world. But companies can take steps to ease the burden, he said, particularly if a foreign country is a member of a multilateral export control regime or has years of experience implementing export regulations. Members of multilateral regimes, such as the Wassenaar Arrangement, often have similar export control laws, Cuddy said, which makes compliance easier. And governments with more export control experience “will have better resources for implementation and outreach” and will “probably have a more smooth and refined licensing system.”

Compliance with newly established export control regimes may be more difficult, Cuddy said. He specifically pointed to the Philippines, which introduced export regulations within the past year. “These present challenges,” Cuddy said. “Sometimes there are limited resources in these countries that have new export control laws, and there's limited expertise with a wide variety of different products, so they may not understand the technical specifications of all the products.”

But Cuddy said governments understand they are partially responsible for industry compliance and are usually open to engagement. He said IBM recently arranged a virtual meeting with the Philippines' government to learn about that country's new “requirements, how things should work and what the next steps are.”

Engaging with local governments can also help global companies navigate the challenges of U.S. secondary sanctions, Cuddy said. U.S. extraterritorial sanctions have caused particular problems among European Union countries because of the EU’s blocking regulation, which prohibits companies from complying with certain U.S. sanctions (see 2108020030).

Businesses should speak with industry associations and local governments to “make sure they are aware of how this impacts your company, so that your government can make the case to the U.S. government of why this is an issue,” Cuddy said. But he also said there is no easy solution to navigating secondary sanctions. “This is not fast. It's not going to make that transaction any easier,” Cuddy said. “But it's how you hopefully get the ball rolling on making it better in the long run.”