All C-level executives are justifiably concerned with risk management. Best practices in export compliance will reduce exposure to steep fines and penalties. Previous posts have described the risks of non compliance with Export Administration regulations. Here is some information from the BIS (Bureau of Industry and Security) website showing details. For help with export compliance contact mitch@52.91.45.227

Penalties

Violations of the Export Administration Act of 1979, as amended (EAA), 50 U.S.C. app. §§ 2401-2420 (2000), and the Export Administration Regulations, 15 C.F.R. Parts 730-774 (2007) (EAR) may be subject to both criminal and administrative penalties. When the EAA is in effect, criminal penalties can reach 20 years imprisonment and $1 million per violation. Administrative monetary penalties can reach $11,000 per violation, and $120,000 per violation in cases involving items controlled for national security reasons. When the EAA is in lapse, the criminal and administrative penalties are set forth in the International Emergency Economic Powers Act (IEEPA).

On October 16, 2007, President Bush signed into law the International Emergency Economic Powers (IEEPA) Enhancement Act, Public Law No. 110-96, amending IEEPA section 206. The Act enhances criminal and administrative penalties that can be imposed under IEEPA and also amends IEEPA to clarify that civil penalties may be assessed for certain unlawful acts. Criminal penalties can reach $1,000,000 and 20 years imprisonment per violation and the administrative penalties can reach the greater of $250,000 per violation or twice the amount of the transaction that is the basis of the violation. See Endnote below.

Violators may also be subject to denial of their export privileges. A denial of export privileges prohibits a person from participating in any way in any transaction subject to the EAR. Furthermore, it is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the EAR with a denied person.

In  previous posts we have emphasized the importance of an annual review of Harmonized Tariff codes as a good business practice. Another good practice is to make sure you are taking advantage of regulations that allow importing on a duty free or preferential basis. Here are a few items for your annual customs review. Contact mitch@52.91.45.227 if you need help.

• Classification– review annual updates to Harmonized Tariff to make sure your codes and descriptions are accurate. Proper classification and valuation of imported goods are the first step in compliance. If you do nothing else, do this.
• Duty Drawback– this is a refund of duties paid on imports that are later exported. Record keeping is key here.
• Chapter 98 of the Harmonized Tariff allows duty free entry of certain categories of goods. Examples are: American Goods Returned, American Goods Repaired or Altered Abroad, and American Components Assembled Abroad.
• Trade agreements– programs which allow duty free or reduced duty rate entries. There are many agreements (such as NAFTA) in place.
• Customs rulings– consider requesting formal customs rulings prior to large transactions. This ensures compliance and eliminates uncertainty about imports. Rulings can be requested thru the CBP website.
• Correcting errors– when an entry mistake is discovered it can be corrected by a prior disclosure to CBP. The formal process is a Post-Entry Amendment/Post Summary Correction. A prior disclosure can help mitigate penalties.