US Export Law Compliance

If there is an error with the EEI declaration, at the very least best practices are not met. As the USPPI, the U.S. Government can make it extremely costly if their regulations are violated. Selling via a routed transaction does not give the U.S. exporter (the U.S. Principal Party of Interest) a free pass. The regulatory onus remains with the USPPI, not the foreign buyer.

U.S. export regulations, enforced primarily by the Bureau of Industry and Security (BIS) under the Export Administration Regulations (EAR), are designed to protect national security and foreign policy interests. Violations can range from unintentional oversights to deliberate misconduct, and they often involve false declarations, unauthorized exports, and failure to obtain licenses.

Common Specific Violations

• Unauthorized exports of controlled goods. Exporting items listed in the EAR, especially dual-use or national security items, without the required license. This includes sending U.S.-origin technology to sanctioned countries such as Iran or North Korea.
• False or misleading export filings. Providing incorrect information in export documentation such as the Automated Export System (AES) or paper shipper's export declarations, including misrepresenting the type, value, destination, or intended use of goods to avoid licensing requirements.
• Failure to obtain necessary licenses. Not securing required export licenses for controlled items, for example exporting thermal imaging cameras to countries requiring a license without authorization.
• Circumventing licensing requirements. Actions that effectively bypass the EAR's license requirement, such as reclassifying goods to avoid controls or using intermediaries to mask the true destination.
• Exporting to sanctioned or restricted parties. Neglecting to screen buyers or partners against the Consolidated Screening List, leading to shipments to entities subject to U.S. sanctions.
• Inadequate export classification or screening. Lack of a formal export classification process or failure to properly screen parties involved in a transaction, often due to insufficient training or outdated procedures.

Potential Penalties

• Civil penalties: Up to $364,992 per violation or twice the value of the transaction, whichever is greater.
• Criminal penalties: Up to 20 years in prison and $1 million per violation.
• Operational consequences: Export denial orders, shipment delays, reputational damage, and loss of market access.

Enforcement

BIS conducts pre-license checks and post-shipment verifications to ensure compliance. High-profile cases, such as ZTE's $1.19 billion penalty and FLIR's $30 million settlement, highlight the severity of these violations.

Bottom line: Specific compliance issues include unauthorized exports, false declarations, license failures, circumvention tactics, and poor screening. These can lead to severe financial, legal, and operational consequences, underscoring the need for robust export compliance programs, training, and documentation controls.

Ready to discuss your routed transaction?

Talk with H.C. Bennett about how this applies to your import or export operation.