Export Control Reform

Controlled Good Shuffle: Three Common Concerns Caused by Export Control Reform

With October 15th come and gone, President Obama’s Export Control Reform (ECR) Initiative has become a reality, and classifying military products has become a lot more complicated.

While it is obvious that Export Control Reform will increase the short term workload for many export compliance departments, many companies are creating a laundry list of additional concerns. Here are three common concerns:

1.)    ITAR Experts in an EAR World. Many Aerospace and Defense Export Compliance Officers can submit an ITAR License application in their sleep, but by entering into a brave new world known as the Department of Commerce and the Export Administration Regulations (EAR), many unknowns lurk.  What information is required for a Commerce Snap-R License Submission? What license exceptions are available? How does the Department of Commerce handle Voluntary Self-Disclosures?

The BIS is advocating companies to go out and get EAR Training, but many compliance officers still have a general sense of unease as they now slowly start to wade into this uncharted territory.

2.)    Updating your Supply Chain. You are not the only one who needs to update your current classifications. You also need to be concerned that your suppliers properly classify products that they provide you, and that your customers receive the new classifications for any products that you manufacture. Remember, the most accurate classifications can only come from the product manufacturer and an individual that has detailed knowledge on the history and technical details of the item, such as an engineer. When it comes to your customers, if they haven’t already started, pretty soon, they will come asking if any of the parts and items you provide them have been affected by Export Control Reform.

3.)    Realistic Management Buy In. A common concern in the world of export controls is getting support from upper management. When it comes to Export Control Reform, this can be divided into two buckets: budget and realistic expectations. Will your management provide you with the resources you need to get this job done? Will they provide adequate time to reclassify your products? I recently heard of a big player in the aerospace and defense sector that was allotting each ECO five weeks to reclassify 100,000 parts and components. By forcing a deadline on reclassification and not providing the export compliance group the resources they need, companies are opening themselves up to the risk of inaccurate classifications, which can grind an organization to a halt if licenses start getting delayed, shipments are held up, and worst of all, the dreaded Voluntary Self Disclosure must occur.

Each company affected by Export Control Reform will feel different pains and concerns, yet, there is a simple message that can alleviate future headaches: get it right the first time. Procrastinating and quick and dirty fixes will do nothing but delay the inevitable need to take your time and figure out the new regulations accurately.