Nobody wants to be that company—the one that gains notoriety after an expensive and embarrassing compliance mistake.
Export violations—even accidental ones—can have devastating consequences for an organization’s reputation and pocketbook. Companies earnest in their efforts to uphold high compliance standards will generally do whatever it takes to stay on the right side of the law. Sometimes, though, they try to do too much.
Maybe you’re scratching your head wondering how you can possibly be too compliant. After all, more is better, isn’t it? Not always. Sometimes, the most well-intentioned due diligence can be bad for business.
Case in point—End User Statements.
An End-User Statement certifies that a buyer is the final recipient of exported materials and has no intention of re-exporting said materials to anyone else. This document can play a vital role in preventing export violations and providing proof of the original exporter’s efforts to do the right thing. There are very specific circumstances under which End-User Statements should be used:
- As required to restrict the flow of materials to embargoed countries like Cuba or North Korea, nations with poor human rights records, or to places generally considered a threat by the original supplier
- To export sensitive or highly controlled items (such as military grade weaponry)
- To restrict exports to countries with a high diversion risk, such as those that have not signed the Nuclear Non-Proliferation Treaty
- If there are other “red flags” that warrant a more cautious approach to the transaction, such as a historical appearance on an entity list (this is where your audit recording can save the day)
Some organizations make a practice of requesting End Use Statements from all their domestic and international customers, and for all items, whether a license is required or not. This includes items that are designated EAR 99 (subject to Export Administration Regulations but not listed with an Export Control Classification Number on the Commerce Control List. The majority of commercial products are EAR 99 and do not require a license to export or re-export).
The potential downside is that utilizing these as a blanket requirement to conduct business might alienate customers who have neither the time nor the inclination to complete superfluous paperwork (and who among us does have that time?) It also creates an unfortunate spirit of ill will where there does not need to be one. Do you really need the biggest U.S. purchaser of your line of stuffed toys to certify they won’t re-export your fuzzy teddy bears, each and every time they buy?
The End-User Statement is a valuable compliance tool. But it must be used appropriately based on (a) what you’re exporting and (b) to whom you’re exporting. Examining one’s own risk profile is beneficial not only to avoid thrusting End-User Statements on undeserving (and eventually angry) trade chain partners, but also for making sensible determinations regarding other compliance obligations, such as procedures for restricted party screening (if your transactions occur just once per month, why rescreen your buyers on a daily basis?) Having a keen awareness of your company’s needs and taking a logical approach to compliance requirements can save you countless hours of manpower. It can also keep you from inflicting unnecessary work on the customers (and potential customers) you rely on to keep your business afloat.
The lesson? Yes, you can have too much of a good thing. To be sure your compliance efforts do not exceed what’s reasonable and prudent—from a financial standpoint or otherwise—strategic compliance is a must. Doing what’s required under the law, and being mindful of what’s needed for the success of your business is often a challenging—but necessary—endeavor.