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Exporting compliance is complex but critical
The United Kingdom has an obligation to ensure that goods, technology or software are not exported into the wrong hands, or breach UK, UN or EU sanctions and anyone who exports goods or technology must comply with strict export control legislation.
Compliance with export control legislation requires the exporter to consider whether they may need an export licence from the Export Control Joint Unit to carry out an activity and, if required, to obtain the licence before any export is made.
Failure to obtain a licence when one is required or failure to observe the terms of a licence is a criminal offence for which the exporter is likely to be liable and ignorance is not an excuse.
Since Russia invaded Ukraine, up to 200 sanctions a day have been imposed and exporters need to ensure they are compliant with the requirements of any new legislation.
Many commercially available materials, products, technologies and chemicals, could have a military application and be subject to export controls, or may be covered by end-use controls or sanctions.
Controlled items often find their way into countries under bans or sanctions, particularly when exporters have not carried out thorough due diligence on their buyer, or believe they are too small to be a target.
Non-compliance with export rules may incur financial and reputational damage, with UK fines running to hundreds of thousands of pounds, while in the US they have been known to run into tens of millions of dollars – plus jail sentences.
There may also be secondary sanctions that apply to any non-domestic firm that decide to trade with sanctioned entities or countries, such as Iran, effectively barring them from trading with the US, who will pursue people who break their rules.
Often, exporters don’t want to know they have compliance issues because they think it will cost them money, but this is a false economy, because our customs experts can help them build a compliance regime that avoids penalties and creates a competitive advantage.
By being compliant our exporters avoid the costs and fines associated with non-compliance, ensuring that their products will not be impounded, and assuring their customers that products are safe to use or to re-export.
Larger firms are starting to use compliance as leverage in supplier negotiations, including clauses in their contracts that put the burden of compliance on to the supplier.
In these circumstances it is critical that the supplier really understands the customer and contract so they can prove due diligence, which may include looking beyond sanctioned entities or countries, to include those that may be more likely to divert goods.
Exporting firms need to understand the intricacies of their supply chains, including all components and in particular US parts, as their export administration regulations state that if the amount of US-owned material in an end-product exceeds a set limit – i.e. 10% – they may only be re-exported with authorisation from the US Department of Commerce.
Under this rule a complete product could meet the requirements for export from the UK, but its components, or spare parts may exceed the US’ threshold and be blocked. The risk of getting the US compliance wrong is very expensive, and potentially liberty threatening.