Recent FedEx Export Enforcement Underlines Need for Proper Export Controls for All Companies - By Dylan McGuire, LexisNexis In-House Advisory
Shipping giant FedEx’s recent agreement to pay $370,000 in fines to settle allegations that it violated U.S. export regulations by shipping computer equipment to a company in Dubai that allegedly used such equipment to make explosive devices used in Iraq and Afghanistan, highlights the importance of having proper export controls for U.S. companies that ship overseas, panelists at a recent webinar said.
“I don’t care how big a company you are, how small a company you are, how many lawyers you have on staff—compliance people on staff—sooner or later the chances are pretty good that every company is going to end up making a mistake or error or somehow commit a violation of law or regulation,” related to export regulations, said Peter Quinter of Gray Robinson speaking at a September 11, 2012 LexisNexis® Webinar entitled Understanding U.S. Export Regulations.
|Peter Quinter, Esq.|
Quinter said that once the government suspects an export violation, its first step is often to issue an enforcement subpoena or a summons to the company.
“When the government issues an enforcement subpoena or summons or conducts any kind of investigation … you don’t know whether it’s going to result in a criminal prosecution, an administrative monetary penalty, or no action whatsoever. Be advised the government is not obligated to tell you—they may not know at that point. So, you should always suspect the worst—that it is a criminal investigation and to keep in mind that when someone contacts you, you’re not necessarily required to answer their questions. The subpoena you are required to respond to, however. How you respond and when you respond is of course up to you and your legal counsel,” said Quinter.
Failure to respond to an Office of Foreign Asset Controls (OFAC), Department of the Treasury, subpoena can result in substantial fines—an automatic fine of $20,000 for failure to respond and up to $50,000 if the value of the exported merchandise exceeds $500,000, Quinter said.
“Just because a subpoena asks for everything under the sun does not mean that you absolutely have to discuss or provide that documentation to OFAC,” he said.
Quinter pointed out that just about everybody who does business overseas is subject to OFAC regulations, but that companies that do business with Syria or Iran are particularly under scrutiny. He said that all U.S. citizens, regardless of whether they are living in the country are elsewhere, may find themselves subject to OFAC regulations if they do business with those countries, due to ongoing sanctions programs.
He offered the following advice to companies under investigation by OFAC: “The government likes it when you cooperate. There are many situations where the violator does not cooperate. As a matter of fact, the violator often provides false information to the government, believe it or not. So when the subpoena is issued by OFAC or BIS [Bureau of Industry and Security] to a company and they ask for certain documents, or ask for certain information and either the documentation or the information is falsified, the government doesn’t like that and will issue penalties based upon that alone. They’ve actually gone after people criminally for lying to the government.”
Quinter recommended that an effective compliance program come from the top down.
“If you’re a substantial exporter, you should really have a written export management and compliance program, signed by the president and enforced by legal counsel or other compliance personnel. It should a management commitment in writing, right from the top and provided to every employee, that says how important the export rules are. The government agencies like to see that,” he said.
He also recommended that companies engage in continuous risk assessment
“Someone should in the company should always be checking to see—not just initially when they install the program but routinely every six months or a year—that the risks are minimal,” he said. He recommended that companies call into their sales department posing as an international company seeking to, for example, ship goods to Iran or Syria, to test how their personnel reacts.
He also recommended companies engage in ongoing training and awareness programs and keep accurate records of transactions and dealings.