U.S. aerospace and defense contractor Raytheon Company has reached an agreement with the U.S. State Department to pay a $4 million fine and invest an equal amount in additional compliance measures for violations of federal arms control regulations. The State Department’s Office of Defense Trade Controls Compliance in the Bureau of Political-Military Affairs determined that [...]
U.S. aerospace and defense contractor Raytheon Company has reached an agreement with the U.S. State Department to pay a $4 million fine and invest an equal amount in additional compliance measures for violations of federal arms control regulations.
The State Department’s Office of Defense Trade Controls Compliance in the Bureau of Political-Military Affairs determined that Raytheon’s numerous violations demonstrated a “recurring, corporate-wide weakness in maintaining effective ITAR controls.”
Over the years, the State Department said Raytheon committed “hundreds of civil violations of the Arms Export Control Act and the International Traffic in Arms Regulations.”
The violations included inaccurate tracking, valuation and documentation of temporary exports and imports of controlled hardware, manufacture of such hardware by Raytheon’s foreign partners in excess of the approved amounts, and failures to timely obtain and submit required documents.
The initial $8 million fine was lowered to $4 million after Raytheon agreed to use an additional $4 million to go towards “remedial compliance measures, as ordered by the government.”
An external “special compliance official” will be engaged by Raytheon to oversee the consent agreement, which will also require the company to conduct two external audits of its compliance program during the agreement term as well as implement additional compliance measures.
Related: U.S. Department of State (DDTC) Consent Agreement
Last Chance for Free Coffee! It’s not too late to participate in Amber Road’s survey on companies’ export compliance readiness! The survey will remain open for one more week. All participants will receive a complimentary copy of the resulting benchmark report. Your answers will be kept strictly confidential. To show their appreciation for your involvement, all participants [...]
Last Chance for Free Coffee!
It’s not too late to participate in Amber Road’s survey on companies’ export compliance readiness! 
The survey will remain open for one more week. All participants will receive a complimentary copy of the resulting benchmark report.
Your answers will be kept strictly confidential.
To show their appreciation for your involvement, all participants will receive a $5 Starbucks gift card!
CLICK HERE to Benchmark Your Company’s Trade Compliance Readiness.
Pratt & Whitney Canada Corp. (PWC), a Canadian subsidiary of the Connecticut-based defense contractor United Technologies Corporation (UTC), last week pleaded guilty to violating the Arms Export Control Act and making false statements in connection with its illegal export to China of U.S.-origin military software used in the development of China’s first modern military attack [...]
Pratt & Whitney Canada Corp. (PWC), a Canadian subsidiary of the Connecticut-based defense contractor United Technologies Corporation (UTC), last week pleaded guilty to violating the Arms Export Control Act and making false statements in connection with its illegal export to China of U.S.-origin military software used in the development of China’s first modern military attack helicopter, the Z-10.
In addition, UTC, its U.S.-based subsidiary Hamilton Sundstrand Corporation (HSC) and PWC have all agreed to pay more than $75 million as part of a global settlement with the Justice Department and State Department in connection with the China arms export violations and for making false and belated disclosures to the U.S. government about these illegal exports. Roughly $20.7 million of this sum is to be paid to the Justice Department. The remaining $55 million is payable to the State Department as part of a separate consent agreement to resolve outstanding export issues, including those related to the Z-10. Up to $20 million of this penalty can be suspended if applied by UTC to remedial compliance measures. As part of the settlement, the companies admitted conduct set forth in a stipulated and publicly filed statement of facts.
As part of the agreement, the companies must pay $75 million and retain an Independent Monitor to monitor and assess their compliance with export laws for the next two years.
Survey finds companies are increasingly at risk for violating U.S. export regulations. The Obama administration is pushing export growth as a way to rev up the economy and boost job creation. But if the results of a recent survey are any indication, the small and mid-sized U.S. companies that stand to benefit most from export [...]
Survey finds companies are increasingly at risk for violating U.S. export regulations.
The Obama administration is pushing export growth as a way to rev up the economy and boost job creation. But if the results of a recent survey are any indication, the small and mid-sized U.S. companies that stand to benefit most from export growth need to educate themselves about the applicable regulations before they crank up their export engines.
The survey, conducted among mid-market companies by global trade management software provider Amber Road, found that these companies are increasingly at risk for violating U.S. export regulations. Of the 150 companies surveyed, 23 percent do not screen for restricted parties prior to engaging with trading partners and customers.
Of those survey respondents who do perform restricted-party screening, 30 percent do so manually using spreadsheets or websites. Two-thirds (66 percent) use manual processes to classify their products, opening the door to errors and inconsistencies. Of equal concern is that only 41 percent have a comprehensive export compliance program, and 20 percent have no formal compliance program in place.
Just over one-third (35 percent) of respondents have a management team that is somewhat aware of the regulations but has no involvement in the compliance process. In fact, survey respondents say a lack of executive sponsorship is largely to blame for their companies’ trade compliance deficiencies.
According to a March 2012 U.S. Bureau of Economic Analysis report, U.S. exports grew 7.7 percent from January 2011 to January 2012. That’s good news, yet it also raises concerns. “Mid-market companies in particular are increasing revenues by accessing foreign markets,” said Scott Byrnes, Amber Road’s vice president of marketing, in a statement. “Unfortunately, it appears that many mid-market companies aren’t fully aware of the regulatory requirements governing global trade.”
Click here to download the full results of the survey.
Source: DC Velocity
Recent events in the Ivory Coast, Egypt and Libya have highlighted the growing risk issues around cross border trading. Many businesses are more than aware of the physical and more obvious risks in this area, but are less familiar with the potential for interruption caused by politically driven regulation including sanctions, arising from multiple multilateral, [...]
Recent events in the Ivory Coast, Egypt and Libya have highlighted the growing risk issues around cross border trading. Many businesses are more than aware of the physical and more obvious risks in this area, but are less familiar with the potential for interruption caused by politically driven regulation including sanctions, arising from multiple multilateral, national, regional and domestic sources.
It is this increasing propensity to see politically driven regulation that may directly or indirectly impact upon trading partners and the advisers to such partners, which can create a real headache for business. Of course it can also create real opportunity for those businesses that understand the regulation and can work effectively with it.
There may be a misconception that this is a short-term problem, or something that only politically sensitive industries, such as defence, need to be concerned about. However, these issues are if anything accelerating and the concept of ‘political sensitivity’ may be applied widely to many industries today.
Whilst understanding the component parts of these cross border risks is challenging, it is possible and this understanding will be key to successful trade in the current and future international business environment. There is also a well established insurance market that can underwrite risk associated with international trade, which together with appropriate risk analysis provides many businesses with the security and confidence to realize trading opportunities in the challenging environment we operate in today.
Source: Jardine Lloyd Thompson Group plc
The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) recently published a series of new “Best Practices for Preventing Unlawful Diversion of U.S. Dual-Use Items Subject to the Export Administration Regulations, Particularly through Transshipment Trade.” These new best practices have been issued by BIS following last year’s publication in the Federal Register of [...]
The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) recently published a series of new “Best Practices for Preventing Unlawful Diversion of U.S. Dual-Use Items Subject to the Export Administration Regulations, Particularly through Transshipment Trade.”
These new best practices have been issued by BIS following last year’s publication in the Federal Register of a notice of inquiry requesting public comments on a draft version of the first update to best practices on transit, transshipment and re-export of dual-use items since 2003.
Best Practice No. 1 – Companies should pay heightened attention to the Red Flag Indicators on the BIS Website and communicate any red flags to all divisions, branches, etc., particularly when an exporter denies a buyer’s order or a freight forwarder declines to provide export services for dual-use items.
Best Practice No. 2 – Exporters/Re-exporters should seek to utilize only those Trade Facilitators/Freight Forwarders that administer sound export management and compliance programs which include best practices for transshipment.
Best Practice No. 3 - Companies should “Know” their foreign customers by obtaining detailed information on the bona fides (credentials) of their customer to measure the risk of diversion. Specifically, companies should obtain information about their customers that enables them to protect dual-use items from diversion, especially when the foreign customer is a broker, trading company or distribution center.
Best Practice No. 4 – Companies should avoid routed export transactions when exporting and facilitating the movement of dual-use items unless a long standing and trustworthy relationship has been built among the exporter, the foreign principal party in interest (FPPI), and the FPPI’s U.S. agent.
Best Practice No. 5 – When the Destination Control Statement (DCS) is required, the Exporter should provide the appropriate Export Control Classification Number (ECCN) and the final destination where the item(s) are intended to be used, for each export to the end-user and, where relevant, to the ultimate consignee. For exports that do not require the DCS, other classification information (EAR99) and the final destination should be communicated on bills of lading, air waybills, buyer/seller contracts and other commercial documentation. For re-exports of controlled and uncontrolled items, the same classification and destination specific information should be communicated on export documentation as well.
Best Practice No. 6 - An Exporter/Re-exporter should provide the ECCN or the EAR99 classification to freight forwarders, and should report in AES the ECCN or the EAR99 classifications for all export transactions, including “No License Required” designation certifying that no license is required.
Best Practice No. 7 – Companies should use information technology to the maximum extent feasible to augment “know your customer” and other due-diligence measures in combating the threats of diversion and increase confidence that shipments will reach authorized end-users for authorized end-uses.
Companies should review and consider incorporating these suggestions in their organization’s compliance programs. While these best practices do not create any new legal obligations, their adoption may be considered by the U.S. government in assessing an activity if an issue were to arise.
Imagine you provided a set of your checkbooks, with pre-signed checks, to 20 or 30 people around town. Wouldn’t you be nervous about how much money they might withdraw from your account? Something similar has happened in the export world. Many chambers of commerce have loaned or rented out their corporate seals to freight forwarders [...]
Imagine you provided a set of your checkbooks, with pre-signed checks, to 20 or 30 people around town. Wouldn’t you be nervous about how much money they might withdraw from your account?
Something similar has happened in the export world. Many chambers of commerce have loaned or rented out their corporate seals to freight forwarders and exporters, permitting those organizations to stamp the chamber’s seal onto documents that are used for export transactions. Of the estimated 4 million certificates of origin that accompany U.S. export shipments annually, we estimate that fewer than half are actually inspected and signed by a chamber of commerce employee, as the international rules require.
Certificates of origin are used to determine where products were made and thus can affect how much duty is levied on imports, whether imports are exceeding quotas or not, and whether the imports comply with local health and product safety regulations. The simple documents, usually just a page in length, can also affect the price of imports: many people overseas will pay more for items they think are made in the United States.
So the stakes are high on these seemingly innocuous documents. Around the world, they are treated with care. In the United States, people frequently handle outgoing certificates of origin with little attention and varying standards, even though U.S. Customs monitors incoming certificates of origin with vigilance.
Legal counsel to chambers on certificate issues has been all over the lot and many chambers have little reason to believe that their current practices are anything other than business as usual. No single authority in the United States has supervised compliance with the international rules on certificates of origin, and plenty of chambers, freight forwarders, and exporters aren’t familiar with how the system is supposed to work. But things are beginning to change, spurred in part by a crackdown on phony certificates of origin by the Consulate General of Egypt in Houston earlier this year, as well as other incidents connected with specific shipments.
Chambers are learning that the stamp-lending practice is against the rules and, equally important, poor governance. The basic authority comes via the Kyoto Convention agreement that was signed by President Bush in 2005 (and previous agreements leading up to it, starting with the Geneva Convention in 1923). Groups that have cautioned against the practice of stamp lending include not just the U.S. government, but also the U.S. Chamber of Commerce, the American Chamber of Commerce Executives (ACCE), the U.S. Council for International Business, and the International Chamber of Commerce’s World Chambers Federation. As a result, several chambers, including some large, big-city business organizations, have begun asking to get their seals back from exporters. ACCE is preparing a training course for chambers on proper handling of certificates of origin. It’s also offering an electronic certificates service, which helps ensure that correct processes are followed and removes the problem for heavy exporters of constant driving back and forth to the chamber to get approvals.
Given how little attention most of us have paid to this issue in the past, any chamber, exporter, or freight forwarder that is taking steps to comply with the international rules on certificates of origin should be commended. The world’s importers should have confidence in the certificates issued in the United States. Let’s not let them down.
Source: Global Reach — The official blog of the U.S. Census Bureau’s Foreign Trade Division
Author Chris Mead is senior vice president of the American Chamber of Commerce Executives, an organization of 1,200 chambers of commerce across America headquartered in Alexandria, Virginia. He can be reached at cmead@acce.org.
The “Import-Export Geeks” dish up their musical take on non-compliance: I know… a song about Trade Compliance. Go figure. Note: BXA refers to these nice folks.
The “Import-Export Geeks” dish up their musical take on non-compliance:
I know… a song about Trade Compliance. Go figure.
Note: BXA refers to these nice folks.
November 3, 2011, 8:00a.m. – Deerfoot Inn – Calgary, Alberta Learn from experts as they present: • How to Classify for Canadian Export Controls – reporting and classification considerations – Export Control List (ECL) & Area Control List (ACL) – Best practices – The Matrix • Export Control Laws and Regulations – Moving beyond Basics [...]
November 3, 2011, 8:00a.m. – Deerfoot Inn – Calgary, Alberta
Learn from experts as they present:
• How to Classify for Canadian Export Controls
- reporting and classification considerations
- Export Control List (ECL) & Area Control List (ACL)
- Best practices – The Matrix
• Export Control Laws and Regulations – Moving beyond Basics
- where to find the rules & substantive differences – Canada vs. U.S.
- latest changes in licensing and export authorization
- practical steps for export compliance
• Economic Sanctions: Canada’s New Compliance Minefield
- overview of Canada’s economic sanctions measures
- focus on sanctions “hotspots” – Libya, Iran and Cuba
- designing, implementing and maintaining an effective compliance system
• U.S. Export Controls Classification Workshop
- breakdown of Export Administration Regulations (EAR) sections
- how to classify using Export Control Classification Number (ECCN)
- how to use the country chart
- overview of various lists, e.g. denied parties
- overview of International Traffic in Arms Regulations (ITAR) and the U.S. Munitions List (USML)
Cost: $495.00 (non-members of IE Canada)
Questions? For further information please contact Linda Bott at lbott@iecanada.com
or 416-595-5333, ext. 28 or toll free at 1-866-616-2243, ext. 28
