6 things you need to know about export controls

One might think that these laws are designed for a very specific range of items and overlook export compliance when they ship goods to their customers. Yet, the intensification of cross-border eCommerce and consecutive global crises pushed countries to further restrict the export of certain goods. In such a context, any company involved in the supply chain must be aware of export control rules to minimize risks and sanctions.  

Export control rules determine what items are restricted for export, what countries are under embargoes, and what organizations and individuals are sanctioned parties. It is therefore essential to conduct pre-checks on all these levels before you export your goods. Are you feeling lost in the export control maze? We compiled 6 things you need to know about export control:  

Are you searching for a fast, reliable and cost-efficient service to check all orders against export control laws? Eurora’s automated Export Control solution can help you!  

1. What are export controls?

Export controls are laws and regulations that can be applied globally, by certain regions, and by countries. Export control laws aim to monitor the export of sensitive items like navigation equipment, IT equipment, electronic devices and components, chemicals, or military goods. These types of items are closely monitored because they can be a threat to national and international security.  

Dual-use goods are specially regulated by export control offices. They correspond to items that can be used both for civilian and military applications. Dual-use goods are initially designed for civilian use, but in the wrong hands can be transformed for military purposes or used for terrorism. They are categorized into 10 internationally recognized groups, among which we can find electronics, computers, or telecommunications. More concretely, dual-use items can be chemical and biological tools, thermal imaging, or some models of drones for example.    

Export controls vary from one country to another. Therefore, the safest move to reduce risks is to know the laws that apply in the country you operate from, the country you are shipping to, and any transit country the goods may pass through. That is the safest move to reduce risks. In some cases, export control rules may even have an extraterritorial impact, meaning that a state applies and enforces its law to matters and persons outside its borders. For example, your company export goods of US origin from France. In that situation, you need to check simultaneously the export rules of both France and the US, as both can apply.  

2. Who is responsible for export compliance?

No matter what goods you ship, as a business involved in the supply chain, you are responsible for export compliance. This means that you are liable to sanctions if you ignore compliance rules. Yet, many companies fail to identify their risks because they’d rather focus on getting orders out. It is true that not all items require an export license. In fact, many items can be exported without a license. Still, it is your responsibility to determine if any license is required. On this basis, it is better to be safe than sorry and double-check requirements. Especially when you consider that a wide range of items other than firearms and chemicals are subject to export controls. As a matter of fact, cameras, computers, or navigation equipment appear on the export control list of many countries, which isn’t so obvious.  

With that in mind, export compliance should be at the heart of your concerns. Whether you are new or a veteran of export compliance, it is important to identify the risks that you face when exporting, so you can reduce them. These risks are usually present on 3 different levels: the item, your operations, and your customer. Let’s take a closer look at each of them.     

• Item: the main risk when you export a controlled item is to do it without an export license when it is required.  
• Operations: you are at risk if you have a weak compliance structure, especially if you conduct your compliance checks manually.  
• Customer: here the risk is multiple. If you sell to an unknown end-user or for an unknown end-use, the buyer can misuse a dual-use item. You are also at risk of selling to an embargoed country.   

3. Why is export control compliance important?

As we saw, export controls protect national security, but also international security. They involve sensitive items that might suppress human lives if placed in the wrong hands. Therefore, violating the export control acts unsurprisingly leads to serious sanctions. You may be subject to criminal and administrative penalties, including fines and imprisonment. This can go from the removal of export privileges, a ban on trade or business, to criminal and civil liability of corporate entities and directors.   

Consequences can apply to both companies and individuals. Your company could suffer reputational harm, restricted access to financial systems and certain markets, or monitoring and audits. As an individual, you could be subject to personal investigations and restricted from certain countries.  

You might think that these sanctions apply rather rarely, and for a very limited type of businesses. The reality is slightly different, especially for postal operators. Since they are shipping huge amounts of parcels every day and everywhere in the world, they are at high risk. Leading postal companies like DHL, FedEx, or Access USA Shipping hit the headlines for export control violations and underwent severe sanctions. FedEx has been accused several times of having repeatedly violated the US Export Control Act. The company sent items to several countries without the required licenses and is liable even if it was unaware of what was in the parcels. This could cost FedEx half a million dollars.    

4. Who regulates exports?

The government agency of the exporting country is usually the export control office dealing with the classification, assessment, and licensing of items. In the United States, it is handled by the Bureau of Industry and Security (BIS). In the United Kingdom by the Export Control Joint Unit (ECJU). In the EU, each member state has its own institution that arranges the enforcement of the law. On top of that, The European Union has an export control regime governed by Regulation (EU) 2021/821. In addition to government regimes, multilateral export control regimes were created.

Their aim is to prevent the proliferation of weapons of mass destruction (WMD) and their delivery means, equipment, and technology. These regimes are voluntary and nonbinding, meaning that countries can choose if they want to join. Its members are major supplier countries like the US, the UK, Germany, France, Canada, or Australia. There are currently four regimes:    

• The Wassenaar Arrangement (WA) on Export Controls for Conventional Arms and Dual-Use Goods and Technologies    
• The Nuclear Suppliers Group (NSG), for the control of nuclear and nuclear-related technology    
• The Australia Group (AG) for the control of chemical and biological technology that could be weaponized    
• The Missile Technology Control Regime (MTCR) for the control of rockets and other aerial vehicles capable of delivering weapons of mass destruction    

To give you a clearer picture, this means that before exporting a controlled item, you need to make sure you comply with all national and international export control laws. For example, if you export a dual-use item from France, you will need to comply not only on a national level but also with the EU regulation. As France is a member of the international regimes described above, it also incorporates them into its national export control laws.   

5. What do I need to do before exporting?

Export control rules determine not only what items are restricted, but also what countries are under embargoes and what organizations and individuals are sanctioned. For that reason, before exporting, it is important to ask yourself these questions:    

• What am I shipping?    
• Where am I shipping to?    
• Who am I shipping to?    
• Why does the importer need this item?    

First, you need to make sure that your goods can be exported to your buyer’s country. In addition, you must verify if you need an export license, especially if you ship chemicals, military, or dual-use items. Yet, no matter what you ship, checking for required export licenses shouldn’t be overlooked. Many items requiring an export license are much less obvious than one would think. For example, you need an export license to export some candles and crayons made with paraffin wax because it contains chemicals that could be harmful to humans. Each country has export control lists where you can find what licenses you need and how to apply. For example, in the US, you can check if your item has an Export Control Classification Number (ECCN) on the Bureau of Industry and Security’s website.     

Then, you need to check if the country you export from has embargoes or sanctions in place in your buyer’s destination country. This information can be found on your country’s government website. Not only countries but also organizations and individuals can be sanctioned. Yet, it is your responsibility to make sure that you are not trading with a denied party. To do so, you need to check denied party lists on your government site as well.     

Finally, you need to know how your goods will be used when they reach their destination. This makes sure they won’t be used for alternative purposes or sent to anyone under sanctions. To help you, countries have lists of “red flags” that may indicate you are shipping to a prohibited end-user or for a prohibited end-use. You should review this list of red flags to determine if any apply to your international shipment. For example, if the product’s capabilities do not fit the buyer’s line of business, or if the customer is willing to pay cash for a very expensive item.  

6. Why use an export control solution?

As we saw, since export controls regulate items sensitive to national and international security, export control violations can lead to sanctions no one wants to face. Yet, the growing demand for cross-border B2C e-commerce makes it harder and harder for businesses to limit risks. And things are not about to improve since cross-border e-commerce is estimated to grow from $300 billion in 2020 to $1 trillion by 2030.   

Several consecutive global crises pushed countries to further restrict the export of certain goods. Any company involved in the supply chain must be aware of export control rules to minimize risks and advise its customers accordingly. Postal operators are especially at risk given the enormous volume of shipments they handle. In the past decade, global parcel shipping volumes tripled. Additionally, they are projected to reach over 260 billion deliveries by 2026 – that’s 32.5 parcels delivered for every person in the world. And as we saw with FedEx, postal companies are responsible because even if they only transport goods, they should be aware of what they are shipping.   

In such context, carrying out pre-checks on goods, destination countries and transaction parties is primordial. Yet, it is extremely challenging for companies that ship a high variety of items around the world. Even if all export control-related lists are publicly available, checking each of them manually is not scalable. The best way to limit risks while reducing manual labor and time spent on compliance is to use an automated export control solution.    

Eurora’s Export Control solution

Eurora’s Export Control solution allows cross-border players shipping to the biggest eCommerce markets to automatically comply with export control laws. By incorporating our solution into your operations, you can automatically screen all your orders and get information on the rules applicable.  

Eurora’s Export Control solution is powered by AI technology, making the export compliance process faster, more cost-efficient, and with reduced manual labor. The main data set you need to provide our engine with is the country of export, country of import, and product description. Our AI takes care of the rest by processing the data in no time and returning the applicable export restrictions and licenses.