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August 04, 2008 

Reuters: Shipping Headaches Plague Small Companies

From today's Reuters Entrepreneur:

It used to be that defense contractors were the primary focus of scrutiny. But under pressure to increase national security, U.S. regulators are casting their net over exported goods from cell phones to toys, looking for those who are shipping without a license. Previously, a violation might result in a nominal fine. Pending legislation would put the cost in the millions.

The government clamp down has prompted smaller companies, even those with limited exports, to become more proactive about taking the right steps toward licensing. And with U.S. exports growing – in the second quarter they were up 9.2 percent, as imports dropped 6.6 percent – concern over compliance is likely to continue.

Editor's Note: While this article is correct that small companies must understand their export compliance and licensing responsibilities, many non-controlled products, such as most toys, do not require a license to be exported from the U.S. in most circumstances (of course they cannot be exported to embargoed destinations). Small companies must also understand their role in the export process, such as their responsibilities for filing Electronic Export Information when they are the U.S. Principal Party in Interest.

In addition, while this article mentions that Senator Dodd's Export Enforcement Act (S. 2000) "could make the penalties for failing to comply with export controls regulations much more costly", the current penalties for violating U.S. export control laws are already significant.

Pursuant to the International Emergency Economic Powers Enhancement Act passed in October 2007, the maximum civil penalty was raised from $50,000 per violation to the greater of $250,000, or twice the amount of the transaction that is the basis of the violation. That law also raised the maximum criminal penalty for violations of the EAR from $50,000 to $1,000,000.

In addition, the monetary penalties for violating the ITAR are $500,000 per violation (civil) and $1,000,000 per violation (criminal).




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