Navigating the ins and outs of federal rules and regulations for exporting can be a difficult task, which is why we here at the West Virginia Department of Economic Development want to help by sharing valuable resources, such as this webinar presented by the National Association of District Export Councils. Watch the webinar to learn more about how to handle export compliance violations, or keep reading for some of our key takeaways from the presentation.
Making a mistake as an exporter, such as using the wrong harmonized tariff code, is similar to speeding and getting a traffic ticket. It happens often, you may not realize you did it and sometimes results in a small fine. But what if you make a serious exporting error, such as selling to the wrong individual? You may be tempted to write it off as a part of doing business and hope it’s never discovered, but filing a voluntary disclosure can save you time and money. Not sure what a voluntary disclosure is or if you should file one? Here’s everything you need to know.
What Is A Voluntary Disclosure?
A voluntary disclosure is an admission that an export violation may have or has occurred to a federal regulatory agency, such as the Bureau of Industry and Security or International Traffic and Arms Regulations. The disclosure doesn’t get you off the hook, but it’s often taken into consideration if the agency confirms that an export violation did occur. Businesses that voluntarily disclose export violations often face less severe penalties and/or sanctions.
Think of it like this: Your kid breaks a window in the house and instead of hiding the evidence, they confess their mistake. Aren’t you more likely to show leniency when it comes time to deal out a punishment?
Why You Should Voluntary Disclose Export Violations
By voluntarily disclosing a violation, you demonstrate that you are a responsible, compliant and thorough exporter. The incentive for voluntarily disclosing an export violation is an automatic reduction of penalties by 50 percent. You are also less likely to be prosecuted for the offense.
Disclosing your mistake comes with risks, such as waiving attorney-client privileges, delays for your licensing applications, information becoming public and hurting your business relationships, penalties and prosecution. But at the end of the day, disclosing an export mistake is the right thing to do. In fact, the federal government expects mistakes from even the best exporters and sees voluntary disclosure as a business doing its due diligence.
What Kind Of Export Violations Should Be Disclosed?
Serious export violations should be disclosed as soon as they are discovered. These include, but are not limited to:
- Selling to someone on the Denied Persons List
- Exporting an ITAR controlled product without a license
- A distributor transferring your product to a prohibited country
Pro Tip: Exercise caution when electronically sharing documents, technical specs and other proprietary information with a foreign entity. Some information requires a license before it can be shared, even if you haven’t made a sale.
How To File A Voluntary Disclosure
If you discover an export violation that needs to be disclosed, here’s what you need to do when filing your disclosure:
- Describe the details of the mistake
- Acknowledge if it is a repeated violation
- Indicate what steps have been or will be taken to prevent future violations.
In your disclosure, be honest but brief and recognize that your reputation is on the line. Demonstrate that the violation will not happen again. Treat the disclosure like a sales proposal and put your best face forward. If possible, consult an attorney or firm specializing in export compliance to make sure you include necessary information.
Pro Tip: Take corrective action before submitting the voluntary disclosure. Training your employees in export compliance, for example, reflects better on your company than providing a list of things you’ll do better in the future.
Get Help With Export Compliance
If you need help developing your company’s export compliance program, contact one of our International Trade Managers today. We can help you find compliance specialists and provide financial assistance for training.
By Caitlin Ashley-Lizarraga
Manager, International Trade
Caitlin works with the West Virginia Department of Economic Development’s Export Promotion Program. She helps introduce the world to the hidden gem of West Virginia one export at a time.