Exporting
and the War on Terror
by
Bruce C. Thelen
In
an increasingly global
marketplace, exports have
taken on greater importance
for companies throughout the
world and, for many, have
become a routine part of their
business. But exporters are
sometimes surprised to learn
that the U.S. government
regulates and, in certain
cases, flatly prohibits many
export transactions. This has
been true throughout U. S.
history, during both wartime
and peacetime.
The
main goals of the regulations'
have been to promote national
security and foreign policy
objectives, to stop
proliferation of weapons of
mass destruction, to deal with
short supplies of goods at
home, and to carry out
international treaty
obligations. After the attacks
of September 11, these
regulations have come to the
forefront as the United States
and its allies look to them as
a critical weapon in the war
on terror.
Few
would be surprised to learn
that U. S. export restrictions
applied in the case of a U. S.
citizen who attempted to
export a thermal imaging
camera through Detroit's
Metropolitan Airport, intended
for use by Hizballah in
Lebanon. But other situations
are less obvious. Consider the
Michigan company that agreed
to a $64,000 civil penalty to
settle allegations that, on
four separate occasions
between 1994 and 1998, the
company illegally exported
optical sighting devices for
firearms to Argentina and
South Africa, without
obtaining the required export
licenses. As this case
demonstrates, many so-called
"dual use" products
that have ordinary commercial and
consumer uses are,
nonetheless, covered by the
regulations because they can
be used for other purposes,
such as terrorist attacks,
military applications, or
the production of nuclear or
biological weapons. Metal
alloys, pipes, valves and
bearings, computers and
software, robots, shotgun
shells, chemical compounds,
electronics, and telecommunications
equipment are all examples of
regulated "dual use"
products.
While
virtually all exports are
prohibited to some countries,
such as Cuba, most exports
need to be evaluated against
the following criteria:
-
What
is the product? For export
control purposes, the
critical first step is to
find out whether the
product fits any of the
regulated classifications.
Note that parts,
components, and related
technology may be covered
as well.
-
Where
is it going? The exporter
will need to identify the
country of ultimate
destination to determine
whether the product is
subject to licensing
requirements.
Exports to close U. S.
allies are subject to
fewer restrictions than
those to other countries.
-
Who
will receive it? The
ultimate end-user of the
product cannot be a bad
end-user.
-
What
will they do with it? The
ultimate end-use cannot be
a bad end-use.
-
What
else do they do? The
regulations may bar
dealings with someone if,
for example, they engage
in financing or freight
forwarding activities that
support weapons
proliferation.
Although
the regulations primarily
affect exports in the
traditional sense, they do
cover other related
transactions and activities.
For example, disclosure of
technology to a foreign
national in the U. S. may be
regulated. Sales in the U. S.
or exports to a permitted
destination with knowledge
that the buyer intends to
reexport to a prohibited
destination will also pose a
problem. Similarly, activities
of foreign affiliates of U. S.
companies may be restricted in
various ways. A foreign
affiliate's export activities
outside the U. S. could be
covered by the U. S.
regulations or by similar
regulations in the country
where the affiliate is based.
Since
many requirements of the
regulations are based on
knowledge of the end-use,
end-user, ultimate
destination, and other facts
related to a transaction or
activity, exporters must
"know your customer"
and be alert for "red
flags." That means that
an exporter will need to take
into account any abnormal
circumstances suggesting that
an export may be destined for
an inappropriate end-use,
end-user, or destination.
"Red
flags" include, among
other things, a customer that
is reluctant to offer
information about the
product's end-use or is
evasive or unclear about
whether the product is for
domestic use, export or
reexport; an order for a
product that is inconsistent
with the needs of the
purchaser (for example, a
small bakery places an order
for sophisticated lasers); a
buyer that declines routine
installation, training, or
maintenance services; or a
request for
equipment configurations that
are incompatible with the
stated destination, such 220
volt equipment for a 120 volt
country, which might indicate
plans for an unlawful
diversion to another country.
When
"red flags" are
present, the exporter has a
duty to check out the
suspicious circumstances and
to inquire about the end-use,
end-user, ultimate country of
destination, and other
relevant facts. A policy of
avoiding "bad"
information will not provide
insulation from liability, and
would usually be considered an
aggravating factor in an
enforcement proceeding. If
inquiries do not resolve all
concerns, then the exporter
should either refrain from the
transaction or apply for the
appropriate export license.
Penalties for violations can
be substantial. They include
fines and penalties of both a
civil and criminal nature and,
in some cases, a denial of
export privileges.
Bruce
Thelen focuses on
international business' and
trade as a member in Dickinson
Wright's Detroit office. For
further information, feel free
to contact him at 313-223-3624
or bthelan@dickinsonwright.com.
Bruce is also a member of the
Michigan District Export
Council.
Date Updated: March 27, 2007
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