Export violation? Voluntary disclosure can save you.
Navigating the ins and outs of federal export rules and regulations 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 tips. Watch the webinar to learn more about how to deal with export compliance violations, or read on for some of our top takeaways from the presentation.
Making a mistake as an exporter, like using the wrong harmonized tariff code, is similar to speeding and getting a ticket. This happens a lot, you might not realize it and sometimes it results in a small fine. But what if you make a big mistake in exporting, such as selling to the wrong person? You might be tempted to ignore it in the course of your trading activities and hope that it will never be discovered, but filing a voluntary disclosure can save you time and money. Not sure what a voluntary disclosure is or whether you should make one? Here’s all you need to know.
What is voluntary disclosure?
A voluntary disclosure is an admission that an export violation may have taken place or has occurred to a federal regulatory body, such as the Office of Industry and Safety or International Traffic Regulations and arms. Disclosure doesn’t get you off the hook, but it is often considered if the agency confirms that an export violation has occurred. Companies that voluntarily disclose export violations are often subject to less severe penalties and / or penalties.
Think of it like this: your child breaks a window in the house and instead of hiding the evidence, he admits his mistake. Are you not more likely to be lenient when it comes time to inflict punishment?
Why you should voluntarily disclose export violations
By voluntarily disclosing a violation, you are demonstrating that you are a responsible, compliant and careful exporter. The the incentive to voluntarily disclose an export violation is an automatic 50 percent reduction in penalties. You are also less likely to be prosecuted for the offense.
Disclosure of your error carries risks, such as waiver of attorney-client privileges, delays in your license applications, information made public and harming your business relationship, penalties and prosecution. But at the end of the day, disclosing an export error is the right thing to do. In fact, the federal government expects mistakes from even the best exporters and views voluntary disclosure as a due diligence undertaking.
What types 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:
- Sell to someone on the refused list
- Export a product controlled by ITAR without a license
- A distributor transferring your product to a prohibited country
Pro tip: Use caution when electronically sharing documents, technical specifications, and other confidential 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 error
- Recognize if this is a repeat violation
- Indicate what measures have been or will be taken to prevent future violations.
In your disclosure, be honest but brief and acknowledge that your reputation is at stake. Demonstrate that the violation will not happen again. Treat the disclosure like a selling proposition and put your best face forward. If possible, consult with an export compliance lawyer or firm to ensure you include the necessary information.
Pro tip: take corrective action before submitting the voluntary disclosure. Training your employees on export compliance, for example, reflects your business better than providing a list of things you will 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 present West Virginia’s hidden gem to the world, one export at a time.