Mass Export Center OCT 2011 BUILD YOUR EXPORT COMPLIANCE MANUAL

1. Mass Export Center OCT 2011BUILD YOUR EXPORT COMPLIANCE MANUAL Roles Program elements Audit tips Natascha Finnerty DL Exports International, Inc www.dlexports.com

2. BIS/DDTC RECOMMEND AN ECMP • Published guidelines for establishing export management system • Nunn-Wolfowitz report google nunnwolfowitz • BIS/DDTC Compliance guidelines Programs are on their websites • DDTC guidelines • BIS updated their guidelines in 2010 and have 9 elements • Includes managerial tasks • Administrative requirements www.dlexports.com

3. IMPLEMENTING A PROGRAM TAKES ... • Management commitment • Export Policy • Regulatory understanding • Resources • Time • Training AB Tech EXPORT POLICY www.dlexports.com

4. GOOD FOR BUSINESS • In successful companies, compliance is part of the corporate culture • It can be a competitive asset and should be listed on your website • Small investment can save big over new penalties www.dlexports.com

5. WHERE TO START? • Establish an Export Steering Committee • Nominate a Focal Point • Engage kick off training • Review business and applicable regulations www.dlexports.com

6. Conduct a risk assessment – see BIS guidelines • Establish/revise policies & procedures that address cradle to grave of hardware and technology release life cycle – integrate into quality SOPs, other compliance programs • Train personnel • Implement & audit www.dlexports.com

7. Suggested Members • Finance • Legal • HR • IT • Security • Sales & Marketing • Sales Admin. • Contracts/Accounting • Order Admin • Manufacturing • Traffic EXPORT COMMITTEE www.dlexports.com

8. NEW CONSIDERATIONS • Effect of Sarb-Ox • Higher fines and penalties • New mitigating and aggravating factors • Export reform - Mixing of ITAR and EAR rules? • Securing of IP from foreign parties or customers • Are contractors or outsourced companies screened? • Anonymous reporting? www.dlexports.com

9. SARB-OX • Upper Management needs to be informed and verify compliance as part of corporate governance • Penalties could adversely affect financial position of company, whether public or private • Could stop a sale or acquisition • Disclosure requirements www.dlexports.com

10. Does SOX apply to your export issues? • What percentage of your business is exports? Are you publicly held? • What percentage of your suppliers is foreign? • Is your company a related company? • Do you export to resellers? If yes, whom do they sell to? www.dlexports.com

11. COMPLIANCE PROGRAMS • MUST PREVENT AND DETECT VIOLATIONS • DOES YOURS? • HOW DO YOU USE METRICS TO MEASURE IT? www.dlexports.com

12. TEMPLATE FOR PROCESSES • Are they written in the active voice? • Do they describe the responsible personnel? • Do you detail the records that are created by the process? • Is there a risk assessment and control process? www.dlexports.com

13. REVIEW CURRENT BUSINESS PRACTICES www.dlexports.com

14. RISK MITIGATION FOR EXPORT ISSUES • Level of technology, ITAR? • Is end-user known? • Dealings in countries of concern? www.dlexports.com

15. RISK ASSESSMENT contd • Any potential misuse of product (EPCI)? • Multiple shipping sites? • Do you control distribution channels? • Do you require licenses and need to adhere to qty, value, provisos? • AES compliance? www.dlexports.com

16. REVIEW APPLICABLE REGULATIONS • EAR (& Antiboycott) • ITAR • OFAC • Foreign Trade Regs • NISPOM • CUSTOMS • CONSENT AGREEMENTS www.dlexports.com

17. RISK ASSESSMENT • DO YOU EXPORT CONTROLLED HARDWARE OR TECHNOLOGY? (ITAR/EAR) • Need export license application procedures, processing, license management, closing • Product classification • Classification of new products • Purchased Products www.dlexports.com

18. RISK ASSESSMENT • Do you know your customers? • Or sell thru distributors? • Or you find out about them later • sw registrations • repair www.dlexports.com

19. PROCEDURES • Compliance Policy and Org chart with responsibilities • Time to get management support • List back-ups to each key position • Central focal point • Product matrix • Ongoing, tie it to new product release • Country charts • Automate, where possible • Denial list screening and managing hits www.dlexports.com

20. EXPORT MANAGEMENT SYSTEM • Duties are cross functional • Employees receive training on export procedures • Use an Action Plan until completed www.dlexports.com

21. DOCUMENT THE PROGRAM • Borrow from your company’s procedures templates and use flow charts • ISO, TQM, Industry Quality standards, Sarbanes Oxley • Upload an International Compliance website • Policy, training slides, product matrix, FAQs • Coordinate with other compliance efforts: Quarterly reports to management www.dlexports.com

22. Sample Order Rec’d • DPL, Entity, SDN-Country-High Risk • Proliferation Conduct screening Product matrix Lic determ Order OK? Y Apply for lic. Cancel Order Contact ECM N Prepare Docs Ship www.dlexports.com

23. Export Compliance and Management Program • Administrative Elements: • Management Commitment • Responsible Officials • Record Keeping • Training • Internal Reviews • Notifications www.dlexports.com

24. Screening Elements • Denial Orders • ECCN Classification/License Determination • Diversion Risk • Nuclear End-Users/Uses • Chemical & Biological End-Users/Uses • Antiboycott Compliance • Add’l US Gov’t Agency Requirements www.dlexports.com

25. STANDARD SCREENING PROCESS Check all exports against: • Restricted Parties and updates • Product Matrix/Classification • License requirements • Restricted/Embargoed Countries • Antiboycott www.dlexports.com

26. RESPONSIBILITY #1Product Matrix • You need to review all products to determine if an export license may be required • This is done export compliance manager with the help of IT • Controlled items can be hw, sw, technology relating to • computers, • software with encryption, telecommunications products, lasers • Industrial equipment and chemicals www.dlexports.com

27. PRODUCT MATRIX • This process is ongoing, and requires regular updates as new items are developed or upgraded. • You need to determine the export commodity classification number (ECCN), countries that may require a license, and customs numbers (Sch B). • The Product Matrix list is included in the Export Compliance Program. www.dlexports.com

28. RESPONSIBILITY #2Denied Parties • You need to ensure that you do not sell to prohibited parties identified by the US Government and, potentially, other gov’ts. • Most companies need to get Compliance Screening Service for this purpose • These lists are updated regularly by the government. • We must determine who is the end-user, what is the end-use, who are the parties to the transaction • Screening must occur before the items are shipped for exports supporting particular projects www.dlexports.com

29. Need to establish a policy for hits • Need enough information to clear hits – what agency, what are the requirements • Determine if it is a false hit • Contact government agency or get certification from the person • Keep records of hits www.dlexports.com

30. RESPONSIBILITY #3High Risk Profile • We need to ensure that we recognize any unusual circumstances or “Red Flags” • Each employee is responsible for taking appropriate actions if a transaction seems suspicious • Report any unusual activity throughout sales and to the Export Compliance Manager WHEN IN DOUBT, CHECK IT OUT! www.dlexports.com

31. RESPONSIBILITY #4Country Embargoes DO NOT SHIP TO THESE COUNTRIES WITHOUT A LICENSE! • The following countries are under General Embargo: Cuba Iran North Korea Sudan Syria • The following countries are highly-controlled: IraqLibya There are many denied parties in these countries: Banks, Entities (Companies) and Individuals www.dlexports.com

32. OTHER COUNTRIES OF CONCERNCountry Groups D • Military & Terrorist Rwanda AngolaLibya • Countries of Concern China Taiwan India Pakistan Middle East Former Soviet Bloc www.dlexports.com

33. RESPONSIBILITY #5 ANTIBOYCOTT LAWS • US companies and their subsidiaries may not participate in the Boycott of Israel • Watch for any statements that include: - you must “comply with Arab League Boycott of Israel”, or - request for certification that Goods are “not of Israeli Origin” • Must report all such statements to DOC www.dlexports.com

34. RESPONSIBILITY #6 RECORD KEEPING • We must keep records for 5 years • Transaction Records include: • Purchase Orders • Quotes • Commercial Invoices • Bills of Lading & Air Waybills • AES records • Banking documents & letters of credit • Export checklists • Screening results • Correspondence and contracts Comm Invoice www.dlexports.com

35. Compliance Records • Acknowledgment of the Compliance policy • Notices in contracts with resellers and websites • Training records • Audit Records • Export licenses and classifications • Encryption reports www.dlexports.com

36. OUR INSURANCE POLICY • Apply Due Diligence • Know your customer • Follow the system for approving exports • Contact the Export Compliance Manager with ANY QUESTIONS! www.dlexports.com

37. DEVELOPCOMPLIANCE PROCEDURES • The entire organization must implement procedures • Export Compliance Manager acts as a focal point NO WHITE KNIGHTS www.dlexports.com

38. TRAINING OF RELATED PERSONNEL • Export Coordinator & back-up - annual external sessions • Upper management • Related employees - In-house annually • New employee training • Specific training for each department www.dlexports.com

39. Training and Audits are a must! • Per the govt – audit, audit , audit! • Is there a schedule? • Records? • Internal or External • Copies of hand-outs? • Using the latest technology? www.dlexports.com

40. BE SURE! • Ensure that your subsidiaries • have controls at their site! • Denied parties screening • Antiboycott • Embargoed countries ABC Sarl ABC GmbH www.dlexports.com