Corporations operate in an increasingly global economy, with markets for and vendors of key technologies outside the United States offering huge opportunities and incentives for those willing to pursue international business and establish an international supply chain. U.S. companies with international operations and/or sales, and the companies that work with them, operate in a regulatory environment that is largely self-regulated with regard to export controls, yet subject to stiff penalties when violations go unreported.
Companies in a variety of industries can be impacted by export controls; however, a renewed focus on export controls by federal regulators and law enforcement has caught many companies off guard — companies that in some instances did not even realize that their international sales or supply chain activities were subject to export controls.
The U.S. government places various rules and restrictions on U.S. and foreign companies that fall within its jurisdiction. Export regulations are primarily administered by the Department of Commerce under the Export Administration Regulations (EAR), the Department of State under the International Traffic in Arms Regulations (ITAR), and the Nuclear Regulatory Commission and Department of Energy under the Atomic Energy Act (AEA). Economic sanctions and embargoes are administered by the Department of Treasury’s Office of Foreign Assets Controls (OFAC) under various country-specific and subject-based regulations.
Since the events of Sept. 11, 2001, these regulators and their law enforcement partners have been increasingly vigilant in enforcing export control laws and regulations. This has resulted in significant and high-profile fines for some companies in recent years. In 2007, the DOJ’s National Security Division announced an initiative to step up enforcement of export controls intended to prevent foreign nations and terrorist organizations from acquiring restricted military and dual-use technology. Because of this ongoing initiative, the number of criminal export prosecutions has grown nationwide.