Global trade law is a complex and continually changing set of regulations that every country can and regularly does adjust, including new embargoes, sanctions, or tariffs. To avoid the penalties for violation of international trade law, a company needs to adopt a robust trade compliance program to minimize risks and equip the company to handle any situation that develops.
A violation of international trade law can cause severe penalties, including loss of export privileges, severe fines, and imprisonment for individual violators. Thus, a company must handle global trade compliance incidents properly to shield itself from these serious consequences. How a company handles the situation can either solve the problem without an issue or exacerbate it.
If a company is made aware of a possible violation, it should take the following steps to protect itself:
Stop the Suspect Activity
The company should act to minimize any further risk by ceasing whatever triggered the suspected violation until it determines the lawfulness of the activity. If it is a single transaction, it would be relatively easy to resolve and avoid repeating it. However, a recurring, ongoing violation will become worse by the day. Most trade law penalties are issued per violation, and the sooner a company stops, the less accumulated risk there will be.
Collect the Facts & Documentation
After ceasing the activity, the company should understand the nature of the violation, identify all individuals involved, and collect physical and digital documentation. A thorough interview process will likely be required, during which time, the company should preserve related documents, maintain attorney-client privilege, and keep interviews above board.
Diagnose The Suspected Violation
After gathering the necessary evidence together, the company must determine if the incident was unlawful or not. Compliance violations take many less obvious forms, and the US Bureau of Industry and Security provides examples of violations by means of the Export Administration Regulations. If the investigation reveals that the company participated in a compliance violation, the next consideration is determining if it constitutes a civil or criminal violation.
Weigh Voluntary Self-Disclosure
If a violation has been committed, DDTC, BIS, OFAC, and Customs all have procedures to voluntarily report violations. Although officials from these departments say that self-disclosure will result in minimized or no penalties, there are cases where self-disclosure has resulted in major cases against the company. Thus, weighing the pros and cons of self-disclosure can determine the best action for the company.
Correctly Respond To Information Requests
If a violation is voluntarily self-disclosed, relevant government agencies will perform their investigation. If a company has not self-disclosed a violation, the information requests will be demanding. Thus, a company must respond correctly to these requests.
In conclusion, every company must ensure it adheres to global trade law to avoid severe penalties. If a company becomes aware of a violation, it should act swiftly to mitigate the risk, identify all individuals involved, and collect the necessary evidence. If the company is considering self-disclosure, it should weigh the pros and cons before making a decision.