Amber Road, formerly Management Dynamics and a provider of global trade management systems, has released a study on U.S.-based mid-market companies' export compliance challenges and found they are increasingly at risk of violating federal regulations.
Of the 150 companies surveyed, 23 percent do not screen for restricted parties prior to engaging overseas customers. For those that did perform this screening, 30 percent make checks manually using spreadsheets or Websites. Only 41 percent of respondents had a comprehensive export compliance program.
“The good news is U.S. exports are growing, and mid-market companies in particular are increasing revenues by accessing foreign markets,” said Scott Byrnes, vice president of marketing at Amber Road. “Unfortunately, it appears that many mid-market companies aren’t fully aware of the regulatory requirements governing global trade.”
The concern with this lack of knowledge is that criminal and civil penalties for export control violations are often harsh. Companies can face criminal penalties of up to $500,000 per violation for "dual-use" export (items with both commercial and military applications) control violations and an individual faces up to 10 years in jail. Civil fines reach $12,000 per violation and can also include denial of export privileges.
Respondents said a lack of executive sponsorship was a primary reason for their trade compliance deficiencies.
According to a March Bureau of Economic Analysis report, U.S. exports grew 7.7 percent from January 2011 to January 2012. The bulk of the growth was related to small and midsized companies. Companies of this size also accounted for 97.8 percent of all U.S. exporters, according to the most recent report by the U.S. International Trade Commission.
Other noteworthy findings from the report include:
- 20 percent of companies don't have formal export compliance programs.
- 66 percent use manual processes to classify products.
- 35 percent have a management team that is somewhat aware of the regulations, but have no involvement in the compliance process.
A full copy of the report can be found here
. — Geoff Whiting