Magazine article Security Management

Keeping an Eye on Exports

Magazine article Security Management

Keeping an Eye on Exports

Article excerpt

Keeping an Eye on Exports

MANY COMPANIES' CORPOrate assets are at risk because of new government activities in export controls. The Gulf War accelerated the development and application of the Enhanced Proliferation Control Initiative (EPCI). The initiative is aimed at stopping the spread of chemical and biological weapons and ballistic missiles, but it presents a problem: The initiative concentrates not only on the chemical, biological, and missile industries but also on their suppliers, down to the second and third tier.

These suppliers, who might be unaware that their products are used in these industries, are held responsible for tracking their products to particular countries and, it is promised, to specific customers. New regulations continue to appear in the Federal Register.

Violations of these new regulations, even inadvertent, can bring disastrous consequences to a company. A major computer manufacturer discovered a shipment had gone astray through carelessness. The company reported the incident, as encouraged by the government, and received only a multimillion-dollar penalty and probation for its cooperation.

Shipments have been detained and even seized by the Customs Service, with companies paying large assessments to recover merchandise -- this in addition to administrative fines and loss of export privileges. Even without such severe penalties, the long delays as the facts are ironed out threaten companies' competitive position and overseas sales while letters of credit lapse and customers grow increasingly impatient.

The most closely guarded assets of modern US industries are technical and proprietary information. Yet the government adds its own rules for dealing with foreigners. New regulations are pending, for example, that require a company to find out the visa status of any foreigner before holding any technical discussions with him or her. Records must be kept to avoid the crushing consequences of incorrect procedures.

Many private firms recognize the need to protect corporate property and information against serious losses. These firms delegate the export control and licensing process to their security professionals. This aspect of the security manager's responsibilities is mastered through on-the-job experience and shared experience with other security professionals. Excepting one society devoted primarily to exporting military equipment,(1) no organizations or journals regularly provide guidance and information in this field.

Manufacturing of chemical or biological weapons (CBW) and missiles is much more dependent on technological knowledge; materials, machinery, and equipment actually influence efficiency and productivity rather than capability. Unfortunately, a great deal of applicable knowledge is dispersed widely already.

The equipment and know-how basic to CBW and to certain aspects of missiles (such as propulsion) have both civil and military applications, and their civil applications are ubiquitous. This implies, of course, that suppliers to the CBW and missile industries are not uniquely wedded to these industries.

The CBW and missile nonproliferation controls form the basis of the EPCI. These controls are lodged in the "dual-use" controls of the Department of Commerce and present a significant burden for the security professional. The approach taken so far is to list commodities by their physical characteristics (for example, containers with coatings that are more than 40 percent nickel--stainless steel). Then exporters apply for an export license if they know that the end use will be for a prohibited application. A list of suspect countries is provided along with the promise of identifying suspicious end users.

THE CUSTOMS SERVICE RECOGNIZES TWO forms of violations. A technical violation usually refers to some minor error in shipping paperwork, such as neglecting to display an export license number on a Shipper's Export Declaration. …

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