United States: Whatcha Gonna Do When They Come For You? Export Control Agency Visits, Part 2

Last Updated: September 29 2017
Article by Olga Torres and Derrick Kyle

This article is the second part of a two-part series. In the first article, we introduced the types of company visits conducted by the two major U.S. export agencies,1 and discussed potential outcomes and consequences of these visits. In this second article, we discuss what to expect during a visit from the agencies and best practices to prepare for them.  The first article can be accessed here.

DDTC Visits

The Directorate of Defense Trade Controls ("DDTC") Office of Defense Trade Controls Compliance ("DTCC") has published specific guidance regarding what companies should expect from a Company Visit Program ("CVP") effort. DTCC will initially contact the selected company, at which point the company could elect not to participate in the CVP visit.2 If the company decides to participate in the CVP visit, DTCC and the company will coordinate and select a date for the visit. After a visit date is confirmed, DTCC will send a formal visit notification letter outlining an agenda for the visit and may request certain pre-visit materials, such as an organizational chart or written export procedures.  

For the initial meeting with the company, DTCC typically requests to meet with senior management to discuss visit objectives. During this initial meeting, the company should provide the DTCC officials with background information about the company and any activities that are regulated by the International Traffic in Arms Regulations ("ITAR"). After the initial meeting, the CVP team from DTCC will meet with operations personnel that are actively engaged in ITAR-controlled activity, e.g., the shipping and compliance departments. Depending on the size of a company and its ITAR operations, these visits will last either one or two days. After concluding its meetings with operations personnel, the CVP team will again meet with senior management to review the information gathered during the personnel meetings, answer questions, and address concerns of the company. Shortly after completion of the visit, DTCC will provide the visited company with a close-out letter that "summarizes observations; notes strong compliance practices; discusses initiatives taken by the company in response to [Export Control Reform]; recommends areas for improvement, if any; and addresses feedback, questions, or concerns of the company."3

BIS Visits

As we discussed in the first article in this series, two branches within BIS conduct outreach visits: the Office of Export Enforcement ("OEE") and the Office of Exporter Services Export Management and Compliance Division ("EMCD"). EMCD outreach visits are relatively new, so there is generally less information available about these visits. On the other hand, outreach visits from OEE have occurred for decades and are much more prevalent than EMCD visits (e.g., there were 743 OEE visits in fiscal year 2016 compared to only 40 visits from EMCD in the same period). For these reasons, this article will focus on OEE visits, though our recommendations would be equally applicable to either type of visit.

OEE outreach visits are conducted for a variety of reasons, including providing export guidance to the selected company, building a relationship with industry, intelligence gathering, and investigation. OEE outreach visits are often scheduled after the submission of a voluntary self-disclosure ("VSD"). After selecting a company for an outreach visit, an OEE officer will contact the company and set a date for the visit. Like DTCC's CVP team, an OEE officer may request certain documents prior to the actual visit. This request could include administrative subpoenas, internal audits by a corporate compliance officer or manager, freight forwarder, broker, and ultimate consignee records.4

OEE has not issued written guidance regarding what to expect on the day of the visit, but typically it will request to meet with a point of contact at the company who can discuss export compliance issues. OEE typically does not provide a visit agenda, but will outline the reasons for the visit if asked by the company. OEE may request additional documentation while on-site, and will generally request the company's point of contact to provide an overview of the company's export operations. OEE may also request a company facility walkthrough (e.g., warehouses and manufacturing floors), or ask specific questions related to the reason for the visit. Typically, either during or after the meetings, OEE will provide the visited company with copies of BIS' own publications such as i) freight forwarder guidance, ii) know your customer guidance, iii) how to request an ECCN, iv) OEE field offices, v) export compliance guidelines outlining the elements of an effective export compliance program, and vi) consolidated screening list, to name a few.

Visit Preparation

When notified of an impending export control agency visit, a company should take several measures to adequately prepare for it. First, if the pre-visit communications with the company have not made it clear, the company should determine the scope and agenda of the meeting; it's difficult to prepare for a visit if you are uncertain regarding the reason for the visit. Next, the relevant company point of contact should immediately notify senior management and legal counsel (either in-house or outside counsel) regarding the upcoming visit. Additionally, companies should communicate the importance of the visit to any personnel that may be asked to meet with the agency. 

Prior to the meetings, the company should review its export compliance program and procedures for errors. A visiting export agency team could notice any obvious violations. At a minimum, the company should review its export manual and other written export procedures to ensure they are accurate and up-to-date. Further, the company should prepare for a potential walkthrough of the company's facilities, and should also conduct a review of recent exporting activity, which may require the running of an Automated Commercial Environment ("ACE") export report(s).

The officers or employees participating in the meetings should be well-versed in the relevant export control regulations and should be prepared to answer questions about the company's export operations. Company representatives should also be prepared to handle requests for documentation. The export regulations require maintaining export records for a period of five years after the export or the expiration of the license that authorizes the export. For outreach visits that are conducted pursuant to the submission of a VSD, the company should be prepared to answer specific questions about the circumstances of the violation(s) disclosed in the VSD and any corrective measures implemented to prevent further violations.

During the visit, representatives of the selected company should take detailed notes regarding the conversations between the company and the visiting agents. Importantly (and obviously), when answering questions posed by government agency visitors, do not lie, and if you are uncertain about something, you can ask the government agents to provide you some time to review and provide the information at a later time.

After the visit concludes, review the notes taken during the visit, document the discussions, and circulate internally to relevant company contacts. Companies should maintain detailed lists regarding any documentation provided to or received from the government. You can also create a list of any follow-up questions or concerns to send to legal counsel (if counsel was not present during the visit) or the visiting agency. Finally, review the visit takeaways and implement any corrective actions necessary to improve the company compliance program. Visits from government agencies can certainly be stressful, but it is important to use the visit as an opportunity to learn and obtain more or better resources for export compliance.

If you have been selected for a company visit by an export agency and wish to share your experience, or simply seek more information about these visits, we encourage you to contact us.

Footnotes

1 Department of Commerce's Bureau of Industry and Security ("BIS") and the Department of State's Directorate of Defense Trade Controls ("DDTC").

2 Electing not to participate may be tempting, but it would probably be more helpful to adequately prepare for a visit than to refuse to be a part of one.

3 Defense Trade Controls Compliance Company Visit Program (CVP), Department of State, Directorate of Defense Trade Controls, 8 (July 2016), available at https://www.pmddtc.state.gov/compliance/documents/CVP_Overview.pdf.

4 James Fuller, What Triggers a BIS Visit or Inquiry: What to Expect and How to Prepare, U.S. Department of Commerce, Bureau of Industry and Security, 6 (2017), available at http://www.exporttexas.com/sites/default/files/Events/OEE.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Olga Torres
Derrick Kyle
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