Warning! If your maintenance business does work for non-U.S. customers, you must first check federal trade laws to verify that you're allowed to serve them. If you don't and get caught doing repairs for banned persons, companies, or governments, you could be hit with hefty fines and even serious jail time.

"Complying with federal export laws is not optional," warned John J. Brodbeck, director of USA Compliance, which provides consulting services and resources for exporters, including the Aeronautical Repair Station Association (ARSA) and its members. "Repairing some innocent-looking component that turned up on your loading dock with incomplete documentation is no excuse either," Brodbeck said. "If you don't know where the part originally came from and who is going to be using it, the feds believe that you are likely breaking some trade law."

What are the penalties for non-compliance, accidental or otherwise? For every violation of the Commerce Department's Export Administration Regulations (EAR), the feds will fine corporations up to $1 million or five times the value of the exports for each violation, whichever amount is greater. Meanwhile, the people responsible for the illegal exports could be fined up to $250,000 and/or be sentenced up to 10 years in prison for each violation. If this isn't sufficiently fear-inspiring, the EAR also allows Commerce's Bureau of Industry and Security (BIS) to ban your company from exporting products/services, receiving exports, or doing business at all.

This is just for violating the EAR, which applies to the illegal export of commercial goods to banned customers. If these components have the potential to serve military purposes--so-called "dual use" components--then your company could run afoul of the State Department's Directorate of Defense Trade Controls (DDTC). Based on the International Traffic in Arms Regulations (ITAR) and the Arms Export Control Act (AECA), DDTC has the power to make your life miserable. Remember: before you export or import anything with a potential military use, you must get approval from DDTC through a license.

If two sources of trouble don't shake you, let's throw in the third member of the "anti-terror trade triumvirate:" Homeland Security's Customs and Border Protection. When it comes to catching improperly-documented and thus suspicious packages, U.S. Customs is on the front line and usually the first member of the triumvirate to get on your case. "Improper or incomplete documents send up what Customs calls a `red flag,'" Brodbeck explained, a flag that can start an investigation into your company's export activities. If you haven't done your due diligence in ensuring that this shipment meets with all government trade restrictions, your trouble has just begun.

If you want to see firsthand what happens to people and companies who don't comply with U.S. export restrictions, surf on over to www.bis.doc.gov and click on the "News" tab. You'll see news release after news release detailing penalties meted out to export law violators.

For instance, a non-U.S. aviation firm was penalized this year for violating the EAR by exporting and attempting to export Cobolt-57, iron foil, and potassium ferrocyanide to the Department of Atomic Energy in India, an organization on BIS's Entity List, without the required Department of Commerce licenses. And a U.S. aerospace company was cited for multiple violations of the EAR when it exported controlled technical data without licenses. The company paid fines, even though it voluntarily self-disclosed the violations and cooperated fully with the investigation.

All told, running up against U.S. export restrictions appears to be an occupational hazard for the aerospace industry. "There have been lots of aviation companies that have been fined over the years," said Suzanne Palmer, president and CEO of Export Compliance Solutions. "To date, $32 million has been the top penalty imposed,"

A company easily can be in violation of the EAR and not know it. For example, one company was cited for producing a part for commercial use that subsequently was adopted by the military as a cheaper off-the-shelf solution. Some firms believe the fallout of such enforcement is overzealous and threatens to derail overseas sales.

These firms have a point. Consider, for example, a U.S. lumber provider who paid a near half million dollar penalty to settle EAR charges related to "1,136 unlicensed exports." What was this illegal export so vital to U.S. security?

Wood.

That's right; wood.

To be precise, the illegal exports were Western red cedar. "Exports of unprocessed Western red cedar harvested from state and federal lands in the United States are controlled for short supply reasons and require a license for export to any destination outside the United States," explains the BIS release.

Clearly, MROs must take U.S. export laws seriously. So what does it take to comply?

Well, you could add compliance monitoring to your personal list of daily duties, but you'd be wise not to. "Compliance is more than not doing work for Cuba, Iran, Sudan, or Syria," said Gary Wilmarth, president of Wilmarth & Associates. "You must know what you can't provide to banned persons, companies, and governments, and stay abreast of changes to the List."

The `List' Wilmarth mentioned is the "List of Specially Designated Nationals and Blocked Persons" compiled by the Treasury Department's Office of Foreign Assets Control. Available online at www.treas.gov/offices/enforcement/ofac/sdn/, the List is more than 200 pages of names, aliases, and details of people/companies with whom you are not allowed to deal.

Some of the people/companies that are banned are obvious, such as Osama Bin Laden and Cubana Airlines. But did you know that doing work for Charles `Chuckie' Taylor Jr. or the innocuously named State Corporation for Cinema is just as forbidden? That's right, because Chuckie happens to be the son of ex-Liberian president Charles Taylor, while the State Corporation for Cinema happens to be based in Sudan.

To make matters worse, staying abreast of changes to the List means monitoring it constantly for new additions. Worse yet, just because a foreign client wasn't on the List when you started working for them doesn't mean you can keep doing so should they get added mid-job. You have to keep monitoring the List constantly to ensure that their name hasn't been added.

Remember, this is just the List. There are other compliance documents that you must understand to know what you're doing. Unfortunately, these documents are written in the kind of mind-numbing legalese that bureaucrats are famous for. For instance, "If you picked up a copy of the ITAR and tried to understand it without training, you'd be lost," Palmer said.

Training and ongoing compliance guidance is what Suzanne Palmer, Gary Wilmarth, and John J. Brodbeck provide. With the stakes as high as they are in the export restrictions game, you'd be well-advised to get it.

Certainly this is the view of Sarah MacLeod, ARSA's executive director. "It is extremely difficult for repair stations to stay abreast of all the laws and regulations that impact their international businesses," she told Aviation Maintenance. "One of the more important are those dictating export restrictions: Most repair stations do not think of their businesses as being involved in technology transfer, but unfortunately, that is not the United States government's view."

"Large penalties are associated with non-compliance with export requirements," Macleod added. "It is one of the reasons that this trade association called on an expert to help our members ensure compliance with yet another set of regulations."

A good introduction to the subject of compliance--and to underscore why your company needs to take it seriously--can be found on ARSA's web site at www.arsa.org/files/ExportComplianceSeries.pdf. This is a compilation of Brodbeck's compliance stories in ARSA's newsletter.

Not surprisingly, Brodbeck, Palmer, and Wilmarth believe that MROs need to have compliance officers on staff to protect themselves from penalties and prosecution. All three also provide training to help MRO staff do compliance work on behalf of their employers; plus provide ongoing consultation on a retainer basis afterwards.

"We do two-day basic and advanced compliance-training courses," Palmer said. "We only allow 50 people into each session. We break them into groups and get them interacting with each other to understand compliance in action. This stuff will put you to sleep if you just try to read about it. You need live examples to make it interesting."

Now that we've looked at the hazards and terrors of export compliance, it is time to take a step back and see it in perspective. In truth compliance is simply the "third leg of the stool" for MROs dealing in the international market, said Gary Wilmarth. "The first leg is establishing that foreign clients have the credit available to pay for your services and the second is being paid by them."

Complying with U.S. export laws is simply "part of the cost of doing business," Brodbeck agreed. The key is to pay this cost upfront by hiring the compliance expertise you need to stay within the law, rather than at the back end in court costs, hefty fines, and jail time.

The bottom line is simply summed up in three words: comply or die. Admittedly, the feds don't have the power to send you to Death Row for compliance violations. But they can make your life miserable.

Resources:

Aeronautical Repair Station Association
Phone: 703 739 9543
Web: ARSA's">www.arsa.org
ARSA's Hotline story about export compliance:
www.arsa.org/files/ExportComplianceSeries.pdf

Bureau of Industry and Security
www.bxa.doc.gov

Directorate of Defense Trade Controls
www.pmdtc.org

List of Banned Persons: www.treas.gov/offices/enforcement/ofac/sdn/

Office of Foreign Assets Control
www.treas.gov/ofac

U.S. Customs and Border Protection
www.cbp.gov

John J. Brodbeck
USA Compliance
Phone: 828-369-5152
www.usacompliance.org

Gary Wilmarth
Wilmarth & Associates
Phone: 860-651-8544
www.wilmarth-associates.com

Suzanne Palmer
Export Compliance Solutions
Phone: 410-757-1919
www.exportcompliancesolutions.com

SIDEBAR
It's Monday morning at XYZ Aviation Services, and you're the boss. Your administrative assistant has just presented you with a letter that starts with the words, "The Bureau of Industry and Security, United States Department of Commerce ("BIS") has reason to believe that on two occasions, XYZ Aviation Services (XYZ) violated the Export Administrative Regulations (the "Regulations"), which are issued under the authority of the Export Administrative Act of 1979 (the "Act"). Specifically, BIS charges that XYZ committed the following violations:"

It doesn't matter at this point what the violations are; just getting this letter is bad enough. As John J. Brodbeck said in the Aeronautical Repair Station Association newsletter, "The letter always arrived certified mail, return receipt requested. It is never good news."

So what do you do? Once you've resumed normal breathing, you should call in your compliance expert, either on-staff or third-party. Calling your lawyer is also a good idea. Then, as soon as possible, you should send a return receipt back by registered mail and get to work on your defense.

"Whatever you do, don't ignore this letter, and by all means don't try and stall them," Brodbeck warned. "The feds take a dim view of those who stall. It makes them think you're guilty."

If you are innocent, then dealing with the issue quickly will only work to your favor. If you've unintentionally violated the export laws, then responding quickly through your company lawyer is the best course. And if you've gambled against the feds not noticing and lost, then now is the time to come clean.

Whatever you do, don't fudge. Open admission of mistakes (never guilt) offers your best chance of reducing penalties through negotiation. If you don't stall or play games, the Bureau of Industry and Security may be motivated to go easier on you. Conversely, one major aerospace company didn't cooperate to the government's liking, and it was apparent that the State Department was determined to teach it a lesson.

Should you decide to stall, you should know that Bureau of Industry and Security officials have the legal right to walk into your offices and seize your files. And remember, these are the people who fined the U.S.-based lumber provider almost half a mi llion dollars for illegally exported wood. They don't mess around when it comes to enforcing compliance.

Again, here is how to respond: