Nov
20
Cabela’s Settlement Includes Audit Requirement
Posted by Clif Burns at 10:06 pm on November 20, 2008
Category: General
Last week we reported on the settlement agreement that Cabela’s, the outdoor supply store, entered into the the Bureau of Industry and Security (“BIS”) to settle allegations that the company had exported 76 rifle scopes without the required BIS licenses. This was the company’s second settlement of illegal export charges, the first covering allegations covering unlicensed exports of 685 rifle scopes between 1999 and 2000. The company agreed to a fine of $680,000 to settle the most recent charges.
The settlement documents are now available on the BIS website and provide details not available in the press release that served as the basis for our initial report on the settlement. Not surprisingly given Cabela’s repeat offender status, the settlement also includes a requirement that Cabela’s conduct a compliance audit substantially in accord with BIS’s Export Management System audit module.
The audit requirement imposed in the settlement agreement is purely an internal audit. Even so, the audit module requires extensive review of company compliance procedures, including compliance with many outmoded requirements. This is because the audit module was created in 2000 and hasn’t been revised since then. Extensive coverage in the audit module is devoted to inquiring whether the company’s export procedures provide instructions on filling out and retaining copies of the Shipper’s Export Declaration (“SED”), even though filing an SED is now a violation of applicable regulations. The module also seems to hark back to the pre-Internet dark ages by requiring the company to keep hard copies of the Export Administration Regulations and the Denied Party List.
It seems to me that if BIS wants to tout the EMS audit module as the touchstone of export compliance, it might want to update it a little more often than every decade.
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Copyright © 2008 Clif Burns. All Rights Reserved.
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6 Comments:
Back a couple of years ago when I was drafting a court ordered compliance program for a client that had to be approved by BIS, I was advised that the Export Management System was passe’ and that the export management systems staff was pushing an “Export Compliance Workbook” that they handed out only at their export managemnt workshops but which they graciously shared with me since that was what they were using as a bench mark compliance programs. Their EMS on their web-site may be superseded.
Hi, Cliff. I appreciate your efforts on this blog. Just wanted to let you know that the link to the audit module is now redirected to a page saying it is “no longer available”.
😉
BIS has at least 3 separate, overlapping sets of guidance for what they believe constitutes and “effective” compliance program: (1) The elements of an Export Management and Compliance Program (ECMP), which is basically a re-named Export Management System (EMS)(which is itself a re-tread of the old requirements for an internal controls program to support application for a Special Comprehensive License); (2) the elements of a Technology Control Plan (TCP) to support application for a deemed export license; and (3) the “Principles of Effective Compliance Programs” for great weight mitigation in administrative cases. There may even be a fourth set of standards; Tom Andrukonis in the Office of Exporter Services has been making the offer to review exporters’ programs – a good thing, in my opinion; but it’s not clear what standards he reviews programs against. The duplication/overlap (and the elements of the 3 different guidances, have some commonalities but are not the same) is compounded by the fact that the first two are managed by Export Administration, and the third by Export Enforcement, with little interaction between the two. BIS also has in the past said that it does not have the resources to follow up on directed audits, so it’s unclear what follow-up action they will take on the audit they are requiring Cabellas to perform. BIS might better serve the exporting community by coming up with one set of standards to use to guide, and evaluate, export ocmpliance efforts by the trade.
If one were to benchmark against the criteria set forth in the Nunn-Wolfowitz report (“NWR”), would that pass muster with BIS, DDTS, OFAC, etc.? It’s as close as one comes to one-size-fits-all, and it seems to comprise the fundamentals called for in the various agency/office-specific guidelines out there? Also, any sense whether NWR reflects the state of the art? At Thales we strongly track NWR and also factor in USSG criteria for effective corporate compliance. Has anyone diagramed the various criteria from the different agencies and the USSG to see where they overlap and differ?
John, I’ve been working on just such a cross-walk of Nunn-Wolfiwitz and the agency guidance – I have one version done but it doesn’t yet include some of the lastest guidance from BIS, CBP and Census. I’m working up an article/pamphlet on same that I hope to get out come first of the year. There is some overlap, and some differences between the agencies – bottom line is that no one set of guidance, NWR or from the individual agencies, covers all the bases; and as I note above, BIS has at least 3 independent sets of guidance out there. I hope to build up a compilation of all the guidance for use by export compliance professionals in evaluating their programs to ensure they’re covering all the agencies’ multiple bases. I’ll keep readers of this site informed of my progress.
That’s a terrific and helpful exercise. I may have some useful input, as I’ve done some legwork to diagram the various compliance criteria. We have each other’s coordinates, so let’s touch base offline and maybe we’ll have something to share with colleagues before too long….
Happy Thanksgiving!
