Export Controls Training In A Recession

Export controls training, in common with most other training, is likely to be one of the first casualties of a recession, as companies seek to control costs. It will come as no surprise to know that the writer regards cut backs in export controls training as false economy.

In order to be effective, export controls training should span almost all employees in a company, albeit at different levels of complexity. The relationship between effectiveness and percentage of workforce covered by appropriate export controls training is, typically, linear.

In order to illustrate the benefits of broadly based export controls training against the costs of not providing export controls training, consider the following scenario:

A stressed commercial executive (is there another kind, I hear you say) in a UK aerospace company tells his assistant to pull up a list of bearing manufacturers and shoot them the spec and a physical example of the assembly into which the bearing is intended to fit on Project X (a military programme) and get me some costings be careful how much you tell them about the programme though.

The costings come in and True Bearing Inc., a US company seems to be the best fit, technically. A contract is agreed and True Bearing gets to work on the manufacturing, as time to delivery is critical to our stressed commercial executive meeting the programme deadline.

A routine internal check of intangible exports at the UK company shows that military technical specifications for Project X have been sent to True Bearing Inc. Questions are then raised, including:
Was there a UK export licence to cover the transfer?
Is True Bearing Inc registered with the Directorate of Defense Trade Controls (DDTC) of the US Department of State?
Is Project X happy with the re-export control implications of using US controlled components?
These are not trivial questions. Let us now assume not even the worst-case scenario, but simply that the answer to the second bullet point is No. Project X is a military programme and the bearings are specially designed for that programme. In US terms these are defense articles under the International Traffic in Arms Regulations (ITAR). True Bearing cannot manufacture a defense article without being registered with DDTC, a process which can take six to eight weeks. They cannot manufacture and register in parallel, registration must be completed first. Very quickly a situation develops where our UK company cannot obtain the parts it needs in time to avoid paying liquidated damages to its customer for late delivery. If other costs are then added on, investigation costs, lost opportunity costs where the plant for producing Project X is standing idle, reputational damage with the customer., the cost effectiveness of export controls training becomes obvious.

What if, having received export controls training:
The assistant tasked with sending the specs had said, Aren't there export control issues here?
Shipping, on being asked to send the physical example, had asked the same question.
Commercial had made it a standard requirement to notify potential suppliers if a part they were being asked to bid on was military.
Supply chain had made a point of asking all US suppliers whether or not they were registered with DDTC
Export controls training, at the level of awareness across large corporate populations, is not designed to create compliance experts, it is designed to alert people to when the question needs to be addressed to such an expert. In general, false alarms do not cost a company significant amounts of money, since most are closed out very quickly. The danger is in the alarm not raised; the boy who does not cry wolf.

Export controls training is not a panacea but nor is it a waste of money on bureaucratic trivia. Export controls themselves play an increasingly important role in global security and countering the proliferation of weapons of mass destruction (WMD). For this reason, they have bite and, though most companies would take the view that they have nothing to do with WMD or global security, they fall within the purview of rules controlling such activities. The real cost to companies though lies in the delays and resultant project cost overruns which often result from reactively fire fighting' export control problems instead of proactively managing compliance. Key to proactively managing compliance is export controls training, at the appropriate level, for the right people/business areas, initially on appointment and regularly refreshed. You can save on overheads' by cutting export control training; just like you can save on road tax by having your car crushed!