Six Essential Tips for Government Contractors Engaging in International Sales

In celebration of the release of the 6th edition of our Government Contracts Compliance Handbook, we are excited to share six essential tips for ensuring compliance in international sales. These tips are designed to help lawyers and executives working for U.S. federal government contractors navigate the complex landscape of regulations that apply to international sales.  

1. Understand Export Control Regulations

Compliance with export control regulations is critical for any company engaged in international sales. The International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR) are the primary regulations governing the export of defense and dual-use commodities, software, and technology, respectively. Companies are responsible for classifying their items and services under the ITAR or EAR. This involves reviewing the United States Munitions List (USML) and the Commerce Control List (CCL) to identify the appropriate USML category or Export Control Classification Number (ECCN). 

Key Actions: 

• Conduct a thorough review of your products and services to determine their classification and whether an export license is required, or a license exception may apply. 

• Apply for any necessary export licenses from the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC), which administers the ITAR, or the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), which administers the EAR. 

• Regularly update your compliance procedures to reflect changes in export control regulations and any new products or services your company develops. 

2. Implement Robust Compliance Programs

A robust compliance program is essential for ensuring adherence to export controls. This includes right sizing those policies and procedures to the risks faced by your specific business model, distributing those policies and procedures, identifying personnel responsible for implementation and compliance, conducting regular audits, and providing training to employees involved in international sales. Companies should also establish a hotline for reporting suspected violations and maintain detailed records of compliance efforts. 

Key Actions: 

• Establish a “tone from the top” regarding adherence and compliance to export controls. 

• Develop and distribute comprehensive compliance policies and procedures. 

• Conduct periodic audits to ensure adherence to compliance protocols. 

• Provide regular training sessions for employees on export control regulations. 

3. Navigate the Foreign Corrupt Practices Act (FCPA)

The FCPA prohibits bribery of foreign officials and requires companies to maintain accurate books and records. Compliance with the FCPA involves educating employees about the anti-bribery provisions, monitoring for signs of misconduct, and seeking advisory opinions from the government when necessary. Companies should also implement adequate recordkeeping practices to ensure transparency and accountability. 

Key Actions: 

• Educate employees about the FCPA’s anti-bribery provisions and permissible payments. 

• Monitor for signs of corrupt practices and investigate any suspicious activities. 

• Maintain accurate and detailed records of all transactions and interactions with foreign officials. 

4. Address Antiboycott Provisions

The antiboycott provisions of the Export Administration Regulations and the Internal Revenue Code prohibit U.S. companies from participating in foreign boycotts not sanctioned by the U.S. government. Companies must be vigilant in identifying and reporting any boycott-related requests and ensure that their actions do not support unauthorized boycotts. 

Key Actions: 

• Educate marketing and sales staff about the antiboycott provisions. 

• Carefully review all contracts and supporting documents for boycott-related terms. 

• Report any boycott-related requests to the Office of Antiboycott Compliance as required. 

5. Manage Restrictions on Agents and Representatives

Engaging agents and representatives in foreign markets requires careful oversight to ensure compliance with the FCPA and other regulations. Companies should conduct thorough background checks on potential agents, draft clear and comprehensive agency agreements, and monitor the actions of their agents to prevent improper conduct. 

Key Actions: 

• Conduct background investigations on potential agents and representatives. 

• Draft agency agreements that clearly define the scope of the agent’s authority and compliance obligations. 

• Monitor the actions of agents and representatives to ensure adherence to compliance standards. 

6. Stay Informed About Regulatory Changes

The regulatory landscape for international sales is constantly evolving. Companies must stay informed about changes in export control laws, FCPA enforcement, and other relevant regulations. This involves regularly reviewing updates from regulatory agencies, participating in industry forums, and consulting with legal experts. 

Key Actions: 

• Regularly review updates from the DDTC, BIS, and other regulatory agencies. 

• Participate in industry forums and training sessions to stay current on regulatory changes. 

• Consult with legal experts to ensure compliance with the latest regulations. 

Navigating the complexities of international sales requires a thorough understanding of export regulations, robust compliance programs, and vigilant oversight of agents and representatives. By following these six essential tips, U.S. federal government contractors can mitigate the risks associated with international sales. Our “Government Contracts Compliance Handbook” provides detailed guidance on these topics and more, positioning us as a knowledgeable and expert resource for government contractors seeking legal assistance.