ITAR Recordkeeping

If you’re a responsible ITAR exporter, record keeping is far and away your best tool to avoid fines and penalties from an audit.  The goal of good record keeping is simple: Fulfill your legal obligation as an exporter and ensure success and minimal impact on your business in the event of an audit.

Earlier this month I took a straw poll from our mailing list and asked the question: “How do you fulfill your record keeping requirement?”  The answers received were informative and in some cases surprising:

The Good

  • From the companies that responded the vast majority have a system in place and are making a conscientious effort to maintain records (whew!).
  • Most of the respondents keep a paper or digital file in order to store pieces of information that relate to their shipments.
    • This includes purchase orders, shipping documents, delivery receipts, notes, etc.
    • Having a single location where you can find all pertinent shipment information is very important in an audit.
  • Of those keeping files most include a checklist identifying steps they’ve taken for due diligence.
    • Checklists are easy to do and show that you’re taking a systematic approach to compliance.
  • For those tracking physical shipments most included a central repository for tracking information for easy access later.
    • Similar to paper files, being able to quickly assess your licenses and shipment data tells an auditor that you are competent and making an effort.

The OK, but Not Great

  • Excel spreadsheet was the word of the day!  Approximately 75% of those tracking shipments use a spreadsheet program.
    • Spreadsheets are good for tracking data, but they’re difficult to share if you have multiple people tracking shipments.
    • Consider the following line from Title 22, section 122.5 of the Code of Federal Regulations and ask yourself how it’s being addressed by your spreadsheet program:
      • This information must be stored in such a manner that none of it may be altered once it is initially recorded without recording all changes, who made them, and when they were made.
  • The majority of respondents did not address documentation for issues like training, hiring, foreign nationals and the like.
    • Record keeping encompasses more than shipping products.  In the event of an audit you will want to be able to produce records detailing all of your compliance efforts.
  • Most of documentation and procedures were focused on the item being exported and its destination.
    • Make sure to include a record of all the entities that interact with your exports – freight forwarders, receiving agents, shipping companies, etc.

The Bad

  • Almost everyone considered the purchase or sale of their product as the start of their export compliance timeline and final shipment the end.
    • Documentation can (and should) include pre-sales investigation and customer communication as well as post-delivery follow up.
  • Accessibility will be an issue for many in the event of an audit due to organization.
    • The amount of time needed to compile a shipment history is an indicator of preparedness in the event of an audit.
  • A few of our respondents placed the burden of record keeping on their freight forwarders and Customs brokers.
    • As an exporter, you are ultimately responsible for your shipments.

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