Kazakis International Presidents' Message

Why do I need a Compliance Program I’m just a small business with only a few exports a year or maybe your company doesn’t even export your company is a Manufacturing Contractor that only ships to domestic companies.  An ITAR compliance program is essential for businesses that handle defense-related items or services. It ensures that sensitive information is properly managed and protected, preventing unauthorized access or transfer. Compliance with ITAR regulations helps maintain export privileges and builds trust with customers, partners, and stakeholders. Non-compliance can lead to significant penalties, reputational damage, and loss of business opportunities. By implementing an ITAR compliance program, businesses can demonstrate their commitment to national security and regulatory compliance.

While ITAR governs defense-related items, the Export Administration Regulations (EAR) cover commercial items with dual-use applications (e.g., technology used in both civilian and military contexts plus 600 series items). An EAR Compliance Program is essential for businesses engaged in international trade to ensure compliance with the Export Administration Regulations (EAR). These regulations govern the export, re-export, and transfer of goods, software, and technology that have both military and civilian applications. The primary goal of an EAR Compliance Program is to protect national security interests and maintain a level playing field in international trade. Businesses must determine which regulation applies to their products.

NOW YOU HAVE READ THE VERBAGE YOU HEAR ALL THE TIME, I always like to tell this true story as it happened it to me.  We all have life experiences.  This happened quite a while ago while I was working for a company in New Hampshire.  I was the International Account Manager and travelled to customers overseas.  We had an export compliance manager that I always thought was doing a pretty good job but he really didn’t have management commitment. He did give internal training classes on exports by an outside company.  He decided to leave and management offered me the position.  I thought wow I won’t have to travel that much and since I didn’t really have experience in that area, I took the position as a supervisor not a manager.  We had what was known as authority to have Distribution Licenses.  In reality our Compliance Program should have been top notch.

A few days into the new job I received a call from the Department of Commerce asking me a few questions.  I really couldn’t answer them that well and assured them that nothing would leave our facility unless I felt secure in the export.  Well MISTAKE ONE, I am sure they felt insecure in my answers because a few days later the company received a letter stating we were being audited.  They were coming to our facility in 30 days.   In the audit letter it stated we were to send to them a copy of the company’s compliance program.  Now comes MISTAKE TWO, I kind of reviewed the manual but didn’t audit it to see if the policies and procedures were in alignment with what we really did and sent it to them.  You guessed right the compliance program was not in alignment with what we were doing.   While the DOC was writing their questions based on the compliance program I sent them, I was also conducting my own audit on that same compliance program.  I had hired an outside consultant to conduct the audit so I could have a written report.  He conducted the audit but I never received a report but did receive a $10K bill from him, which we did not pay.  During those 30 days, I prepared for the audit by going to training classes, reading the regulations, how we truly conduct business and made timelines when I would have certain areas completed in compliance with the regulations.

We had 1000 employees at that facility and just got purchased from a company in the UK.  Seventy percent of our business was international.  Needless to say, the company that purchased us never showed up for the audit nor did they ever have conversations with me about it.  However, I did see a memo from the managing director in the UK stating that the international audit was “thwart with danger.”  I’ll never forget those words!

The day of the audit and I will make this brief by 10:00 a.m. They had made a call to Washington to shut down international business.  It took only a moment to realize that we would have layoffs and most likely fines and penalties.  People would not have pay checks but they still had mortgages to pay, etc.  I threw my cards on the table and showed them my timelines, what I had done in one month and how most importantly I had management commitment.  I had gone to our President and CFO and let them know what could happen.  The President was still in the “we pay their salaries” mode but the CFO understood completely.  The auditors reviewed what I had written my timelines, etc. and I had 33 pages front and back of compliance issues to resolve.  My timelines they stated needed to be completed in 60 days along with the 33 pages (front and back) of compliance issues and they would be back.  That day they were coming back was December 30th.  Forget about end of year results, we were more worried about being open for business.  The Distribution License Authority stopped immediately and we were on license only approval.  I had called a company meeting the next day and stated to everyone I need your help.  All hands-on deck.  We accomplished so much in that timeframe and so very proud of everyone.  The auditors came back as they stated, and we passed but I want to make sure everyone knows that I would not have made it happen all by myself.  Compliance is a company effort not an individual.  The DOC did see us quite a bit during the course of the year, to make sure we were on the right path and had Management Commitment.  You see, when you have Management Commitment, Management is stating to you, we will provide Time, Resources and Money to achieve your goals.  Hold them to that commitment.

Take a little time to review your processes and procedures and conduct that audit and document it. Your compliance program is always a work in progress!

Pat Kazakis, President
Kazakis International Consultants, LLC