Legal Compliance & Supervision International Business Practice

There is a greater risk in certain sectors and specific business operations for service providers, manufacturers or suppliers who violate the applicable legislation. This certainly applies to businesses involved in the international import and export of goods and services. If your business operates internationally, you must take into account both international and local legislation regarding the import and export of products across different national borders. In these situations, operating in accordance with the applicable legislation becomes particularly important.

The export of goods from the Netherlands to countries inside and outside the European Union (EU) is subject to national and international rules, legislation, export controls and customs formalities. Export compliance refers to the active enforcement of and compliance with national and international legislation and regulations on sanctions. These national and international rules and export controls are intended to restrict the international distribution of sensitive goods. Examples include dual use goods and military goods. The purpose of these rules is to prevent goods or services from falling into the wrong hands.

In certain situations, violating legislation while importing and importing products may qualify as a criminal (economic) offence. This is something organisations want to prevent at all times. Not only because of the consequences in criminal law, but also because of the reputational damage to the company and the potential for financial loss. Moreover, government organisations and financial service providers are increasingly calling upon companies to demonstrate that their operations are compliant. It is important to be aware at all times who you are doing business with and how the buyer intends to use the products. A good compliance policy helps you to know who your customers are, and where your products are going, as well as understanding the requirements that apply in the destination country.

The above described risks are particularly relevant to services or products that although not illegal, and normally used for civilian purposes, may also have a military application. These products are referred to as ‘dual-use’ products. Examples include software, technology, computers, electronics, material processing systems, navigation and avionic systems, telecommunications equipment, information security, marine systems and shipping.

If the product to be exported appears on the list of ‘dual-use’ goods, an export licence is required. Without a licence, the goods cannot be delivered and you as an entrepreneur can run the risk of fines and even criminal sanctions.

There is also a risk of legal products being supplied to persons or countries subject to political sanctions. Such sanctions are imposed to prevent products or services from being used for terrorist purposes or in any other way that could lead to the violation of human rights. If you knowingly or unknowingly supply such products to a sanctioned company or country, or if the product is used or sold on by the end user for the manufacture of nuclear weapons, or for military purposes, then you run a (financial) risk.

You as an entrepreneur are also required to correctly register any products or services you import or export to the customs authorities. Using the correct goods code in the customs declaration is of vital importance when it comes to charging on levies and customs duties. If the code is incorrect, the customs authorities can impose an additional assessment. In turn, this may result in higher financial expenses for your company.

A compliance policy helps mitigate the risks outlined above, and identifies any supplementary compliance requirements in advance and in good time.

Boels Zanders has extensive experience in conducting international business and in particular setting up a compliance policy. A sound compliance policy ensures that your business always knows which export regulations must be complied with and enables you to demonstrate that your business is operating in accordance with the applicable legislation.