MA. EXPORT CENTER COMPLIANCE CLINIC This slide is running during the Registration period Click mouse pointer on speaker symbol Presented by : Paul Divecchio –DiVecchio & Associates Phone: (617) 513-3230, Fax: (508) 393-3645 Email: pauldivec@earthlink.net

CURRENT CLIMATE MANY REGULATORY CHANGES (You have to Keep Up With Them) “EXPORT CONTROL REFORM” * Singular licensing Agency * Singular Control List * Singular Enforcement Agency * Singular IT Data Base Targeted Enforcement (Collaborative Effort) Ambiguous Regulations/Convoluted Coordinate and Communicate – A MUST

WHATZ HAPPENEN Criminalization of corporate wrongdoing Dramatically increased Penalties High scrutiny on corporate ethics Accountability for directors and individual managers Evolving enforcement initiatives & tools Global Compliance a MUST REFORM????????

CHANGING ENVIRONMENT HIGHER SCRUTINY = NEW COMPLIANCE CULTURE Post 9/11 – Corporate Governance Laws & Regulations constantly shifting - Foreign policy (“as the world turns”) Global Trends - Nonproliferation (“the know standard”) – U.S. “EPCI” – Regime “catch all” - Anticorruption Laws (FCPA) - Greater Regime participation – Mexico/Singapore/Malaysia/Taiwan - Transhipment “Best Practices” - Compliance and Enforcement issues of U.S. Corp’s foreign affiliates Enforcement Initiatives - Spot audits – AES data/license data/PLC & PSV/safeguard trips/ web search New Investigatory Tools - Global harmonization of resources - Intelligence sharing - Automation of export reporting (enforcement targeting) - Tenfold increase in Penalties HIGHER SCRUTINY = NEW COMPLIANCE CULTURE Speaker Gary

What can happen if it goes wrong? Fines (CONGRESS PASSED 10/03/07) $50k TO $250k IEEPA Negative Publicity Denial Export Privileges Disruption of Business Jail Time

ACCOUNTABILITY Knowledge includes not only actual knowledge of an event, but also an awareness of “high probability”* of its occurrence. Not this! So … use all available information. Seek more information if you have suspicions. *The US government would like to revise its regulations to say that you have “knowledge” of an event if a reasonable exporter would consider the event “more likely than not”. THIS WAS WITHDRAWN BY BIS

The “Corporate Challenge” How to get 100% of employees & their managers to work to the same standards of integrity (and tell you if they see problems)?

Trade Compliance Program Connecting People and Processes Globally Automation – Trade Tools Maintaining a Robust Compliance Program is Critical! Compliance is a Living Process NOT a Project

Starting point: 7 elements of an effective (beyond paper) program senior management commitment & resources clear written standards & controls effective training & communication consistent monitoring, evaluation & reporting “walk the talk” & visible decisions compliance resources & positioning unambiguous beyond “legalese” job related & continuous multimedia metrics & measurement confidential channel to report concerns reports to senior management & Board consistent enforcement due care in delegating authority program oversight A global working group was appointed in June 2002 to lead the development of the Code of Conduct and the associated change management, communications and training plans. Working group consisted of representatives from the LoBs, SHEQ, HR, IM, corporate relations, risk management and the legal function. Focus Groups will take place during March. Feedback will be incorporated into the implementation programme and plans for each LoB and function. no “double standard” non-retaliation performance alignment avoid discretionary authority to managers likely to violate promotions & new hires continuous risk assessment & improvement review & amend program after breaches occur

5-Step Implementation Process* 1. Compliance risk assessment & prioritisation 2. Compliance Planning 5. Management Review & Certification 3. Implementation & Operation 4. Measurement, Evaluation & Corrective Action *Integrated into existing risk management processes

Export Compliance Decisions 1. USE COMMON SENSE!! Everybody Has it?? 2. Document Decisions Demonstrate your D2 “Due Diligence” 3. Abide by the Exporters Cardinal Rule WHEN IN IT OUT, NOT: IT OUT 11

EVERYONE'S ACCOUNTABLE