Export Compliance Management Seminar 29 May 2012: Key Issues & Complexity in Global Trade Management and How It Affects Your Business

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Adela Deaconu - Royal Philips Electronics …

Adela Deaconu - Royal Philips Electronics


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  • 1. Key Compliance Issues & Complexity in Global Trade Management and How it Affects our Business Adela Deaconu © Royal Philips Electronics, The Netherlands 29 May 2011 – Rotterdam – The Netherlands 1
  • 2. Adela Deaconu Corporate Export Controls Philips International - Corporate Legal Department/Compliance Group Breitner Center HBT 17.02 Amstelplein 2, 1096 BC Amsterdam P.O. Box 77900, 1070 MX Amsterdam The Netherlands IMPORTANT NOTES: • © Koninklijke Philips Electronics N.V. 2010. All rights reserved. Reproduction, adaptation, modification or dissemination in whole or in part is prohibited without the written consent of the copyright owner. • Disclaimer: No liability will be accepted for any consequence of the use of the information contained in this document. The data or text mentioned in this presentation have no legal value. For all valid information reference is made to the applicable laws and regulations and other sources of official governmental information.Confidential 2
  • 3. Royal Philips ElectronicsFounded in 1891Headquartered in Amsterdam, the NetherlandsSales over EUR 25.4 billion in 2010 (USD 33.8 Healthcarebillion)33% of sales generated in emerging marketsGlobally recognized brand (world top 50)Our brand value doubled to $8.7bln since 2004119,000 employees Consumer LifestyleSales and service outlets in over 100 countries€1.6 billion investment in R&D, 6% of sales50,000 patent rights – 36,000 registered trademarks –63,000 design rights Lighting 3
  • 4. Governmental Requirements INTERNATIONAL & NATIONAL regulations Apply to ALL EXPORTERS & BROKERS And are implemented & enforced by national governments through license requirements… and much more… 4Confidential
  • 5. Untangle the Export Control Process! 5Confidential
  • 6. The challenge of compliance Manufacturers, Distributors & Brokers Challenge Manufacturer Distributor Broker Classification requires technical knowledge & different interpretations of the legislation Destination Controls knowledge of the End-User, re-export destinations and sanctions regimes End-Use & Catch-All Controls Specific Applications eg. Space, military, nuclear etc Jurisdiction & Authorizations US extraterritorial controls, re-export licenses and other applicable restrictions from EU member states 6Confidential
  • 7. Methods Used to Evade Export Controls Evading methods are a violation in itself. 7Confidential
  • 8. Compliance in a nutshell…do your due diligence • Know your product …its classification and end-use • Know your customer … Its business and its compliance program • Know your destination …where your products will end up • Know the law …jurisdiction and authorizations applicable to your transaction * Products = goods, software, technology 8Confidential
  • 9. Develop compliance strategy - Overcome the challenge… Export Controls compliance needs to be integral part of the business, embedded in the company’s business and processes Your compliance framework should: 1. Create a Culture of Compliance - From Management commitment to employee commitment - Build trust, build partnership, build one team 2. Assess Compliance Risk - Know the business past, present and future compliance challenges and be prepared 3. Establish Control Activities - Simple but effective business controls 4. Keep Communicating - Train, train and train some more 5. Create a Monitoring (Self-assessment) Program - Speak softly and carry a big stick 9Confidential
  • 10. The Philips Framework – brief introduction & case study on screening challenges 10Confidential
  • 11. Philips System on Export Controls In order to enable the Philips organisation to comply in full with all applicable laws and regulations on Export Controls, Philips has created the Philips System on Export Controls mandatory for everyone in the company administered by Corporate Export Controls http://pww.export-control.corp.philips.com 11Confidential
  • 12. Philips Policy on Export Controls• Corporate Policy Comply in full with the terms and spirit of all applicable export control regulations• Compliance Responsibility of the operating units• Uniform and company-wide system on Export Controls Procedures & advice tool PROTECT mandatory for everyone• All staff involved in Export Controls 12 Personally accountable for adhering to regulations in their country and to Philips rulesConfidential
  • 13. Philips Screening Strategy Our MOTTO is = “EVERYTHING, EVERYTIME and by EVERYONE.” Among other we have the following: - Screening Tool is available for everybody in the company without restriction - Ability to screen on line and off line using our own developed tool called PROTECT - Tool is mandatory, screening must be incorporated at all levels of the organization - Our SAP system is also running the GTS module incorporating the screening module where PROTECT lists are incorporated - We implement all lists in all the jurisdictions we are located as well as in the jurisdictions our customers are located including making use of list that are no mandatory to use for risk management purposes (e.g. Risk files) - Central handling of actual “HITS” at Corporate Export Controls 13Confidential
  • 14. Develop a screening strategy: Needs – Wants – Musts • Risk Assessment must take into account the following: – Location of your company – Location of your markets, and direct and indirect customers – Sensitivity of your product portfolio – Size – Daily business transactions – Business model and infrastructure – Risk appetite – etc The result of the assessment should make it clear WHAT you SHOULD implement. Screening process is a MUST per definition in any company. The debate should be about the What and the How!Confidential 14
  • 15. Screening Challenges CHALLENGE RESOLUTION FACTORS Some Choices Which lists to use Jurisdiction and business US vs. EU & other vs. ALL scope When to screen Business model and Order intake vs. Shipment & practices invoicing vs. ALL Who should screen Organizational model and Sales vs. Logistics practice What tools to use Business sophistication and Manual vs. off the shelf SW amount of transactions tools vs. own developed Language Market and customer English vs. Other location National legislation on Business locations Risk based approach vs. do privacy not care How to deal with the Business model, practice and Ad hoc vs. local vs. central HITS sophistication 15Confidential
  • 16. Case study on timing of screening transactions 16Confidential
  • 17. When MUST I screen a transaction? Case: – Sales manager gets a lead on a major deal in middle east – He prepares a sales pitch and gets in contact with the potential customer taking with him some samples of our new product containing the new security implementation – During the meeting he finds out that the deal is urgent needs to be closed within 1 week with product to be shipped out within 2 weeks – Sales manager checks stock levels at factory – Sales manager commits to do the sale (contract) and comes back and places the order in the internal system 17Confidential
  • 18. When MUST I screen a transaction? Possible Scenarios 1. Order goes through the system • but is stopped at customs offices • but the payment is refused by the bank • but the LSP does not want to process and holds the goods 2. Order is blocked in the system • Order can never be delivered (customer on SDN list) • Order can only be delivered with individual license ALWAYS, …but most importantly be aware when new business leads are pursued… 18Confidential
  • 19. Food for thought… • Do you have all the lists implemented that you must have to be compliant? • Is your software screening tool effective to cover all areas of your business? • Is your software tool available to everybody that might need it both on line and offline if required? • Is your screening strategy effective to cover all areas of your business? – Have you thought about: • E.g. Screening your company “preferred hotels”? • E.g. Screening your visitors? • E.g. Screening universities and students you are working with? • E.g. Screening research entities you are working with? 19Confidential
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