CES Professional Ethics & Compliance 3 — Questions and Answers
Question 1: A robust export compliance program (ECP) should include all of the following EXCEPT:
- Written policies and procedures
- Management commitment and oversight
- Periodic audits and corrective action processes
- A policy of never disclosing violations to regulators (Correct answer)
Correct answer: A policy of never disclosing violations to regulators
Effective ECPs include written policies, management support, training, recordkeeping, and a commitment to timely disclosure of violations—concealment is not a best practice.
Question 2: Which of the following is considered a 'red flag' that should prompt heightened due diligence before proceeding with an export transaction?
- A buyer that is a publicly traded company in an allied nation
- A buyer who is unusually insistent on paying cash and avoiding documentation (Correct answer)
- A repeat customer with a history of timely payments
- A buyer requesting goods well within the EAR99 classification
Correct answer: A buyer who is unusually insistent on paying cash and avoiding documentation
A desire to avoid documentation or pay in cash is a classic red flag that may indicate the buyer is attempting to conceal the true end use or end user.
Question 3: The BIS 'Know Your Customer' guidance advises exporters to investigate a transaction further if the buyer:
- Requests products that are consistent with its stated business
- Appears knowledgeable about the product's export licensing requirements
- Is reluctant to provide information about the end use of the product (Correct answer)
- Has an established relationship with a U.S. freight forwarder
Correct answer: Is reluctant to provide information about the end use of the product
Reluctance to provide end-use or end-user information is a key red flag in BIS's Know Your Customer guidance, signaling possible diversion.
Question 4: In export compliance, 'deemed exports' refer to the release of controlled technology or source code to:
- A foreign government via official diplomatic channels
- A foreign national within the United States (Correct answer)
- A domestic company with foreign subsidiaries
- Goods shipped to a free trade zone
Correct answer: A foreign national within the United States
A deemed export occurs when controlled technology is released to a foreign national in the U.S., which is treated as an export to that person's home country under EAR.
Question 5: When a freight forwarder is preparing export documents, who bears ultimate legal responsibility for the accuracy and legality of the export?
- The freight forwarder, as the licensed agent
- The exporter of record (Correct answer)
- The foreign buyer
- The U.S. Customs broker
Correct answer: The exporter of record
The exporter of record is legally responsible for the accuracy of all export documentation and compliance with export control laws, regardless of who prepares the documents.
Question 6: An exporter receives an order for dual-use items classified as EAR99. The buyer's stated end use seems inconsistent with their known business. Under 'red flag' principles, the exporter should:
- Ship immediately because EAR99 items never require a license
- Proceed after obtaining the buyer's signature on a standard end-user statement
- Investigate further before proceeding, even though no license is required (Correct answer)
- Report the transaction to BIS and await approval before shipping
Correct answer: Investigate further before proceeding, even though no license is required
Even EAR99 items cannot be exported knowingly to prohibited end users or for prohibited end uses; red flags require investigation regardless of license requirements.
Question 7: Which of the following best supports an ethical culture of compliance within an export organization?
- Setting aggressive sales targets that override compliance concerns
- Anonymously reporting compliance concerns with guaranteed non-retaliation policies (Correct answer)
- Limiting compliance training to the legal department only
- Treating compliance as a one-time annual certification exercise
Correct answer: Anonymously reporting compliance concerns with guaranteed non-retaliation policies
Anonymous reporting channels with non-retaliation protections encourage employees to surface compliance issues early, which is a cornerstone of ethical organizational culture.
CES Professional Ethics & Compliance 3
A robust export compliance program (ECP) should include all of the following EXCEPT: