As the Yuan continues its steady gains against the Dollar, more and more of our clients are looking at selling product to China as an additional revenue stream. Engaging in sales and shipping from the U.S. to China has its own unique challenges.
Free advice — don’t be this guy. The arrest affidavit is worth a read, but the short story is that two Taiwanese buyers of controlled technology equipment and a Chinese national exporter were linked through their use of a fake website operated by Homeland Security. The Chinese national met with an undercover agent in the United States to consummate the sale, and then he was arrested and charged with crimes that carry a possible $1 million fine and up to 20 years in prison.
U.S. export officers love a good sting operation. Export enforcement mirrors drug enforcement in that way. It is very difficult for federal agents to effectively police actual illegal exports, so they instead often pose as attractive buyers with lots of money to encourage their targets to violate the rules. Call it entrapment if you want, but the safe response for anyone exporting from the United States is to operate legally and to thereby avoid falling into the trap. If someone calls you and wants to buy millions of dollars of your product, it’s great. If they are encouraging you to fudge information on licenses or to conceal the final shipment destination, don’t do it, unless you want to risk finding yourself hit with a large fine and a possible prison sentence.
To protect yourself as an exporter, you should implement a compliance program to avoid falling victim to such an operation. Such a program really comes down to three things: know your product, know the destination of your product and the rules relating to the country to which your product is going, and know your end-user. With that information in hand, you will know whether or not you need export licenses, which federal agencies are involved (there’s about a dozen that can be), and how to ensure that you have covered yourself against legal problems. And if you should get a prospective buyer pushing you to violate the rules, all you have to do is walk away.