Adela Deaconu - Royal Philips Electronics www.exportcompliancemanagement.com

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
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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.
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3. Royal Philips Electronics
Founded in 1891
Headquartered in Amsterdam, the Netherlands
Sales over EUR 25.4 billion in 2010 (USD 33.8 Healthcare
billion)
33% of sales generated in emerging markets
Globally recognized brand (world top 50)
Our brand value doubled to $8.7bln since 2004
119,000 employees Consumer Lifestyle
Sales and service outlets in over 100 countries
€1.6 billion investment in R&D, 6% of sales
50,000 patent rights – 36,000 registered trademarks –
63,000 design rights
Lighting
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4. Governmental Requirements
INTERNATIONAL & NATIONAL regulations
Apply to
ALL EXPORTERS & BROKERS
And are implemented & enforced by national governments through
license requirements…
and much more…
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5. Untangle the Export Control Process!
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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
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7. Methods Used to Evade Export
Controls
Evading methods are a violation in itself.
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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
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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
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10. The Philips Framework – brief introduction &
case study on screening challenges
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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
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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
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Personally accountable for adhering to regulations in their
country and to Philips rules
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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
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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!
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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
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16. Case study on timing of screening transactions
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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
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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…
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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?
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