High-level export compliance officers are in demand as companies realize value of the position.
Warren Carter was interviewed for this article by American Shipper magazine to discuss the increased demand for qualified export compliance officers.
Highly competent export compliance officers don’t grow on trees, and that’s a big problem for companies increasingly aware of the impact of complying with complex and intensifying export controls in the United States and abroad.
Demand is rising for qualified export compliance officers (ECOs) as the role shifts from being one more associated with administrative tasks to one that touches multiple layers within an enterprise.
“The people we look for to fill this role are leaders,” said Mitch Fonda, Senior Manager of Global Trade Compliance and Product Stewardship at Waters Corp. “There are a lot of people who know the regulations, but what you want is that cross-functional adaptation of technical knowledge to manufacturing, sales and research and development within your organization. We refer to these people as business owners, because they actually own the business that impacts you.”
Waters Corp., a Boston-based analytical laboratory instrument and software company, has recently added these types of resources to its compliance team, including someone who has an MBA in supply chain management, another who oversaw a European operation, and most recently a new addition early in their career “who is a natural at this,” Fonda said. “It can take five to seven months to find someone with those qualities,” he added. “You can find a tactician in this field on just about every street corner, it seems, but you won’t find a team leader just to fill this role just anywhere.”
Export compliance officers have been around for decades, with the field defining itself within American corporations during the Cold War when there were numerous restrictions imposed on U.S. goods exports to the Soviet Union and its allies. Of particular concern to the U.S. government at the time was the export of “dual-use” goods, or commercial products and technologies with the potential to be used in Soviet weapons production. The U.S. Commerce, State and Defense departments were put in charge of overseeing the nation’s export control regulations.
During the Cold War, the export compliance officer’s role was largely a back-office, administrative function. The export control rules then were black-and-white, one could either export a product or not based on a rather defined global adversarial political system. A U.S. company would apply for a Commerce Department license to export to a party within the Soviet Bloc countries, and it was either approved or denied.
That all started to change with the dissolution of the Soviet Union in December 1991, and U.S. export controls became more focused on rogue nations and those overseas corporations and individuals who threatened national security, making the rules dramatically more complex and convoluted. But it would take another 20 years before the role of the export compliance officer was seen as vital to a corporation’s wellbeing by those executives in the “C” suite.
“More companies are recognizing the importance of the ECO’s role,” said Paul DiVecchio, head of Boston-based DiVecchio & Associates, who has spent more than 35 years advising companies on export compliance. “I think this is a direct result of the advice from their outside counsel as to export compliance being a key role to ensure corporate governance and also because of the transparency of the many compliance violations and investigations.”
Another significant aspect to throw light on export compliance for many corporations came with the Obama administration executive order seven years ago for the federal government to modernize the country’s Cold War-era export controls. Numerous procedural and regulatory changes have been instituted by the Commerce, State and Defense departments since then as they attempt to streamline the export control system.
On top of that, U.S. trade sanctions continue to change with such velocity that failure to comply could lead a company to face down federal investigations, potential civil and criminal penalties and negative exposure in the press. And the uncertainty is further heightened as the Trump administration asserts its position in national security and foreign policy.
“In today’s environment, you don’t just ship products,” Fonda said. “You also ship data. This sets the compliance bar even higher.”
The details about how products are made has become just as valuable, or perhaps more so, to countries and borderless terrorist groups determined to build weapons of mass destruction.
But getting compliance issues inside the “C” suite or executive boardroom has only come recently for ECOs at major corporations. These individuals, for years, operated quietly inside legal, finance and even supply chain management offices.
A compliance officer at an electronics manufacturer said he recently presented to the company’s board of directors audit committee. He noted that the board has become increasingly interested in compliance topics, particularly data protection and expects this trend to continue.
Fonda said for years many companies considered export compliance as a “dirty word—it’s the dreaded must have in the organization.”
In fact, export compliance officers were traditionally loathed by their peers in product development, sales and marketing and logistics. A simple “no” could quickly doom a multimillion-dollar deal with an overseas customer, simply because the country had sanctions or export control regulations against it. It requires a savvy export compliance officer to figure out how to properly comply with the export control regulations on how and when to export a product, but that doesn’t mean other departments in an organization like, or respect, that expertise.
For example, just because an end-user is located in Russia or Iran doesn’t mean the countries are totally off-limits to U.S. businesses. The U.S. government recently lifted some restrictions on aircraft and related parts to Iran.
“The ideal situation is that the products/technology are not controlled,” Fonda said. “We need to keep up with the regulatory changes, ensure we interpret them correctly and implement them appropriately. For instance, changes to the Commerce Control List could move a product from a controlled status to decontrolled, but it requires the ECO to know of the changes and work with the product owners to accurately classify the products and technologies on the most current regulations.”
“That’s the position this field should be headed toward,” he said. “The compliance officer needs to be able to be flexible all the while implementing robust and scalable processes to allow the company to change with the world as it changes. To me, that’s the type of untapped potential just sitting there in most organizations today.”
Fonda further explained it is most beneficial for export compliance officers working in collaboration with product development or sales managers to ensure business opportunities are vetted for compliance early in the cycle. That way, that those opportunities can be leveraged, yet still be in compliance with regulations, rather than spending large sums of money on programs that are destined to be halted by export control regulations.
“The export compliance officer should help drive a company to a higher state of business,” he said. “Who would have thought a compliance officer could do that? This is what we’re doing.”
DiVecchio, who works with scores of companies’ compliance officers in the New England area, said successful export compliance in his view requires the individual to be a:
• Diplomat—Dealing with all levels within and outside the employer’s environment.
• Tactician—Having both the theoretical and practical understanding of the subject.
• Psychologist—Being able to identify with the personnel with which one deals in order to achieve goals.
• Manager—Managing people and processes.
• Decision maker—Analyzing data and feeling confident to make the best decisions possible.
He also said an export compliance officer should possess skill sets for using logic, effective communications, people skills and confidence, which will lead the individual to being a recognized “problem solver.”
“These positions have moved from glorified administrators to corporate compliance officers due to the critical nature of the position in the realm of corporate governance within the employer’s environment,” DiVecchio said.
Where does the ECO reside?
Where an export compliance officer sits within the corporate structure, depends on the size of the company and nature of its business. Ideally, the position should be within a department that has access to information about the entire operation globally.
“Ideally, the best organizations for the ECO to be positioned would be legal counsel, followed by finance,” DiVecchio said. “In some cases, the position could report to supply chain and logistics. Seldom will the position report to sales and marketing. Smaller companies might have the position report directly into the president or CEO.”
DiVecchio warned that companies should take “ownership” of their export compliance, not outsource it. “God forbid if you are under investigation by a federal agency, they will not consider mitigation if they observe that the company outsourced its compliance responsibility,” he said. “Only an in-house ECO is in the position to observe day-to-day activities, instill a compliance mindset and ensure that the compliance policies and procedures are implemented properly.”
That’s not to say that export compliance officers can’t work with outside resources, and many do. “A third party with the ‘street smarts’ and years of experience can greatly help the ECO keep up to date in the comprehensive and practical application of the compliance program,” DiVecchio said. “The third party consultant should be viewed as a mentor/advisor in guiding the ECO in implementation of a best practices-based compliance program.”
Import compliance officers, on the other hand, are generally licensed customs brokers, meaning they are required to take training and pass an exam issued by U.S. Customs and Border Protection. Import brokers are also in a position to provide assistance to a company. There are no recognized government licensing programs for export compliance officers, which makes it difficult for a hiring company to judge whether potential candidates have sufficient knowledge for the position.
In some companies, export and import compliance may be rolled into one position, but this increases the risk that the individual will not be able to sufficiently meet the demands of fulfilling both compliance responsibilities, according to DiVecchio.
Despite growing demand, many companies struggle to find highly qualified export compliance officers to place within their corporate ranks.
Jim Bartlett, former senior counsel for imports and exports at Northrop Grumman and publisher of the Daily Bugle, a 17-year-old free online newsletter focused on export/import regulatory changes, said the job postings that he receives from companies have jumped from an average of 25 per week three years ago to about 125 weekly job listings today.
“Some companies go on hiring sprees as corrective actions after export violations” and enforcement by the federal government, he said in an interview.
However, Bartlett said more companies are realizing that export compliance is not just about “avoiding punishment for violations, because trade compliance can improve a company’s competitiveness, move freight faster, and increase profits.”
Bartlett, who is a partner in the Dutch accounting/advisory company Full Circle Compliance, maintains a law office in Washington and teaches a master’s degree program in international trade for the University of Liverpool in London, said “I tell my students not to worry about the job market for compliance specialists, because it’s headed up. Regardless of who is in office, enforcement is increasing, and there will be more need for compliance specialists.”
Warren R. Carter, senior managing partner of the executive search firm – The QualiFind Group, has worked with both medium and large corporations (primarily in the automotive, aerospace, medical device and defense sectors) since 1997 to find and hire qualified compliance officers. He says these individuals are increasingly in demand.
Those individuals receptive to the headhunter’s calls tend to be at firms where they gained their experience and are now ready to leverage that experience for upward mobility.
“I can pretty much tell right away when a person in a compliance role is not taken seriously,” Carter said. “When I’m hearing their frustrations that means it’s easier for me to recruit that candidate into a role where they will be taken seriously.
“However, if I call someone who is revered and their opinions are listened to, then it will be extremely difficult to unseat that person for a new opportunity. And people in this industry know which companies are difficult to work for.”
The job of an export compliance officer in a large corporation pays well, about $150,000 to $300,000 for a vice president-level, and $125,000 to $175,000 for those with senior manager or director titles.
“Unfortunately, many mid-sized firms will tend to plug any eligible person they can get for the job at a reduced salary, as opposed to paying the market value for a highly qualified ECO,” Carter said.
There are compliance options for those companies who lack suitable export compliance capabilities in-house. Pitney Bowes, for example, manages cross-border e-commerce transactions on behalf of many large and small retailers and has developed sophisticated technology and a highly trained team of compliance specialists to ensure its clients don’t run afoul of export control regulations in the United States and abroad.
Jamie Dick, senior vice president of Pitney Bowes’ global supply chain operations, said many of his compliance specialists gained their experience in “luxury cross-border retail,” meaning that they have worked with some of the most sensitive goods, such as high-value works of art, in trade.
“They’re highly motivated to solve problems,” he said.
Dick said Pitney Bowes has a team that focuses primarily on export compliance.
“The regulations both in the U.S. and outside the U.S. are changing quickly,” he said. “We need our team not only to keep up with them, but to stay ahead of the curve.”
He explained that the company’s compliance staff also “read a lot and share what they learn with each other. There’s lots of cross-pollination within the group.”
Export compliance is “a must-get-right category of work,” Dick said. “If you make too many mistakes in that side of your business, you eventually won’t have a business.”
Source: Article by Chris Gillis for American Shipper