1. THE QUE GROUP WOULD LIKE TO THANK THE 2013 SPONSORS

2. Export Compliance Paul Stewart Chief Technology Officer/Export Compliance Officer Worthington Aviation Parts, Inc. Worthington Maintenance Repair and Overhaul Center

3. Who am I … – Paul Stewart, Chief Technology Officer and Export Compliance Officer for Worthington Aviation since 2004. Former employee of Component Control from 1998 to 2004, leaving as the Vice President of Quantum Product. QUE Group Board Member since 2009 and former QUE Group Liaison at Component Control. – Worthington Aviation specializes in Regional Turboprop, Commercial and Corporate aircraft. Established in 1998, Worthington has locations in Eagan MN. USA, Pompano Beach FL. USA, Tulsa Ok. USA, Brisbane Australia and Prague Czech Republic. http://lnkd.in/9GYE8S

4. In This Session … – Gain knowledge of common export classifications. – Learn the elements of a basic compliance program – Understand where functions are within Quantum to support your program – See how customizations can refine Quantum to better support your internal needs

5. What are the elements of an export? Export Control Classification Universal Harmonized Code (UHC) End User Information Country of Destination Country of Manufacturer

6. You are responsible for determining this classification As the exporter of record! Export Control Classification is a category code assigned to a commodity to determine if an export license is required to ship the goods.

7. The Harmonized Code – UHC – is used to determine duties, taxes and other tariffs in international trade when passing through customs. It does NOT determine licensing requirements! Establish in 1988 by the World Customs Organization, more than 200 countries recognize these codes. As of 2010, 98 percent of international trade used the Harmonized system

8. We Are In A Global Market Laws Change. Rules Change. The Debarred Lists Change. Customers Change. So you must always be diligent. BUT IVE NEVER WORRIED ABOUT THIS BEFORE. WHATS THE BIG DEAL?

9. Truth: Whether or not a product is mass-marketed around the world does not determine whether it is subject to U.S. export controls (though it may play a role in determining how tight a control will be placed on such a product). U.S. embargoes, for instance, often capture things as "simple" as toys and office equipment.. My products and services are mass-marketed around the world. They are not subject to U.S. Export Controls.

10. Truth: Everything can be (and is) subject to export controls. Even e-mails, telephone calls, and release of technologies (software, data, diagrams, etc) to non-exempt foreign nationals can be subject to U.S. export controls. My product or service does not have a military use, so it's not subject to U.S. export controls.

11. COMMERCIAL PRODUCT IS GOVERNED BY THE DEPARTMENT OF COMMERCE

12. This is the governing law for categorizing your product and determining if a license requirement exists. The Department of Commerce uses Export Control Classification Numbers – or ECCNs to categorize products. These are alpha- numeric codes. EAR (Export Administration Regulations)

13. EAR (Commercial Product) Criminal: $50K to $1 million or 5 times value of export, whichever is greater, per violation, 10 years imprisonment Civil: revocation of exporting privilege, fines $10K to $120K per violation Bass-Pro - $510K for shipping guns without a license Dr. Thomas Butler, Texas Tech – 2 years in prison for making fraudulent claims & unauthorized exports (biological agent) THE COST OF NON COMPLIANCE

14. Category 1 (Materials, Chemicals, Microorganisms, and Toxins ) 1C992.l – This most commonly relates to fire extinguishers, explosive cartridges associated with fire extinguishing systems.

15. 1A001.a – This most commonly relates to non organic flexible seals and gaskets and fuel bladders. Category 1 (Materials, Chemicals, Microorganisms, and Toxins )

16. 1C999.a – This most commonly relates to hardened steel ball bearings 3mm or larger

17. Category 6 (Sensors and Lasers) 6A998 – This most commonly relates to Weather Radar, Transponders, TCAS Computers

18. 7A994 – This most commonly relates to Data Processor Units, TCAS Computers, Air Data Computers, etc. Category 7 (Navigation and Avionics )

19. If it is electronic, and goes in the cockpit, it is likely a Category 6 or 7 item and will have the most restrictions on it for exports. RULE OF THUMB

20. Category 9 (Propulsion Systems, Space Vehicles and Related Equipment) 9A991 – This most commonly relates to Gas Turbine Engines and Aircraft Parts and Components Not Elsewhere Specified.

21. EAR 99 (Items subject to the EAR that are not elsewhere specified) EAR 99 – This most commonly relates to non aviation specific items consumables.

22. MILITARY PRODUCT IS GOVERNED BY THE DEPARTMENT OF STATE

23. ITAR (INTERNATIONAL TRAFFIC in ARMS REGULATIONS) This is the governing law for categorizing your product and determining if a license requirement exists For Military Product. The Department of State uses ITAR Codes to Classify product. These are roman numerals.

24. ITAR (Military Product) –Criminal: Up to $1 million per violation & 10 years imprisonment –Civil: seizure & forfeiture of article, revocation of exporting privilege, up to $500K fine per violation ITT – $30M for exporting night vision materials without license Raytheon fined $25M Boeing fined $4.2M Lockheed Martin fined $13M Dr. J. Reece Roth, University of Tennessee & Atmospheric Glow Technologies, Inc. THE COST OF NON COMPLIANCE

25. Category VIII Ground support equipment, Aircraft spare parts, and Engine spare spares to include Airframe spare parts and landing gear spare spares

26. Category XI Electronic equipment such as radar, radio, command and control systems, computer systems and cryptographic equipment

27. A product cannot be controlled by both DOS and DOC. Only one government entity will control the license determinations of a product. If you ever need to know who controls a product, you can submit a Commodity Jurisdiction request, or CJ.

28. THE EXPORTER OF RECORD IS RESPONSIBLE FOR OBTAINING A LICENSE. THAT INCLUDES DETERMINING WHAT THE CLASSIFICATION OF THE PRODUCT IS. IF YOU SHIP U.S. MADE GOODS ANYWHERE IN THE WORLD, OR YOU SHIP PRODUCT OUT OF THE UNITED STATES YOU ARE THE EXPORTER OF RECORD.

29. Many changes are being implemented this fall through the Presidents Export Reform Initiative. John Bushnells presentation from July 24 th can be downloaded on the QUE Group website. That session covered the export classification changes and new exemptions and rules that impact the Aviation Industry

30. So now what? GET ON BOARD With A Export Compliance Program. What are things an export compliance program consist of?

31. Whats In An Export Compliance Program? Customer Screening and Due Diligence Product Classifications and Control License Applications and Enforcement Other Export Related Elements Education Documentation and Record Keeping

32. Customer Screening and Due Diligence Monitor who you do business with.

33. Customer Screening and Due Diligence The End Use Certificate is a way for you to do your Due Diligence on the customer. All new customers should complete one of these and return it back to you as part of the account setup. The End Use Certificate is a way for you to do your Due Diligence on the customer. All new customers should complete one of these and return it back to you as part of the account setup.

34. Customer Screening and Due Diligence Our website has a special page that provides answers To common questions. This is also where you can find Our end use certificate. Our website has a special page that provides answers To common questions. This is also where you can find Our end use certificate.

35. Customer Screening and Due Diligence You can find a link to this page at the bottom Of every page on the website. You can find a link to this page at the bottom Of every page on the website.

36. Customer Screening and Due Diligence In the company records, we use field check box to indicate if the EUC has been filed. Our EUC is good for three years.

37. Customer Screening and Due Diligence We also use the Document Imaging Module to attached the signed EUC to the company record.

38. Customer Screening and Due Diligence At Worthington, when a new company is created, an Automated Notice is sent to the originator, and our accounting team. The notice has a report containing similar named companies. This can be done with Event Manager, or Third Party Crystal Report Tools. At Worthington, when a new company is created, an Automated Notice is sent to the originator, and our accounting team. The notice has a report containing similar named companies. This can be done with Event Manager, or Third Party Crystal Report Tools.

39. Customer Screening and Due Diligence NOTE: You can also use the new Add Unverified capabilities in Company Management to force the review of new company records. This is very handy for controlling the verification of data, then once verified, the company record can be activated NOTE: You can also use the new Add Unverified capabilities in Company Management to force the review of new company records. This is very handy for controlling the verification of data, then once verified, the company record can be activated

40. Customer Screening and Due Diligence Our Accounting Team screens the new Company Names, Address and Persons For any potential flags using eCustoms Services. Once they are screened they are put on a watch list and we are alerted If their status changes. Our Accounting Team screens the new Company Names, Address and Persons For any potential flags using eCustoms Services. Once they are screened they are put on a watch list and we are alerted If their status changes.

41. Customer Screening and Due Diligence The Visual Compliance export control software screens many U.S. government lists, including: Department of Commerce Denied Persons [BIS] Department of Commerce Entity List [BIS] Department of Commerce "Unverified" List [BIS] Department of Treasury Specially Designated Nationals and Blocked Persons, including Cuba and Merchant Vessels, Iran, Iraq and Merchant Vessels, Sudan Blocked Vessels [OFAC] Department of Treasury Specially Designated Terrorist Organizations and Individuals Department of Treasury Specially Designated Narcotic Traffickers and Narcotics Kingpins Department of Treasury Foreign Narcotics Kingpins Department of Treasury Palestinian Legislative Council List (PLC) Department of State Designated Terrorist Organizations Department of State Terrorist Exclusion List (TEL) U.S. Federal Register General Orders Department of State Arms Export Control Act Debarred Parties Department of State International Traffic In Arms Regulations Munitions Export Control Orders Department of State Nonproliferation Orders Department of State Missile Proliferators Department of State Chemical and Biological Weapons Concerns Department of State Lethal Military Equipment Sanctions Foreign Persons Designated Under the Weapons of Mass Destruction Trade Control Regulations The Visual Compliance export control software screens many U.S. government lists, including: Department of Commerce Denied Persons [BIS] Department of Commerce Entity List [BIS] Department of Commerce "Unverified" List [BIS] Department of Treasury Specially Designated Nationals and Blocked Persons, including Cuba and Merchant Vessels, Iran, Iraq and Merchant Vessels, Sudan Blocked Vessels [OFAC] Department of Treasury Specially Designated Terrorist Organizations and Individuals Department of Treasury Specially Designated Narcotic Traffickers and Narcotics Kingpins Department of Treasury Foreign Narcotics Kingpins Department of Treasury Palestinian Legislative Council List (PLC) Department of State Designated Terrorist Organizations Department of State Terrorist Exclusion List (TEL) U.S. Federal Register General Orders Department of State Arms Export Control Act Debarred Parties Department of State International Traffic In Arms Regulations Munitions Export Control Orders Department of State Nonproliferation Orders Department of State Missile Proliferators Department of State Chemical and Biological Weapons Concerns Department of State Lethal Military Equipment Sanctions Foreign Persons Designated Under the Weapons of Mass Destruction Trade Control Regulations

42. Customer Screening and Due Diligence ALL Companies and People are screened to ensure They are not on the Denied Parties list and/or their country Is not embargoed. ALL Companies and People are screened to ensure They are not on the Denied Parties list and/or their country Is not embargoed.

43. Customer Screening and Due Diligence If a company is found to have violations or restrictions, we Place warnings on the company for all transactions. If a company is found to have violations or restrictions, we Place warnings on the company for all transactions.

44. Whats In An Export Compliance Program? Customer Screening and Due Diligence Product Classifications and Control License Applications and Enforcement Other Export Related Elements Education Documentation and Record Keeping

45. Product Classification and Control The Part Master Record, Additional Info Tab, holds the pertinent Export Classification information.

46. Product Classification and Control Worthington has used the Screen Designer Module to simplify This for users, and made it mandatory for every part entered. Worthington has used the Screen Designer Module to simplify This for users, and made it mandatory for every part entered.

47. A summary index has been provided to help identify commonly Used codes. These are NOT all possible codes. A summary index has been provided to help identify commonly Used codes. These are NOT all possible codes. Product Classification and Control

48. .. And, drop down menus have been added for easy input of Classification Codes Product Classification and Control

49. The ECO checkbox is there to indicate the classification has been Reviewed by the Export Compliance Office, and date-time stamps When it was reviewed. The ECO checkbox is there to indicate the classification has been Reviewed by the Export Compliance Office, and date-time stamps When it was reviewed.

50. Product Classification and Control Additionally, we want to track the source of the classification information, so we added a drop down selection box.

51. Product Classification and Control If a part is added to an international order, any order, and it has not been reviewed by the ECO, an automated Email notice is send to the ECO To alert them of the needed review the part record.

52. Product Classification and Control Notices like this can be generated by the Event Manager Module, or a third party Crystal Reporting tool.

53. Product Classification and Control Just like the Company Records, NEW Part Numbers can also be controlled. You can use the Add Unverified functionality to force review of the part record.

54. Product Classification and Control However, simply identifying them is not enough. Using the Part Warnings, we place warnings on all ITAR controlled product.

55. Product Classification and Control We also use special colored tags to visually identify ITAR controlled parts..

56. Whats In An Export Compliance Program? Customer Screening and Due Diligence Product Classifications and Control License Applications and Enforcement Other Export Related Elements Education Documentation and Record Keeping

57. LICENSE APPLICATIONS AND ENFORCEMENT An Export License Is required from the Department of State, or the Department of Commerce in order to send controlled product outside of the US borders. An Export License Is required from the Department of State, or the Department of Commerce in order to send controlled product outside of the US borders.

58. A Re-Export License Is required to sell or Move controlled goods From one foreign party To another. A Re-Export License Is required to sell or Move controlled goods From one foreign party To another. LICENSE APPLICATIONS AND ENFORCEMENT

59. Written authorization is Required before you engage in ANY negotiation or pricing activity of brokered goods. Written authorization is Required before you engage in ANY negotiation or pricing activity of brokered goods.

60. LICENSE APPLICATIONS AND ENFORCEMENT Brokering is when you Arrange, negotiate or facilitate the sale of goods which are purchased from a Foreign company and shipped to the Foreign end user. Brokering is when you Arrange, negotiate or facilitate the sale of goods which are purchased from a Foreign company and shipped to the Foreign end user.

61. LICENSE APPLICATIONS AND ENFORCEMENT How do I know if I need a license? If it is military product you need a license. If you want arrange a sale of foreign military product, you need approval BEFORE you can begin any discussions with the customer. How do I know if I need a license? If it is military product you need a license. If you want arrange a sale of foreign military product, you need approval BEFORE you can begin any discussions with the customer.

62. All employees Are required to Watch the introduction Video on Export Compliance Awareness All employees Are required to Watch the introduction Video on Export Compliance Awareness To help you determine if you need a license… LICENSE APPLICATIONS AND ENFORCEMENT

63. For sales and support service employees, transaction risk assessment flow charts are available to help you determine compliance procedures.

64. LICENSE APPLICATIONS AND ENFORCEMENT Additionally, restricted country cheat sheets are distributed as desktop aids.

65. LICENSE APPLICATIONS AND ENFORCEMENT Export License information is held against the company record. Export License information is held against the company record.

66. LICENSE APPLICATIONS AND ENFORCEMENT This utility keeps track of expiration dates, Approved amounts and the remaining amount On the licenses. This utility keeps track of expiration dates, Approved amounts and the remaining amount On the licenses.

67. LICENSE APPLICATIONS AND ENFORCEMENT We can restrict a company to export license Transactions only if we choose to. We can restrict a company to export license Transactions only if we choose to.

68. LICENSE APPLICATIONS AND ENFORCEMENT The export license number is recorded In the Sales Order Header. The export license number is recorded In the Sales Order Header.

69. LICENSE APPLICATIONS AND ENFORCEMENT When selling under the export license, the sales Person identifies which license is being used in The Sales Order Header. When selling under the export license, the sales Person identifies which license is being used in The Sales Order Header.

70. LICENSE APPLICATIONS AND ENFORCEMENT You can also identify licenses at each line Item level. You can also identify licenses at each line Item level.

71. LICENSE APPLICATIONS AND ENFORCEMENT You can pick from all licenses in the system. This is great when using a freight forwarder. BUT – if its ITAR, all parties to the transaction Must be on the license! You can pick from all licenses in the system. This is great when using a freight forwarder. BUT – if its ITAR, all parties to the transaction Must be on the license!

72. LICENSE APPLICATIONS AND ENFORCEMENT Using the Forms Designer Module, Worthington has built in Alerts on the Pick Ticket Document to show warehouse staff pertinent export license information. Using the Forms Designer Module, Worthington has built in Alerts on the Pick Ticket Document to show warehouse staff pertinent export license information.

73. LICENSE APPLICATIONS AND ENFORCEMENT There are also functions build into the Shipping Order Module that allow you to put Export Hold on shipments Pending a review, or license approval There are also functions build into the Shipping Order Module that allow you to put Export Hold on shipments Pending a review, or license approval

74. LICENSE APPLICATIONS AND ENFORCEMENT When purchasing items requiring a license, the Purchasing Team alerts the warehouse. When purchasing items requiring a license, the Purchasing Team alerts the warehouse.

75. Again, Custom Forms allow us to clearly alert the Warehouse and Quality Teams the classification Of the items. Again, Custom Forms allow us to clearly alert the Warehouse and Quality Teams the classification Of the items.

76. Whats In An Export Compliance Program? Customer Screening and Due Diligence Product Classifications and Control License Applications and Enforcement Other Export Related Elements Education Documentation and Record Keeping

77. We record issues, interactions and the like In Quantums Contact Management Module We record issues, interactions and the like In Quantums Contact Management Module

78. LICENSE APPLICATIONS AND ENFORCEMENT Each entry is date time stamped and we can Easily run reports or search for specific entries. This method of documentation exceeds the Government recommendations for compliance Each entry is date time stamped and we can Easily run reports or search for specific entries. This method of documentation exceeds the Government recommendations for compliance

79. LICENSE APPLICATIONS AND ENFORCEMENT Each entry is date time stamped and we can Easily run reports or search for specific entries. This method of documentation exceeds the Government recommendations for compliance Each entry is date time stamped and we can Easily run reports or search for specific entries. This method of documentation exceeds the Government recommendations for compliance

80. LICENSE APPLICATIONS AND ENFORCEMENT If you use Shipping Management, status codes (like export hold) can create, and open contacts for you, and then close them when the shipment status is changed. This help define, and drive a clear process for compliance issues If you use Shipping Management, status codes (like export hold) can create, and open contacts for you, and then close them when the shipment status is changed. This help define, and drive a clear process for compliance issues

81. Whats In An Export Compliance Program? Customer Screening and Due Diligence Product Classifications and Control License Applications and Enforcement Other Export Related Elements Education Documentation and Record Keeping

82. Sales Order Other Features End Use and Destination Options are available. This helps you record, and control where the product is ultimately going, and what it will be used for. End Use and Destination Options are available. This helps you record, and control where the product is ultimately going, and what it will be used for.

83. Repair Order Other Features End Use and Destination Options are available. This helps you record, and control where the product is ultimately going, and what it will be used for. End Use and Destination Options are available. This helps you record, and control where the product is ultimately going, and what it will be used for.

84. Purchase Order Other Features End Use and Destination Options are available. This helps you record, and control where the product is ultimately going, and what it will be used for. End Use and Destination Options are available. This helps you record, and control where the product is ultimately going, and what it will be used for.

85. Shipping Order Details The Shipping Order Pulls in several of the export elements required. The export classification is a reference for the type of product you are selling. Watch out for those DUAL USE items! The Shipping Order Pulls in several of the export elements required. The export classification is a reference for the type of product you are selling. Watch out for those DUAL USE items!

86. DUAL USE Dual Use items are products that can be used in both a commercial and military function. Dual Use items are identified and controlled through the Wassenaar Arrangement, made up of 41 countries. Dual Use items are products that can be used in both a commercial and military function. Dual Use items are identified and controlled through the Wassenaar Arrangement, made up of 41 countries.

87. DUAL USE For more information On Dual Use items, visit the Wassenaar Arrangement website. www.wassenaar.org If you are unfamiliar with the DUAL USE RULES, or think it does not apply to you, this is a must read! For more information On Dual Use items, visit the Wassenaar Arrangement website. www.wassenaar.org If you are unfamiliar with the DUAL USE RULES, or think it does not apply to you, this is a must read!

88. Whats In An Export Compliance Program? Customer Screening and Due Diligence Product Classifications and Control License Applications and Enforcement Other Export Related Elements Education Documentation and Record Keeping

89. Where to Find More Information www.wassenaar.org www.pnddtc.state.gov The Bureau of Industries and Securities (BIS) website has great Free training. http://www.bis.doc.gov/seminarsandtraining/seminar-training.htm The Society For International Affairs is a great resource http://www.siaed.org/ The National Export Initiative provide free training And links to other training resources. http://www.export.gov ASA Has a special training workshops centered on Exports that Will be available at the ASA tradeshow.

90. Key Points to Take Home … – Your responsibilities as an exporter – The areas in Quantum that will help you enforce your policies – The basics of export control – Where to go for additional information.

91. Your Turn! ? Questions? How to contact me: Paul Stewart pstewart@worthingtonav.com Please remember to complete your conference evaluation

92. Disclaimer The Content provided is expected to be for the sole use of paying members and not to be disseminated outside of its intended audience, or sold without prior consent of both the QUE Group and the originator of the document or presentation. For Questions regarding the QUE Group, please visit www.quegroup.orgwww.quegroup.org