Export Control Manual

Export Controls & Economic Sanctions

 Export Control Manual 2

Contents
Introduction 4 Executing an export transaction 17
– This manual – its purpose 4 – What is an export? 18
Organization 5 – Export license 18
– Sensitive Country Committee 6 – Mandatory check before the export transaction
– Product Safety & Regulatory Affairs (PSRA) 6 is executed 20
– PSRA – Global Trade Control Manager (TCM) 6 – Documenting your shipments 21
– PSRA – US Trade Control Manager 6 – Potential red flag signals 22
– PSRA – Export Control Officers (ECOs) 6 The AEB tool and how to use it 23
– Senior Legal Trade Control Counsel – (TCC) 7 – What is the AEB tool? 24
– Internal Audit (AUD) 7 – AEB third parties screening prior to transactions 24
– Information Management 7 – AEB export transaction screening 24
The 3 Ps 8 Contracts and End-User-Statements 26
– The 3 Ps of export control 9 – Terms and conditions and contracts 27
Product – what is our product? 10 – End-User Statement 27
– Items – goods, technical data, services and information 11 US Recusal 28
– Classification tree 11 Training 29
– Purpose – what is it going to be used for? 12 Irregularities and concerns 31
Parties – who am I shipping it to? 13 – Monitoring and audit 32
– Designated Party screening 14
Place – where am I shipping? 15
– Sensitive Countries 16
Our policy 3

Our policy
AkzoNobel’s policy is to comply fully with all applicable EU, US and other Any employee who is aware of or suspects questionable conduct or
countries' export controls and sanctions, including trade and finan- potential violations of export controls or sanction regulations or the rules
cial embargoes. in this manual should immediately report these concerns to his or her
Export Control Officer or to the Legal Group, who will investigate and
Export control laws restrict the shipment, transfer, transmission, export address those concerns. AkzoNobel will not retaliate against individ-
or re-export of certain items from one country to another and to certain uals for asking questions, raising concerns about compliance issues, or
designated parties and individuals. These items include goods, parts, reporting possible misconduct in good faith. You should never hesitate
software, data, technology and services. to contact your Export Control Officer with any questions or concerns
about export or sanctions compliance.
The export and re-export of certain items are regulated to safeguard
national security and foreign policy by preventing the spread of weapons
of mass destruction, controlling the trade in military and dual-use items,
and controlling transactions with sanctioned or embargoed countries,
persons and entities. To carry out an export or re-export, the written
authorization or export license of one or more government agencies may
be required. In some cases, the transaction may be outright prohibited.

All AkzoNobel employees and affiliates need to adhere strictly to export

control laws and sanctions regulations. Failing to comply can result in
criminal penalties and civil liabilities for AkzoNobel, our employees and
our business partners. Penalties may include significant fines, disgorge-
ment of profits, multiple years of imprisonment, loss of export privileges,
previously-approved licenses being revoked, and goods being seized
or forfeited.

Because complying with all applicable export controls and sanction regu-
lations is so important for continuation of our business, any employee
who knowingly violates them or the provisions of this manual will be
subject to appropriate disciplinary action, including dismissal.
 Introduction 4

Introduction • control the export of certain items or technologies to a specific country compliance framework in place is a competitive edge for our business.
Why compliance with export controls is important • stop certain individuals from traveling to a specified country Seamless integration of export control procedures allows us to quickly
Exporting our products and technology around the world is essential to respond to business opportunities and smoothly carry out Supply Chain
our business. This is why it’s vital that we get things right. Sanctions lists are generally easy to find, since each government execution, while at the same time controlling trade risks.
publishes its own sanctions lists. The difficulty in complying with the
In particular, we need to comply at all times with relevant export controls various sanctions is generally in matching names, especially where the
and economic sanctions regulations – not just to avoid penalties, and sanctioned party knows about the sanction and attempts to hide its This manual – its purpose
protect our employees, but because our integrity, reputation and our true identity. This manual is mandatory for all AkzoNobel employees and affiliates and
future ability to do business depend on it, and because we are committed complements existing training materials. It is designed to explain the
to the highest standards of international business ethics. Export controls are national and international regulations on the cross- general principles behind the national and international export control
border trade of strategic goods, information and technology. Export regulations and sanctions you need to follow when exporting products
controls aim to ensure that transfers of these strategic goods, infor- or technology, and our compliance policy. Export controls and economic
In this manual the terms “product” and “item” mean all physical or
mation and technologies do not contribute to developing or enhancing sanctions regulations are the essence of global trade controls.
tangible goods, software, and intangible goods like technology,
military capabilities that undermine international and regional security and
­information and services.
stability, and that products, information and technologies are not diverted This manual aims to help you comply with export controls and sanctions
to support those military capabilities. at all times. Whenever you’re involved in an international transaction, use
the checklist, flow chart and guidelines included in this manual. These will
What are export control and sanctions? Export control and sanctions are generally interrelated, but not always. support your due diligence activities and help you to determine if what
Countries and organizations around the world, including the United you’ve been asked to do complies with the relevant regulations.
Nations, regulate the export and re-export of certain products, tech- Risks and penalties
nology, software and services. In certain circumstances, they may also Violating national or international export control regulations can be a The Compliance function is responsible for reviewing and updating this
place restrictions on the individuals, companies and countries that we civil or criminal offense. In addition to the damage to our worldwide manual at least once a year and otherwise as needed to reflect changes
can do business with. reputation, a violation can also lead to significant penalties, fines, trade in regulatory requirements and business practices.
restrictions and possible imprisonment. And, legal action can be brought
Sanctions and embargoes can be defined in many ways, but are generally not only against AkzoNobel as an entity, but also against management
directives or measures imposed by national governments and interna- and/or individual employees. Examples of violations and penalties can be This is a living document. Regular updates and new content are
tional organizations to achieve public policy aims. They come in a variety found here in the Summary of Major US Export Enforcements. added as needed. You should regularly check this manual for changes
of types, the choice of which depends on the aim of the country imposing and updates.
the sanctions. Examples of types of sanctions include measures that: Opportunities and reputation building
• target assets, such as freezes or restrictions on sales Preventing violations helps safeguard our reputation as a sustainability
• target business relationships leader and a reliable business partner. Having a good export control
 5

Organization
Organization 6

The organizational principles are as follows: PSRA – Global Trade Control Manager (TCM)
The Global Trade Control Manager:
Sensitive Country Committee • manages product classification and embedding of product classifica-
There are risks in doing business with parties in certain countries. These tion in business systems
risks may involve regulatory non-compliance, adverse publicity and • manages effective operation of the shipment screening tool AEB
potential damage to our reputation. The risks may relate to security, • assesses shipment block release forms (non-US) and approves/
safety and payment. To prevent, reduce and manage these risks, the declines release
Executive Committee set up the Sensitive Country Committee. • conducts annual risk assessment and monitors compliance with the
export control framework
The Sensitive Country Committee consists of the: • oversees performance management and education of export control
• General Counsel officers.
• Director Compliance
• Managing Director of Performance Coatings Business Area. PSRA – US Trade Control Manager
The US Trade Control Manager:
This committee reviews countries where there are issues relating to export • oversees and assesses the US part of product classification
controls, corruption, human rights, financial and investor concerns, and • conducts periodic risk assessment and monitors US businesses
safety/security, and identifies whether additional safeguards should be • assesses shipment block release forms (US) and approves/declines
put in place to reduce or manage risks to AkzoNobel. release
• oversees performance management and education of US export
The Sensitive Country Committee is responsible for maintaining and control officers.
making available the list of countries for which trade is banned or
restricted for AkzoNobel businesses. PSRA – Export Control Officers (ECOs)
Export Control Officers located in the businesses, and in cooperation with
Product Safety & Regulatory Affairs (PSRA) the PSRA Global Trade Control Manager, execute, manage and improve
PSRA is responsible for providing and maintaining a framework export control compliance across the global SMU business. ECOs are
that ensures that AkzoNobel products and sales of AkzoNobel responsible for:
products comply with product regulations, export controls, and sanc- • Awareness: ensure trade control rules are available to designated
tions regulations. individuals in the business and ensure designated individuals have
completed the relevant trade controls training.
The PSRA Director supervises the responsibilities of the Trade
Control Organization.
 Organization 7

• Classification: ensure all military and dual-use products and tech- ECOs ensure that all military and dual-use products and technology in the Internal Audit (AUD)
nology in the business are identified and classified. Maintain a businesses are identified and classified, and that an up-to-date register Internal Audit audits and reports to management whether:
classification registry. of the classification is maintained. They also make sure that appropriate • AEB operates effectively
• Licenses: ensure licenses are in place and notifications are made tools and controls are in place and function effectively, and that shipments • shipment documentation is retained adequately
for relevant products and technology in accordance with laws are checked against lists of sanctioned countries and Designated Parties. • licenses are applied for and notifications made in accordance with
and regulations. Shipments to countries on the Sensitive Country List will be submitted PSRA instructions
• Record Keeping: Ensure that records relating to exports of controls for approval to the Senior Legal Trade Control Counsel. • the right contracts and End-User Statements are in place.
products are kept as required.
• End-User Statements: Ensure End-User Statements are obtained. ECOs ensure all appropriate licenses and End-User Statements are in
• Shipment control: ensure the AEB tool is in place and functions place and the required notifications are made for our products and tech- Information Management
effectively. Check defined shipments against sanctioned countries nology in accordance with laws and regulations and internal rules. And, Information Management:
and denied parties. Process shipments to countries on the Sensitive they assess the risk of violating laws and regulations related to exports, • carries out the implementation of AEB across all of AkzoNobel
Country List and apply the Sensitive Country Guidelines. re-exports, imports and Designated Parties. • keeps AEB up-to-date (patches, updates, etc.).
• Reporting: report incidents to management, BA Export Control
Manager and Operations and periodically report blocked shipments. Senior Legal Trade Control Counsel – (TCC)
• Continuous improvement: self-assess the control framework, report The Senior Legal Trade Control Counsel executes our export control
deviations to management and coordinate corrective action. policy by providing regular guidance and updates on global export
• Support: provide export control support to all areas of the business, controls and sanctions regulations.
including Supply Chain, Sales, RD&I Projects and Technology.
The Senior Legal Trade Control Counsel:
The Export Control Officers carry out the day-to-day export control oper- • prepares the rules on export control and provides general training
ations at the Business Area, business unit, and regional levels. • advises on developments and interpretation of law
• conducts investigations into violations
The ECO is the first point of contact for business colleagues. He or she • approves trade to Sensitive Countries
provides support to the business contacts and refers questions to the • periodically tests the classification framework.
Global Trade Control Manager or Senior Legal Trade Control Counsel,
as required. Each ECO provides continuous awareness training to his or
her respective organizations and reports risks to management and the
Global Trade Control Manager. Together with the business, they ensure
appropriate actions are taken to mitigate risks.
 8

The 3 Ps
 The 3 Ps 9

The 3 Ps of export control

Export control and sanctions can be categorized using the 3 Ps of export control compliance.
Following the 3 Ps will guide you when deciding:
• which products can be exported, and what is their purpose or use
• what parties will finally use the product
• what places can the product be exported to.

You should follow the 3 Ps in this order. Why? When we talk about export control, the product
is linked to the place it is being exported to. Product plus place (country) may result in an export
license being required or the transaction being prohibited. To verify license requirements or
­prohibitions, you also need to know who the final recipient of your product is (i.e., the end-user).
This way of following the 3 Ps illustrates the logic of the export control process and how this
manual is structured.
 10

Product – what is our product?

Product – what is our product? 11

Items – goods, technical data, services and For further guidance on what is covered by technology, please see the
information trade control web site.
You should interpret "product" very broadly. Most of our products consist
of various components or ingredients, processed according to recipes Classification tree
and formulas. In some cases, the end-product will determine the export The designed end-use of a product is key in determining whether a
control requirements. In other cases, the ingredients of a product will product is subject to export controls.
determine the export control requirements. It's where the product,
components and technical information originated and where they are There are three categories:
being exported that define the export control aspects of the product. • military products
• products that can be used for both civil and military purposes, i.e.
"dual-use” products
Don't forget that technical information should also be classified. • non-controlled products.
Technical information includes software, services and technology
associated with the product. How the EU and the US classify products can differ slightly. Easy-to-use
classification trees have been developed that will help all AkzoNobel
employees to classify products properly.
End-products vs ingredients / components
As an example, one of AkzoNobel's main categories of end-products
is coatings. Coatings consist of various ingredients. If an ingredient can When a product becomes obsolete, the classification and restrictions
be re-extracted from the end-product, that ingredient also needs to be for the product still apply! Keep this in mind when clearing stock
classified. If an ingredient is shipped separately, that ingredient also needs and supplies.
to be classified. The recipe or formula information of that product will have
the same classification and control.

Technology
EU and US laws stipulate that technology used for the development,
production or use of controlled goods is also subject to export controls.
Often, authorization must be obtained before exporting technology
concerning controlled goods. The term "technology" has been defined
very broadly, and includes formulations, manuals and instructions, as well
as any descriptions, blueprints, diagrams or other information related to
the development, production or use of certain goods.
 Product – what is our product? 12

We generally use a top-down approach to classify a product, using the Certain choices in the design process may make the export control Purpose – what is it going to be used for?
following as a guide. requirements for the sale of the product more or less restrictive. Your Restrictions on exports vary according to exporting country, but
• Is the product a military item? regional Export Control Officer needs to be involved in the early stages strict export controls usually apply to any product that has military or
• If no, is the product listed or non-listed dual-use? of product development, purchasing or sales. nuclear applications.
• If no – the product is not controlled.
Changes in regulations Export controls aim to restrict any business activity with individuals and
The higher the classification, the more strictly controls will apply. EU and US export controls change frequently. Even small changes entities that are engaged in certain military- or defense-related activities,
in classification specifications can cause a product to change from or the development or proliferation of chemical, nuclear, or biological
The regional Export Control Officer, together with the relevant product non-classified to classified status, or vice versa. Changes in sanctions weapons of mass destruction or activities related to the development of
specialist or chemist, will determine the classification for each product regulations can also mean a product is banned for export to a designated missile technology.
that AkzoNobel exports or will export. Each change to an existing country overnight or is allowed again.
product, new product developed, or new or changed product sourced This is why business units must remain vigilant and carry out a ­ ppropriate
from external suppliers must be classified before that product may You should ensure that you stay abreast of regulatory developments levels of documented Designated Party screening to ensure that they do
be exported. that may affect your products as well as relevant updates to this manual. not supply AkzoNobel products either directly or indirectly, via a third-party
supplier, to a person, entity, or body engaged in a p
­ rohibited "end-use".
The Export Control Classification Procedure describes the methodology AN Controlled Product list
for collecting, reviewing and processing data needed to determine and All export classification activities are performed under local laws but Whenever a transaction includes export to a sanctioned country and/or
assign a European export control classification, a US export control documented centrally in the business unit or BA. This process helps whenever products subject to export controls are to be exported, you
classification, and any equivalent when required by any regional, ensure accuracy, completeness, consistency and efficiency. The Export must conduct Designated Party screening, including verification of the
country, or local export control laws and regulations. The Export Control Control Officer is responsible for maintaining up-to-date classification intended end-use of the product (see below).
Classification Procedure can be found here. records of all controlled items and products.
Additionally, when an export license is required, an End-User Statement
New developments and product changes PSRA, the Global Trade Control Manager, the Senior Legal Trade Control (EUS) must be completed prior to the transaction. The end-user has to
Each new product that AkzoNobel exports must be classified. This Counsel and Audit must have access to all classification records that are have the EUS authorized or certified by local authorities.
can be either a new product developed or a new product or ingredient stored in the respective business ERP systems or product classification
purchased. databases. If you want to know if and how a product is classified, consult For further information on EUS, see the chapter on Terms & Conditions,
your ERP system product information. If you don't have access to the Contracts and EUS below.
A product that is changed must also be classified. An existing classi- ERP system or the export control information is not captured or acces-
fication must be verified and adapted when needed before an export sible, you should contact your Export Control Officer.
transaction is considered.
 13

Parties – who am I shipping it to?

 Parties – who am I shipping it to? 14

Designated Party screening

Generally speaking, a Designated Party (DP) is any entity, person or vessel that a government has
put on a restricted party list.

Often, those on a restricted party list are considered to have engaged in illegal activities of some
kind. There are obvious restricted parties, like known terrorists or arms traffickers. Lists of restricted
parties don’t stop at the obvious, though; they also include entities that have illegally exported
controlled commodities and financial institutions that are known as safe havens for money laun-
dering. In addition, you need to bear in mind that entities owned or controlled, directly or indirectly,
for more than 50% by one or more Designated Parties are considered restricted as well.

In order to manage the risk of interacting with or shipping to Designated Parties, AkzoNobel
screens both our customers and other parties to a transaction. Designated Party screening or
end-user due diligence is the process of cross-referencing the parties involved in the transaction
against the many (and frequently changing) lists of restricted parties published by different govern-
ments, international organizations (i.e., the United Nations), and governmental agencies.

More guidance on Designated Party screening and end use(r) due diligence can be found here.
 15

Place – where am I shipping?

 Place – where am I shipping? 16

Sensitive Countries
National governments and the international community use sanctions to advance public policy
goals and exert influence on conflicts within and between countries, without using military inter-
vention. Common types of sanctions are arms embargoes, freezing assets, travel restrictions
and trade restrictions. In some cases, national authorities set out these international sanctions
in individual countries’ sanctions regimes. You should carefully check the sanctions regimes that
may apply to your export.

Customs, sanctions and export authorities in general monitor compliance with sanctions when
products, information, software, technology and services from and to certain countries are
imported or exported. Customs, sanctions and export authorities issue licenses and grant exemp-
tions related to compliance with export and sanctions regimes.

The Sensitive Country Committee reviews countries with recognized issues concerning export
controls corruption, human rights, financial and investor concerns, and safety/security, and
identifies whether additional safeguards should be imposed to reduce or manage our risk. This
committee maintains a list of countries to which exports are banned, restricted or subject to
approval, the Sensitive Countries List. This committee reviews the Sensitive Countries List on a
quarterly basis and makes changes as appropriate.
 17

Executing an export transaction

 Executing an export transaction 18

With the 3 Ps in mind (Product, Parties, Place), each export transaction It’s important to remember that the rules on the export of products from • 10%
can be carried out using a similar checklist. the original exporting country may apply throughout the transaction. The De Minimis US content for foreign-produced items is 10% if the
These can include restrictions on places where the item or product goes destination of the product is a “terrorist supporting county”. This
What is an export? while in transit to its final destination. means that foreign-produced items with US parts, components or
Products materials may not be sold to one of these countries if the amount of
Most parties think of export as physically shipping a product to a foreign Deemed export US parts, components or materials is greater than 10% of the item’s
destination. And that’s certainly likely to be true for the vast majority of Release of controlled technology or information to foreign persons total value.
our exports. in the US is "deemed" or considered to be an export to the person’s • 25%
country or countries of nationality. Typical organizations using deemed For all other destinations, items with greater than 25% US content by
But an export can also mean the transmission of technology or informa- export licenses include universities, high technology research and value are subject to the EAR.
tion, including software, from one country to another. This transmission development institutions, bio-chemical firms, as well as the medical and
can be done via any form of communication, including telephone, mail, computer sectors. Export license
email, and download as well as by physical transfer. License requirement
US export control regimes control deemed exports. Deemed export The EU and the US differ as to when you need a license to export.
In this manual where we talk about “products” and “items” we mean requirements apply when the product is of US origin or has US compo- Sometimes, you must obtain both EU and US licenses (see US compo-
all physical or tangible goods, software, and intangible goods like tech- nents or technology. The EU has no deemed export rule. nents and Re-export).
nology, information and services.
US components It is safe to say that military products always require an export authori-
Re-export The level of US-origin components in non-US products may determine zation or license. In general, dual-use items, whether exported from the
“Re-exporting” is the process by which AkzoNobel ships a product from whether the US export control regulations apply as well. This is known EU or the US, will also require an export authorization. Other controlled
one country to another, and then AkzoNobel or another party re-exports as the “De Minimis rule”. A detailed description of the De Minimis rule items (EU – Non-listed dual-use / US – EAR 99) in principle do not require
that product to a third country. A re-export can also occur if AkzoNobel can be found on the US BIS website here. a license, but exceptions may apply. You therefore always need to check
imports a product from a supplier, and then re-exports the product to the license requirements with your Export Control Officer before an export
our customer. De Minimis US content is the amount of US content, as determined transaction is considered.
by percentage of value of the US content in the end-item, required to
US export control regimes control re-exports of products and technology. make a foreign-produced item subject to the US Export Administration
Re-export restrictions also apply when the product is of US origin (i.e., Regulations (EAR). The general thresholds are:
the product comes from the US) or has US components, parts or tech- • 0%
nology-– even if the product itself was manufactured outside of the US. For some items, there is no De Minimis content, meaning that any
The EU has no re-export rule, but bear in mind that EU export controls US content will make the foreign-produced item controlled under the
will still apply to any re-export from an EU country. Export Administration Regulation (EAR).
Executing an export transaction 19

Obtaining a license (EU)

Licenses are obtained and maintained by the business Export Control
Officers. They keep an updated record of all licenses, their scope and
validity at all times.

The types of licenses and license requirements vary according to country.

In general, however, two types of licenses can be identified:

General licenses
• General licenses allow us to export certain listed items to certain desti-
nations under stated conditions. A general license is a broad grant
of authority by the government to all exporters for certain catego-
ries of products. The administrative requirements are simplified and
exporters need to ensure that they meet all the licensing terms and
conditions, in most cases including registering or reporting before an
export transaction under a general license may take place.

• The benefit of having a general license is that during the validity period
of the license, if all conditions are fulfilled, all exports are possible.
There is no time-consuming authorization procedure and no end-use
/ End-User Statements are required. It gives us reliability of planning.
Notification may be required.

• In addition to any possible national general licenses, the EU issues

certain EU general licenses for dual-use products. An EU general
license could be used by every exporter established inside the EU.
The EU general licenses and their scope, duration, etc. are published
in the official EU journal or national law bulletins. There are currently
only six EU general licenses in place.
 Executing an export transaction 20

Individual and global licenses Export Administration Regulations (EAR) re-exporting defense articles or defense services or engaging in “deemed
• Where a general license doesn’t apply, an individual or a global license The EAR regulate exports (including re-exports and “deemed exports”) of exports” of ITAR-controlled technical data.
must be obtained. Individual and global licenses are regulated on a commercial and dual-use goods, software and technology (i.e., products
national level. Unlike general licenses, individual and global licenses intended for non-military applications that nonetheless may be useful for Economic Sanctions Regulations
are limited to a specific transaction or transactions and for a limited military purposes). OFAC administers and enforces economic and trade sanctions against
timeframe. For each individual or global license, you need to provide targeted countries and designated entities and individuals. Before
all required documentation such as license application, End-User The specific products subject to the export control restrictions under the exporting a product, you must verify whether the country or party to
Statements etc. to the authorities, and wait until the license is issued EAR are identified on the Commerce Control List (CCL). which you intend to export the product is listed on any of the OFAC
before proceeding with the export. sanction lists. If it is, you should verify whether the export is prohibited
Exports of products identified on the CCL may require a specific license or subject to license.
• You should take into account that a license request procedure can from BIS, depending on the reasons for control applicable to the partic-
take several weeks and it is not guaranteed that a license will be ular products, the country of destination and the purposes for which the Mandatory check before the export
granted. products will be used. transaction is executed
You can read the Export License Guidelines here, or consult your Export Products that are not specifically identified on the CCL (or the United With each export transaction, there are a few simple checks that you
Control Officer. States Munitions List, discussed below) fall into a “basket” category need to do before you can continue. Questions you should ask yourself
known as "EAR 99". This basket category includes a wide range of include:
Obtaining a license (US) common products, such as pencils, Band-Aids, automobiles and house- • What is the origin of the Product?
The US government maintains several sets of export control regulations. hold appliances. EAR 99 products generally can be exported without first – Where is it exported from?
obtaining a license from the US Commerce Department, except to the – Where was it developed or modified?
• The EAR administered by the Commerce Department’s Bureau of sanctioned countries, entities and individuals discussed in this manual. – Does it contain US components?
Industry and Security (BIS) regulate exports of commercial products • Is the product controlled according to the AkzoNobel product
with potential military applications (“dual-use” products). International Traffic in Arms Regulations ­classification database?
• The International Traffic in Arms Regulations (ITAR) administered by The ITAR regulates exports from the United States and re-exports from • To what Place is the product being exported?
the US Department of State Directorate of Defense Trade Controls abroad of US-origin “defense articles” and “defense services,” as well as – Is the product being shipped to a Sensitive Country? Is the product
(DDTC) regulate exports of products and services specially designed certain temporary imports of foreign-made defense articles and “brok- being shipped to a country requiring a license or notification?
for military applications. ering” activities. These products and services have been identified by the • To what Party is the product being exported and for what purpose?
• The Foreign Assets Control Regulations administered by the US US government as being inherently or predominantly suited for military – Has the Party been screened against the required restricted party
Treasury Department’s Office of Foreign Asset Controls (OFAC) applications, and therefore are subject to extensive export controls. lists?
regulate the US government’s economic sanctions targeting certain – Is there reason to believe that this Party may ship the product to a
countries, entities and individuals. With very few exceptions, if a product is subject to ITAR exporters prohibited party, to a restricted country or for a prohibited end-use?
must obtain prior written authorization from DDTC before exporting or
 Executing an export transaction 21

Export hold & release procedure

When an export is prohibited, the transaction must be blocked. When
a license is required but no valid license is available, the specific export
transaction must be put on hold. All businesses have developed and
implemented procedures to ensure that the export hold process is strictly
managed. Where possible this procedure is automated through an inter-
face between the AEB tool and the ERP system. In all other cases a
manual procedure is in place until an IT tool is available.
When an export license is obtained, the export transaction can be
released. Again, this is controlled via the AEB tool or manual procedures,
where appropriate.

Documenting your shipments

All cross-border shipments are subject to national and international
customs regulations. Most customs authorities require that the key
shipping information and documents be kept in a file for each shipment.
This file can include packing slips, commercial invoices, and customs
declarations. AkzoNobel requires certain records be kept in relation to
the export of all controlled products. What records must be kept, how
and by whom can be found here.

Your local Customs department or Export Control Officer is responsible

for maintaining proper records.
Executing an export transaction 22

Red flags The end-user requests:

"Red flags" are a set of (non- exhaustive) indicators that can signal that • equipment inconsistent with inventory
the customer is trying to engage in illegal or potentially illegal transac- • spare parts in excess of projected needs
tions. These indicators are designed to alert employees to the need for • performance / design specs that are incompatible with the relevant
increased suspicion and scrutiny. You should use your best judgement resources or environment
and report any signs that a transaction may potentially be illegal. • technical capability / end-use that is inconsistent or incompatible with
the consignee's or end-user's line of business
• end-use that differs from standard practices
Potential red flag signals • a middleman from a third country to place the order and/or refuses to
Using common sense is essential in weeding out potentially problematic state whether goods are for domestic use, export, or re-export
transfers. Alarms should go off when:
A customer or agent: If you have any compliance concerns or a transaction raises any of the
• doesn't want to provide end-use / end-user information red flags listed above, or any other potential red flags, you should consult
• is willing to pay cash for high-value shipments your Export Control Officer.
• has little background or history in the relevant business
• appears unfamiliar with the product or its use
• declines normal warranty/service/installation
• orders products/quantities incompatible with the relevant business
• provides vague delivery dates or locations.

A shipment involves a:
• private intermediary in a weapons sale
• freight forwarder that is designated as consignee / end-user
• intermediate consignee's business or location that is incompatible
with or different form the end-user's
• shipment directed to trading companies, freight forwarders, or
companies with no connection to the buyer
• request for packing that is inconsistent with normal mode of shipping
• choice of an economically illogical routing, or through multiple
countries.
 23

The AEB tool and how to use it

The AEB tool and how to use it 24

What is the AEB tool? to check any new business contact against sanctioned parties before
We use many different IT systems at AkzoNobel. Some have integrated agreeing to a transaction.
export control specific functionality through a third-party company,
AEB. The AEB tool is either fully integrated or is used as a stand-alone If AEB is integrated with ERP in your business, it will automatically screen
support tool. every sales order and every delivery note against sanctioned parties.
Possible hits will automatically be sent to your business Export Control
The AEB tool checks individual addresses or entire address data- Officer, who reviews the hit and then blocks or releases the shipment
bases against various restricted party lists. It also checks documents depending on whether the party is indeed a sanctioned party for the
(orders, quotations, etc.) against different kinds of export control laws relevant shipment.
and regulations.
If AEB is not integrated with ERP in your business, the Export Control
AEB third parties screening prior to Officer runs a daily batch screening of the entire customer portfolio.
transactions Possible hits are e-mailed to your business Export Control Officer for
review. The Export Control Officer will notify relevant personnel of a true
There are a number of different sources that you need to consult before hit and a customer that should be removed or a shipment that needs
offering our products or committing to a sale. These include, through to be stopped.
AEB, the Denied Parties List, Special Designated Nationals List, Blocked
Persons List, Entity List, and the Unverified List. AEB export transaction screening
Every time a sales document (order, quotation, etc.) is saved in the ERP
These lists cover individuals or entities with ties to particular countries that system, the AEB tool carries out a check. This check results in either a
are subject to restrictions or sanctions by the exporting nation or asso- hit or a miss. A miss means that the sales document has been checked,
ciated with terrorism, international narcotics trafficking, diamond trading but no suspicious address or relevant export restriction was found. No
or weapons of mass destruction. Entities and individuals can be added further action is required.
if authorities become aware that they are assisting parties that are on a
country’s Designated Party list. There is not an all-inclusive Designated
Party list covering all governments and international organizations that The AEB tool is configured with pre-set rules. Export Control Officers
is publicly available. And equally important, the Designated Party lists assess the red flags it generates in order to determine the proper
change daily. actions to be taken. Still, you must be alert to any abnormalities and
manually put an export transaction on hold if you are in doubt.
Designated Party screening is mandatory in all AkzoNobel businesses.
AkzoNobel uses the AEB Compliance & Risk Management tool, Assit4,
 The AEB tool and how to use it 25

A hit means that the AEB tool has identified a suspicious contact, address or export restriction. When a hit occurs, an automatic email is sent to
Export Control Officers (ECOs).
Customer Service

Release order for

Order/Quotation Hold order as per Hold Order /
Checks information Inform ECO shipment (AEB
entered into MFG Pro ECO's instructions cancel order
process ends)

Order file sent to AEB to

process checks

Daily Daily
AEB Engine

Address/country match Maintain Good guy list

AEB Sensitive Country sends email to ECO in AEB
list / SP list?

AEB check process

ends, order processed
as normal

Contact COS to obtain

more information
Export Control Officer

Sends notification
Checks Address
emails to COS (24 Sufficient Needs License/ Inform COS to
/ Name / Country
hours upon receipt of information? prohibited order? Proceed Shipment
in AEB
AEB notification)

Inform COS to hold

order til License
obtained /
Or cancel order

Critical elements of sales order for effective order screening

 26

Contracts and End-User-Statements

 Contracts and End-User-Statements 27

Terms and conditions and contracts EU End-User Statement

The sale of controlled products is subject to certain written terms and • Common Military List and listed dual-use: An End-User Statement (EUS) or End User Certificate (EUC) certifies that
condition. These terms and conditions put the receiving party on notice – shipment within EU member state: T&Cs with export control clauses a buyer is the final recipient of the exported materials and has no intention
that the products are controlled, provide for obligations by the receiving – shipment to other EU member state: contract with export control of re-exporting the materials to anyone else. This document plays a vital
party to refrain from certain export, re-export and use of the product, and clauses role in preventing export violations and providing proof of AkzoNobel’s
enable us to terminate the sales agreement if the receiving party doesn't – shipment outside the EU: contract with export control clauses efforts to do the right thing.
meet its obligations. The Legal Group has made certain standard export and EUS
control contract clauses available. The Legal Group has also included End-User Statements should always be used:
appropriate export control clauses in our standard sales agreements • Non-listed dual-use: • as required to restrict the flow of materials to embargoed countries,
and distribution agreements. These can be found here. These standard – shipment within the EU: no specific requirement nations with poor human rights records or to places generally consid-
clauses and agreements must be used in the sale of any controlled – shipment outside the EU: T&Cs with export control clauses ered a threat by AkzoNobel
product. If the other party's contract must be used, the Legal Group – shipment to embargoed country: contract with export control clauses • to export sensitive or highly controlled items (such as military and dual
templates and clauses serve as a reference to check that the appro- and EUS use products)
priate provisions are in place. If there are any material differences, please • to restrict exports to countries with a high diversion risk
EU CML Listed Dual Use Non-Listed
contact the Legal Group. Dual Use • if there are other “red flags” that require a more cautious approach to
the transaction.
Shipment within EU T&C T&C None
Below is an overview of when at a minimum terms and conditions (issued
member state
by AkzoNobel, without signature by the receiving party) are required and An EUS is specific to a product and destination (place and party). You
Export to other EU Contract Contract None
when at a minimum a contract (both AkzoNobel and the receiving party member state don’t always need a new EUS for each transaction. It is possible to have
sign) is required. T&Cs mean general terms and conditions. EUS means Export to country Contract + EUS Contract + EUS T&C one EUS for multiple shipments when the product and destination are the
End-User -Statement. outside EU same. An EUS should be renewed on at least a yearly basis.
Export to Contract + EUS Contract + EUS Contract + EUS
US embargoed country More guidance on Designated Party screening and end use(r) due dili-
• domestic shipment and export of EAR 99 products: T&Cs with export gence can be found here.
control clauses The terms and conditions requirements above are in addition to the
• export of ITAR and dual-use items (except EAR 99): contract with exporter’s duty to verify whether export to the destination country and The guidelines on what documents must be retained and for how long
export control clauses and EUS the party is permitted, and to obtain a license, if required. is described in the Export Control Record Keeping Guidelines. You can
find those guidelines here.
US ITAR Dual Use EUR 99
(expect EAR 99)
Shipment within US T&C T&C T&C
Export Contract + EUS Contract + EUS T&C
 28

US Recusal

US Persons may not be involved, facilitate or approve trade in US

­products or technology with destinations that are under embargo by the
US government. You can read the full US Recusal Guidelines here. These
guidelines also refer to a web page that shows which US Persons have
been explicitly recused and which non-US Person is responsible instead.
There is also a link to questions and answers that may provide guidance
in particular situations.
 29

Training
Training 30

All AkzoNobel employees, whether under a permanent or temporary All secretaries, assistants and administrative personnel are excluded from
contract, who may be involved in the export of goods, information, this selection.
technical data or software are required to complete an export control
awareness training. • Basic Export Control Awareness Training
All other employees who may be involved in the export of products
Our training programs are designed to provide a wide group of employees or technology or who have a responsibility to influence organizations
with a basic level of awareness of export controls and sanctions, and a or related processes. These employees include:
specific group of employees with more advanced information on how – Sales employees (except those who get original version)
the export control framework works. Training may either be conducted – Information Management employees
individually through the Global Learning Office / e-Learning, or in groups – Procurement employees
through classroom / face-to-face training. – Finance managers
– Treasury employees
The Corporate Compliance Committee designates those roles that must – Tax managers
take export control awareness training. Global Business Support ensures – Corporate strategy employees
that the designated staff is correctly listed in the AkzoNobel Learning – Legal, with the exception of counsels and administrative support
Management System (LMS) and invited by the system. staff

E-Learning The trainings are repeated every other year.

There are two types of export control awareness trainings available.
Classroom training
• Full Export Control Awareness Training The export control e-learnings provide a solid foundation for under-
This training is provided to any employee who is in a position in which standing the fundamentals of export controls. Those employees
he or she may have responsibility for the export of products or tech- significantly exposed to exports of controlled products and/or exports of
nology or advising on products or technology. These employees products to Sensitive Countries will be provided with additional classroom
include: training. Classroom training is developed to provide hands-on guidance
– Executives and directors on how procedures work and how they apply to those employees'
– Sales and Customer Service managers specific situations.
– Logistics, supply, distribution managers
– Research managers
– Legal counsels
– Controllers (i.e. those with control in their job title, but excluding
quality controllers)
 31

Irregularities and concerns

Irregularities and concerns 32

For any day-to-day questions or issues that arise from an export trans- Monitoring and audit
action, either before or during the process, the Export Control Officer is PSRA is responsible for providing an appropriate export control frame-
your first point of contact. If interpretation of the law or guidance on legal work, including a product classification, a shipment verification process
standards is required, the Export Control Officer will consult the Senior and training. The Export Control Officers conduct an annual self-as-
Legal Trade Control Counsel. sessment to verify that their business operates in accordance with the
AkzoNobel export control framework and rules. The self-assessment
Despite all our efforts, there could be a transaction that causes irreg- form can be found here. The results of the self-assessment feed into the
ularities with respect to export control regulations. You must notify the sign-off of the relevant NFLOR question.
Export Control Officer of any potential irregularity immediately. The ECO
assesses the situation and, if it is considered to be potentially a violation Periodically, Internal Audit will conduct an audit of the export control
of any regulation, informs the Legal Group without delay. organization and its processes and procedures. Internal Audit will give
special attention to the completeness of shipping documentation, export
A transaction resulting in a potential export control violation must always licenses, End-User Statements and up-to-date product classifications.
be reported to the Senior Legal Trade Control Counsel, either directly or Internal Audit will also give attention to whether the Designated Party
through your contact in the Legal Group. The Senior Legal Trade Control screening and license requirement screening works effectively.
Counsel and the Global Trade Control Manager will assess the situation
and coordinate all following actions until that situation is resolved and
closed.

The investigation and remediating action is documented for retention,

disclosure and audit purposes.
For questions, please consult your Export
Control Officer or the Senior Trade Control
Counsel of the Legal Group.

www.akzonobel.com

AkzoNobel creates everyday essentials to make

people’s lives more liveable and inspiring. As
a leading global paints and coatings company
and a major producer of specialty chemicals,
we supply essential ingredients, essential
protection and essential color to industries
and consumers worldwide. Backed by a
pioneering heritage, our innovative products
and sustainable technologies are designed
to meet the growing demands of our fast-
changing planet, while making life easier.
Headquartered in Amsterdam, the Netherlands,
we have approximately 45,000 people in
around 80 countries, while our portfolio includes
well-known brands such as Dulux, Sikkens,
International, Interpon and Eka. Consistently
ranked as a leader in sustainability, we are

AN_202814_071016
dedicated to energizing cities and communities
while creating a protected, colorful world where
life is improved by what we do.

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