End of Year Compliance Wrap-up – So-long 2020!

The one thing we can say about 2020 is that it will, in fact, be a memorable year. Many of us would likely be willing to forget much of what occurred this year, present company included. However, despite these challenges, PAP has undergone a complete compliance transformation this year. As much as we all have personally suffered at the hand of Covid-19, PAP and its affiliates have made enormous strides in compliance across the enterprise.  Many of these changes were “a long time coming,” as many would say; others who are not as adaptable to change have finally accepted the “inconveniences” of these changes. Notwithstanding, PAP is now a better company, in many respects, including compliance.

Let’s begin with Export Compliance. This year, we conducted several export compliance audits, which revealed some interesting challenges. It was clear through these audits that the number one issue was a misunderstanding of the use of EAR99, 9A610, and RPL. Let me expand on this: EAR99 is a designation under the Department of Commerce regulations (the Export Administration Regulations “EAR”) that signifies that a product does not require a license for export. Many everyday items like sugar, chairs, and tables are usually classified as EAR99. Rightfully so, as they do not have any significant military application. However, PAP and its affiliates create and work on military products (almost exclusively); hence, the use of EAR99 would likely rarely be seen. 9A610 is the typical designation that any PAP product would need if being exported as a new or refurbished product. Use of this EAR designation was applied in some instances when shipping items back to customers, but not regularly. And, of course, those of you who received training now understand what RPL means. RPL is another EAR designation used when a customer sends in a product(s) for repair, and it is returned as repaired without increasing its capabilities.

Based on the internal audits completed at PPI, C&S, and PFC, many folks in shipping, Sales & Marketing, and the Senior Executive Staff of PAP received training. The training focused not on the errors committed and discovered in the audits but instead focused on how to solve the issues identified to ensure non-reoccurrence. Audits are planned for June 2021 to assess if the training worked, but I am confident that we are 100% better than identified in 2020. I want to send gratitude to all personnel that underwent the training – thank you.

Physical Security was another challenge identified at PAP. Starting with PPI, it became nearly instantly apparent that we had significant physical security challenges. PPI was the first physical security audit location, mostly due to proximity. C&S also suffered from similar challenges. PFC did well, thanks to Pam Tumminello’s leadership (way to go, Pam!). Initially, I was told that it would be impossible to install electronic access controls at PPI since it had been attempted in the past but never achieved due to cost. We met with ADT, and we worked out a fiscally palatable way for the ownership and provided needed physical security. Not only did we make an agreement with ADT for electronic access, but we also negotiated the inclusion of security cameras. We are now fully e-badge accessible and have security cameras at the doors throughout our facility. PAP is now fully automated and secure. My gratitude to all those naysayers and supporters and my special gratitude to Jared Flynn, who put up with all the naysayers without flinching. As a side note, we have had over 120,000 door access’ since installing the system.

The Foreign Corrupt Practices Act, or FCPA, is a law that requires U.S. companies to comply with rules that prohibit corruption, both here in the U.S. and abroad. The law is strict and has significant penalties should a violation occur. An audit of how we conduct international business was completed and gaps were identified in the already robust PAP process. The implementation of new methods and strategies includes an online training platform with mandatory FCPA training for our foreign agents and representatives, concise Representations and Warranties form, background checks on all international and domestic representatives, agents, and consultants, and the inclusion of strong FCPA language in all new representative, agents agreements.  These changes have again moved PAP to a new compliance level that competes with Fortune 50 companies in the U.S. My gratitude to Jeff Heikke and Buddy Tobin for having the fortitude and vision to move forward with a first-class process and system.

In addition, the Compliance Department worked on a myriad of compliance issues throughout the year. Matters related to production challenges to Covid-19, we took every step to address all issues fairly and independently. 2020 was a challenging year on the compliance front, but we are ending this year on a high note.

I expect and hope 2021 will be kinder and gentler than 2020 – well, at least we hope.

Happy Holidays to all!

George Canovas