How Global Trade Works: Understanding International Trade Management Rules, Risks, and Best Practices

After a trip to the local grocery store, a shopper could easily return home with products sourced from around the world: Indonesian coffee, French cheese, and Mexican-grown avocados. Without giving it a second thought, they are participating in and benefiting from a vast global trade network. Behind each of these products are exporters, importers, customs procedures, and trade regulations that help move goods across borders and onto store shelves.

The electronics we use every day tell an even more remarkable story. Take the iPhone, while it is often described as an import from China because final assembly takes place there, this accounts for only a small fraction of the device's overall value.

In reality, materials and components used to manufacture the iPhone come from over forty countries, and the scope of its creation extends far beyond physical production. The operating system's code, software design, engineering expertise, research and development, and countless supporting services are all made possible through the global exchange of goods, services, and knowledge. Bringing these elements together requires companies to navigate a complex web of export controls, import requirements, tariffs, trade agreements, and regulatory obligations across multiple jurisdictions.

This interconnected ecosystem illustrates how modern commerce depends on global trade management. From the food on our tables to the technology in our hands, the seamless movement of goods and services relies on organizations effectively managing trade regulations, compliance requirements, and cross-border risks. Without global trade, many of the products, services, and innovations we rely on every day would be far less accessible.

Global trade refers to any economic transaction that occurs between parties in different countries. This includes the exchange of physical goods, digital products, services, and intellectual property.

At its core, the difference between domestic and global trade is straightforward. Domestic trade takes place within a single country, while global trade occurs across international borders.

In practice, however, international trade is far more complex. Cross-border transactions are subject to a wide range of regulations, including tariffs, sanctions, export controls, customs requirements, trade agreements, restricted party screenings, and product-specific restrictions. Businesses engaged in international commerce must navigate these requirements while ensuring goods, services, and payments move efficiently and compliantly across borders.

Broadly speaking, all global trade can be categorized as either:

• Export: A product or service sold to an international market.

• Import: A product or service purchased from an international market.

Broadly speaking, all global trade can be categorized as either:

The main components of the rule aim to: 

• Restrict unnamed entities not just direct parent-subsidiary relationships, but to complex or multi-tiered ownership chains where 50% or more are owned, directly or indirectly, by one or more parties the BIS entity list. 
• Restrict unnamed entities not just direct parent-subsidiary relationships, but to complex or multi-tiered ownership chains where 50% or more are owned, directly or indirectly, by one or more parties the BIS entity list. 

• Aggregate ownership stakes such that control is calculated cumulatively. For example, two listed entities each holding a 25% stake may trigger the 50% threshold. 

• Automatically apply to complex ownership structures including subsidiaries, holding companies, shadow networks and any entity meeting the rule’s ownership criteria without needing to appear individually on the denied party list. 

Table 1: Side-by-Side Analysis: OFAC and BIS Ownership Restrictions 

This proposed rule reflects growing concern around national security and export control enforcements. The primary motivating factors include: 

• Preventing tech diversion to adversarial military programs, particularly in China, Russia, and Iran. 

• Strengthening enforcement by eliminating the need for time-consuming case-by-case designations. 

• Responding to bipartisan pressure: A 2023 report by the House Foreign Affairs Committee criticized the BIS Entity List as ineffective without ownership-based controls.  

The proposed BIS 50% Rule brings a structural overhaul of export compliance. If finalized, it will require companies to rethink how they identify restricted entities, shifting from name-based screening to ownership-based enforcement. This change represents far more than a longer watchlist. It expands the enforcement scope and increases global trade complexities that businesses need to carefully prepare for. 

• More complex denied party screening: The rule requires organizations to screen for ownership, not just names. That means tracing corporate structures through parent companies, joint ventures, and indirect investors. Many screening tools in use today aren’t equipped to uncover these layered connections, raising the risk of missing restricted parties and triggering higher false positive rates due to complex ownership overlaps. 

• Higher risk of violations without ownership visibility: Companies who lack capabilities to map corporate ownership risk unintentional export control violations. Opaque structures make indirect control hard to detect, especially across borders or with rapidly shifting ownership. 

• Supply chain volatility within sensitive technology sectors: Organizations managing dual-use goods, telecom infrastructure, or advanced chips will be most affected. A single unresolved ownership link in a supply chain can lead to shipment delays, licensing pauses, or urgent sourcing shifts especially under stricter export control regimes like the BIS 50% Rule. 

• Broader due diligence needs: Export compliance teams will need to expand their reviews, mapping ownership structures, monitoring changes in control chains, and documenting findings. What used to be a scheduled task now calls for active, ongoing monitoring to meet audit expectations. 

• Greater geopolitical and operational risk: Countries affected by the rule, particularly China, may respond with retaliatory measures. That raises the stakes for multinational supply chains, which are already under strain from shifting trade rules. 

With enforcement likely to ramp up quickly once the rule is finalized, businesses can’t afford to treat these risks as hypothetical. Understanding the scope now will make it easier to act decisively and avoid compliance gaps later. 

Finalization of the BIS 50% rule is only a matter of time. Compliance leaders should begin preparing their systems, policies, and teams now to ensure readiness before the rule becomes enforceable. Here’s a focused checklist to strengthen your export compliance posture: 

• Evaluate your restricted party screening software: Many solutions only catch direct name matches. Under BIS 50% rule, you’ll need tools that uncover indirect and aggregated ownership—tracing relationships across corporate layers. Systems should be able to map nested ownership paths and identify entities that don’t appear on any denied party list but still fall within scope.  

• Expand your due diligence framework: Go beyond surface-level checks. Map corporate structures for customers, suppliers, and partners—including subsidiaries, shareholders, and indirect owners tied to the BIS Entity List. This is especially critical in high-risk regions and sectors flagged for tech diversion concerns. 

• Embed screening into business systems: Integrate denied party screening into your ERP, CRM, and procurement platforms so it runs automatically at critical points—customer onboarding, order booking, payment, and fulfillment. For guidance, follow these best practices for integrated restricted party screening. 

• Refresh internal policies and training: Ensure your export compliance policies accurately reflect the new sanctioned ownership thresholds. Train all relevant departments, including compliance, procurement, sales, logistics, and legal on how to identify ownership red flags and what to do when they appear. Documentation and escalation procedures should be clear and consistent. 

• Work with a specialized compliance vendor: Ownership networks evolve constantly. Spreadsheet-driven tracking won’t scale. Partnering with a technology provider gives you access to timely list updates, AI-powered screening accuracy, and ongoing monitoring tied to BIS 50% rule updates. 

With the BIS 50% rule looming, proactive compliance isn’t optional. Descartes offers purpose-built export compliance solutions to handle ownership complexity at scale, with: 

• Sanctioned party ownership screening: Uncover indirect and aggregated ownership using enhanced data sources. Our specialized screening data provides deeper visibility into complex ownership chains so you can easily comply with the BIS 50% rule. 

• Real-time list updates: Access a global, frequently updated database of denied and sanctioned lists to track evolving regulatory designations. 

• Automated workflows: Streamline review, escalation, and documentation with built-in compliance manger workflows. 

• AI assisted denied party screening: Enhance accuracy and accelerate screening with AI-driven precision that reduces false positives by 40 to 60%. 

Find out more about our denied party screening software and contact us to speak to an expert about how we can help your team comply with the BIS 50% rule.