Export controls specifically ban businesses from working with denied parties at home and abroad, as well as international entities from regions under trade restrictions and embargoes. Companies, therefore, must take care of their own legal compliance in this respect by being aware of every aspect of their operations.

While restrictions like these have always been in place, the U.S. government is making it clear now that it will not tolerate violations of its export controls and associated regulations, especially with regards to recent sanctions imposed on Russia, Belarus and parts of Ukraine. In fact, it’s been focusing more and more attention into enforcement of export compliance.

The Bureau of Industry and Security (BIS) has laid out its export control compliance requirements that all domestic organizations must follow. If you want to reduce the risk of incurring financial penalties, and losses in industry trust from non-compliance of sanctions regulations, be sure to start implementing legal compliance measures like restricted and denied party screening.

This article will cover some of BIS’s recent actions and what implications they have for businesses, especially those based in the United States.

The Office of Export Enforcement Battens Down the Hatches

Having seen less use over the previous U.S. administration, the BIS’s Office of Export Enforcement will likely be far more active in coming years. Among the new changes coming with the Biden administration is the addition of Matthew Axelrod as the Assistant Secretary.

Axelrod has mentioned directly that he intends to focus more on export compliance. Observers said that the former federal prosecutor will not only penalize export violations more harshly but will also implement changes in law that incentivize better compliance postures across the business landscape.

Violations of export controls pose a threat to national security, as they allow the sale of sensitive products and technologies to foreign parties deemed as “bad actors” by the U.S. government. What it means for you as a business is that you will need to design your international trade operations and policies with export controls and compliance in mind.

Controls Regarding Trade with China

One holdover from the Trump administration that will likely be continued are the controls surrounding China. BIS has telegraphed new attempts to prevent China from receiving sensitive technologies under U.S. export controls. Chinese businesses targeted include a consumer electronics manufacturer, a state-owned semiconductor manufacturer, a technology and entertainment conglomerate, and a social networking platform

Remember to keep track of other countries on restricted lists when choosing your partnerships. Achieving compliance is thankfully easy when you have monitoring tools which we’ll discuss later.

Large Telecom Company Fined $1.87 Million

Take a look at the significant penalty a large U.S. based telecommunications firm received for acting as a subsidiary of a Vietnamese organization.

The document details illicit exports of certain goods to the Southeast Asian nation. The transistors and development tools were sent for defense end uses, but the company allegedly misled Customs by claiming that they were for civil use. The penalties here included:

  • A $1.87 million fine
  • A requirement to allocate budget to improve its export compliance program
  • Opening a new position for a compliance executive

Avoid making similar mistakes by taking a proactive approach to trade compliance by monitoring your deals and stopping potentially risky transactions from happening.

Start by Implementing Denied Party Screening Software From Descartes

It’s clear that the BIS means business when it’s been strengthening its enforcement actions in recent months. It’s become clear that domestic companies themselves are responsible for their own compliance.

Want to know how you can reduce the risk of legal penalties by screening for denied parties during trade deals and automate tasks to achieve better efficiency?

With features like automated and integrated denied party screening, compliance management workflows, and export document management, Descartes is a provider of an industry-leading suite of denied party screening, 3rd party risk management solutions, as well as trade content for leading business systems, that can be integrated with minimal disruption, sometimes in under an hour.

Descartes Visual Compliance and Descartes MK Denied Party Screening solutions are flexible and modular, allowing organizations to pick the specific and exact functionality and content they need for their particular compliance needs and scale up later as and when necessary.

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Written by Jackson Wood

Director, Industry Strategy, Global Trade Intelligence, Descartes