By Michael Ford, Tradebridge Consulting
Screening processes for U.S. exporters are critical mechanisms designed to ensure compliance with federal export regulations, such as the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR). These regulations aim to protect national security interests by restricting the export of sensitive technologies and goods to unauthorized users or for prohibited end-uses.
The screening process involves evaluating potential customers and transactions to identify any risks associated with diversion or non-compliance.
Navigating these multifaceted rules often requires resources and expertise, which can be particularly challenging for small and medium-sized enterprises (SMEs) that may lack dedicated compliance teams.
Leveraging Technology to Assist you in Automation
Modern technology plays a crucial role in enhancing compliance management processes. This not only minimizes manual errors, but it also streamlines overall efficiency in managing compliance efforts.
Additionally, data analytics can be harnessed to recognize trends and patterns within import-export activities, thereby allowing companies to anticipate and address potential compliance issues proactively.
Implementing a structured approach to risk assessment helps companies pinpoint vulnerabilities and reinforce their compliance strategies.
1. Exporters must screen against all 11 lists maintained by the U.S. government that restrict exports, re-exports, and transfers of items.
U.S. exporters and their foreign affiliates should conduct thorough due diligence on their customers to assess the risk of unlawful diversion and prohibited transactions.
2. Conduct due diligence on all parties involved in transactions. This includes not only direct customers but also distributors and, when possible, end customers. Exporters are ultimately liable for any violations, even if distributors handle end-use screening.
3. Implement frequent screening intervals. Make sure you include in your freight forwarder process how and when they screen your order(s). At minimum, screen immediately before shipping goods. For higher-risk transactions, consider screening upon order receipt and again before shipping, as restricted parties may be added to federal lists at any time.
A fundamental principle is to utilize only trade facilitators and freight forwarders that implement sound export management and compliance programs, particularly those that address re-export and transshipment in accordance with U.S. export control laws.
4. Stay informed about new export regulations and all updates for all entity lists. Exporters must adapt their compliance processes and system activities to the evolving regulations.
5. Ensure that you have an internal escalation process in place to address any and all concerns that may arise when the process is active.
6. Educate your new employees, and especially your partners, about export control compliance, best practices, and potential “red flags” of illicit activities.
7. Prepare for increased scrutiny and enforcement [1]. The Bureau of Industry and Security (BIS) aims to increase enforcement outcomes by 15% and end-use checks by 25% by September 30, 2025. Exporters should be prepared for more rigorous compliance checks.
By implementing these actions, US exporters can enhance their compliance with screening processes and mitigate risks associated with increased enforcement of export controls.