Certain industries deal with added complexity when shipping their
products. In this QAD Precision Report we look at six reasons why
high tech and industrial manufacturers need automated compliance screening.
Denied Party Screening: Why It Matters
If you’re the operations or logistics manager of a high tech or
manufacturing firm, knowing who your trading partners are — and that
the products you ship are destined for authorized customers and
friendly purposes — is critical.
Law enforcement and trade regulators around the globe compel
organizations to verify the identities of their trading partners. This
helps them to close the net on terrorist and criminal organizations,
as well as rogue states.
In order to comply with global trade regulations, manufacturers must
ensure that their trading partners do not appear on any sanctions or
denied party lists (DPLs). In addition, they need to verify if an item
requires an export license and ensure that the individuals or
locations that have ordered their products are eligible to receive them.
Organizations that fail to provide adequate screening can face severe
penalties. For some recent examples, take a look at “Don’t
Let This Happen To You” — a round-up of fines imposed by the US
Department of Commerce’s Bureau of Industry and Security. As this
document makes clear, BIS will impose penalties for license missteps
as well as for more serious compliance violations.
It is important to note that denied party screening is not only
required for overseas shipments. Manufacturers of high tech,
industrial and dual use goods must screen domestic shipments too to
ensure that money and products don’t flow to terrorist and criminal
organizations. Furthermore, manufacturers in the US, must take into
account deemed export laws. Under these regulations, shipping
technology, goods or even information to a foreign national based in
the US is known as a “deemed export” even though the goods have not
left US soil.
These challenges are driving demand for automated
screening software. The alternative? Checking each shipment
manually to determine whether the recipient’s name or business entity,
along with the name of the recipient's bank, business partners, and
known associates, do not appear on any published list of sanctioned
organizations and individuals.
Manually screening against all of these lists is extremely labor
intensive — particularly for high volume shippers. Nevertheless,
failure to comply with these restrictions and regulations is not an
option. Organizations who violate trade regulations are at risk not
only of high fines, but ruptured business relationships and damaging
publicity if their products fall into the wrong hands.
Six Reasons Why Manufacturers Need Denied Party Screening
Let’s look in more depth at six reasons why manufacturers need
automated trade compliance screening.
DUAL USE PRODUCTS
Certain industries — such as high tech, industrial manufacturing, and
life sciences — deal with added complexity when shipping their
products. That complexity is due to the potential for misuse of their
products. Electronics and components that seem harmless enough often
face regulations. This is due to the fact that criminals, terrorists
or other bad actors could potentially use their parts in ways not
intended by their primary purpose.
For instance, a diesel engine can power a lawn mower — or a rocket
launcher. Live viruses intended for vaccinations could instead be used
to build a biological weapon. Car batteries can provide a ready source
of power for almost any use — not all of them friendly. Nitrogen-based
fertilizer can be used to build bombs. Even electronics from a music
power amplifier, or PA, could be repurposed to build rudimentary
Because of this potential for dual use, it’s important to ensure that
your trading partners are who they say they are. Implementing
automated screening and checking products and components against
ECCN lists are key steps to ensure export safety.
As penalties for trade compliance violations become more expensive
and tightly enforced, leading electronics and parts suppliers have
found themselves on the radar of regulatory agencies. Suppliers are
held responsible to ensure that their products don’t end up in the
wrong hands. They, in turn, are holding their customers responsible,
requiring that the distributors that purchase products from them
implement trade compliance as well.
Automated trade compliance screening helps manufacturers comply with
these supplier requirements. As a result, this helps to maintain
business relationships and prevent losses in revenue.
FOLLOW THE MONEY
The potential for money laundering and terrorist financing are major
concerns for any organization involved in global trade.
Cyber-criminals, terrorists, and organized crime figures operate in
every corner of the world. As a result, no matter where you trade, you
must ensure that any payment you receive does not come from hackers,
terrorists, or organized crime syndicates.
TOO MUCH INFORMATION
Published lists of sanctioned parties and controlled products are
subject to near constant change. Unfortunately, manually keeping track
of changes to DPLs is time-consuming and labor intensive. This can
lead organizations to be somewhat lax about updating their information
when applying these checks.
Automated trade compliance screening software makes the process easy.
It accesses real-time data from published lists of sanctioned
entities, ensuring that your screening process is water tight yet
No manufacturer would wish to see their company or brand name
associated with a terrorist attack or criminal event. That’s why
denied party screening is a critical part of your brand protection and
risk mitigation strategy. Automated screening can not only prevent
your products from falling into the wrong hands, it also shows that
you exercised due diligence to prevent that from happening. Denied
party screening and compliance checks are essential parts of the audit
trail, helping you prove to authorities that you did your part to keep
your shipments safe.
High tech and manufacturing firms are increasingly engaged in B2B
e-commerce. Globally, B2B
e-commerce Gross Merchandise Value is forecast to reach US$12.2
trillion this year.
As e-commerce volumes grow, it’s becoming more challenging to ensure
that your products aren’t misplaced or misused. Organizations that
work with third party fulfillment or contract shippers must be
especially careful to ensure that their products don’t end up in the
hands of blacklisted individuals.
High tech and manufacturing firms are increasingly dependent on
global and e-commerce trading relationships. Yet, with access to
foreign markets and fewer in-person interactions comes a greater
responsibility to ensure the safety and security of every shipment.
With automated trade compliance screening, companies can save time,
avoid fines, and ensure that their trading partners are reputable as
they grow their global businesses.
About QAD Precision – Trusted Global Trade and Transportation Execution
QAD Precision (Precision Software), a division of QAD Inc., provides
trade management, transportation
execution and multi
carrier shipping software solutions from a single, integrated
platform. Preeminent industry leaders in every region of the world
rely on QAD Precision’s global support centers to leverage thousands
of carriers and manage millions of shipping transactions every day.
Our open architecture easily integrates with Enterprise Resource
Planning, Warehouse Management Systems and legacy solutions. An
ISO-certified company, QAD Precision assists companies to minimize
shipping costs, optimize first mile and last mile deliveries, automate
free trade agreement compliance, avoid customs delays and mitigate
the risks associated with dynamic trading environments to
maximize their competitive advantage. QAD Precision’s customers span
multiple industries including banking and finance, life sciences, high
technology, retail, industrial, automotive, higher education and
public sector as well as logistics providers. For more information
about QAD Precision, visit www.qadprecision.com.
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