Global trade may be the foundation of the contemporary economy,
but export controls restrict the movement of many goods. In the
latest Precision Report we look at trade compliance issues for high
Global trade is the cornerstone of the contemporary economy. We eat
oranges grown in Florida, wear clothes made in Milan, and use phones
assembled in Shenzhen. Supply chains are global, and manufacturers
source products and raw materials from all around the world. The final
products we buy may use components and intellectual property from
every region of the world.
Despite this, the global trade landscape is not open to the
unfettered movement of goods. Many, many goods are subject to export
controls and customs regulations (not to mention tariffs).
Adhering to customs and trade compliance regulations is crucial for
any high tech manufacturer. For those shipping dual use goods with
both military and civilian applications this is even more the case.
There are significant consequences attached to violating export
regulations. Monetary fines, penalties and delayed shipments are all
very real possibilities. All of these put the customer relationship at
risk, as does the reputational damage they cause.
Better record keeping can solve a number of compliance issues. But
that’s easier said than done if you are relying on manual processes.
Record keeping can be a most time-consuming drain on resources.
Shipping and logistics managers may need to complete pages and pages
of documentation for each shipment to ensure smooth transportation.
When you export high tech goods you may need to comply with
regulations from a number of different government departments. In the
US, for example, businesses are subject to multiple government
agencies, each with a different set of rules. These include the
International Traffic in Arms Regulations (ITAR) from the Department
of State; the Bureau of Industry and Security (BIS) from the
Department of Commerce; and the Office of Foreign Asset Control (OFAC)
under the Department of the Treasury, to name a few.
The US is not alone in expecting exporters to adhere to a wide
variety of legislation. In Japan, exports are subject to a complex mix
of both primary and secondary legislation. This can make understanding
export controls a challenge. Companies based in the European Union
that trade exclusively across the bloc have less onerous compliance
regulations. Goods can move freely between EU member states. However,
EU regulations restrict or forbid the export of certain items to a
third country. Dual use goods as well as military materials require
export licenses. Furthermore, EU Trade Sanctions restrict the export
of goods to certain governments, entities, groups or people.
Let’s have a look at four of the top trade compliance issues for high
High tech manufacturers must keep abreast of changing government
export controls and sanctions. These sanctions include trade
restrictions on countries like Venezuela and Cuba as well as detailed
caveats on transferring high-security technology across borders. The
consequences of doing so are monumental. Just ask the companies and
people that ended up on the United States’ “Don’t
Let This Happen To You” publication of investigations of export violations.
In recent years, the US and the EU have moved away from outright bans
on all trade with certain countries. Instead they have increasingly
used hybrid sanctions. These allow certain commercial activities to
continue, but doing business while remaining compliant becomes an
increasingly arduous task.
Iran is a good point in case. The 2015 Joint Comprehensive Plan of
Action — the Iran nuclear deal — significantly lifted strict sanctions
on Iran. However, the US withdrew from JCPOA in 2018 and US sanctions
against Iran snapped back. Although it is possible for European
companies to do business with Iran, the task of doing so, without
falling foul of US sanctions is very difficult. This is because
companies that have an American bank account or making payments in US
dollars, must abide by US law. Unsurprisingly, a large number of EU
companies suspended projects and withdrew from Iran.
Government bodies and international organizations keep lists of
entities, groups and individuals with whom it is illegal to trade.
Keeping current with denied party lists and manually checking each
shipment against DPLs is an almost impossible task. DPLs are subject
to thousands of changes every year.
Even with an in-house compliance team, making sure all staff check
shipments against DPLs, is a daunting task. Logistics managers and
warehouse staff responsible for shipments will be knowledgeable of the
correct screening procedures, but front office staff is generally less
aware of regulation changes. If admin staff ship a sample to a denied
party, your company would be in breach of regulations. Even sharing
information by phone or email with foreign entities may violate export regulations.
When you send high-security shipments, it can happen that only
specific entities or licensed individuals may receive them. That means
that if the named recipient is unavailable, the package can not be
delivered to, and signed for by, anyone else. To do so would violate
trade compliance laws and such breaches can lead to serious fines.
This is particularly the case with certain types of technology.
Licensing restrictions may limit who can handle specific shipments and
High tech manufacturers looking to move into foreign markets may need
to comply with certain licensing controls and regulations.
Manufacturers must manage and monitor these licensing agreements
carefully in case of audit.
You cannot simply export technology created in one country without
restriction to another. For example, an item that contains a
substantial amount of US technology or intellectual property is
subject to US export controls, even when manufactured or shipped from
outside the US.
As high tech manufacturing organizations look to expand global
operations, they must consider how to handle compliance roadblocks.
Unsurprisingly, many technology companies are turning to
With automated compliance management tools, high tech organizations
can mitigate the risk of violations while freeing employee resources.
A robust global trade compliance solution will verify that your
trading partner has passed DPL screening, determine the End Use of the
item, validate the country of destination and ensure all shipments
include any special documentation — including export licenses and
permits — needed. Furthermore, you can run checks at any point of the transaction.
A best-in-class automated solution will monitor changes to compliance
regulations in real-time against international and government lists.
This ensures that high tech manufacturers always have up-to-date
compliance data. Manual compliance checks can take hours; automated
solutions can perform the same checks in a matter of minutes, with
minimal risk of errors. These streamlined processes reduce the risk of
financial penalties, customs delays and damaged reputations.
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.precisionsoftware.com.
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