Compliance

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Trade Compliance

ZLIOS can support you with active trade compliance strategies. A trade compliance strategy is designed to protect your company and your employees from international business risk including financial penalties, imprisonment and denial of export privileges. Trade compliance components include Denied Party Screening, Export Controls, Licence Management and Product Classification. Customs Management Operations including Customs Audits also need to be included in any Trade Compliance strategy as they form the foundation for all international trade accreditations including AEO Certification. Trade Compliance processes are heavily reliant on Technology systems and Data Protections systems including the EU GDPR policies.

 

Active Trade Compliance Component include,
1. Trade Compliance
2. Customs Management
3. Data Protection
4. Compliance Penalties
5. Technology Compliance

 

1) Trade Compliance

Trade Compliance regulations are built around international trade regulations and laws, which are created and published by national governments and official agencies. These regulations and laws evolve as a result of political, social and economic changes around the world that can affect peace and stability in distant locations. Complying with trade compliance processes and international regulations protects you and your company from penalties, imprisonment and the removal of export privileges.

Trade Compliance Components
A. Denied Party Screening
B. Export Controls
C. License Management
D. End user agreements

 

A) Denied Party Screening

Denied Party Screening systems rely on national government agencies or official bodies’ restrictive party lists that contain the names of people, organisations, groups and companies that have had specific legal and economic sanctions imposed upon their legal entities by national government and official agencies.

 

Denied Party Screening enables you, the economic operator to scan these parties as and when required.

I. Suppliers,
II. Individuals,
III. Subsidiary companies,
IV. Global trading partners,

 

Trading with entities, who are listed on any of the restricted party lists is actually against the law. You and your company can be at risk from penalties, imprisonment and the removal of export privileges and could be blacklisted”.

 

Restricted Party Lists
Restrictive party lists or Denied party lists are published at regular intervals by national governments including the  US department of Bureau of Industry and Security (BIS) and by the European Union. Currently, there are over 600 restricted party lists, which are published by government agencies globally at regular intervals.

Example lists
I. CFSP, Consolidated Financial Sanctions List
II. BOE, Consolidated List of Financial Sanctions Targets in the UK
III. DPL, Denied Persons List, US-BIS-EL, Entity List, US-BIS Department of Commerce
IV. UL, Unverified List, US-BIS Department of Commerce
V. SDN, Specially Designated Nationals List, US Department of the Treasury
VI. OFAC-CSL, Consolidated Sanctions List, US Department of the Treasury
VII. LADP, List of Administratively Debarred Parties, US Department of State
VIII. LSDP, List of Statutorily Debarred Parties, US Department of State
IX. NPS, List of Non-proliferation Sanctions, US Department of State

 

Trading with entities, who are listed on any of the restricted party lists is actually against the law. You and your company can be at risk from penalties, imprisonment and the removal of export privileges and could even be blacklisted”.

 

B) Export Controls

If you are exporting sensitive products to an overseas client. It is advisable to have an export control system in place.
An export control system, will check the destination country, the product unique classification and the final end use of the product against any current export restriction and license requirements, which may be in forced for that destination country.

I. Sensitive products can also include dual use goods, technology, software and even documentation relating to specific equipment or knowledge.

II. Dual Use items are products, which can be used for both civilian and military applications.

III. Products, which have been specially designed for military use only are also subject to export controls. These products can include vehicles, technology, software etc.

IV. Export controls processes are currently being used in numerous countries around the world and these controls also comply with international agreements.

 

Export Control Classification Numbers (ECCN) is a reference number, which is used in the USA for product classification. The UK/EU have developed the Commerce Control Lists (CCL). Both the ECCN and CCL product classification numbers are linked to the core reference data within the Wassenaar Control Lists. There are 10 categories, listed 0-9 which match the original Wassenaar Control List. These classifications are also used for Dual Use products. The ECCN/CCL classification code is in addition to the Commodity Code product classification.

 

EU Dual Use list Categories
Category First Digit Code Description of Use
Category 0 Nuclear Materials, facilities & Equipment
Category 1 Special materials and related Equipment
Category 2 Materials Processing
Category 3 Electronics
Category 4 Computers
Category 5 Telecommunication and Information Security
Category 6 Sensors and Lasers
Category 7 Navigation and Avionics
Category 8 Marine
Category 9 Aerospace and Propulsion

Category Second Digit Code Description of Sub Category Use
Category A System, Equipment & Components
Category B Test, Inspection, Production Equipment
Category C Materials
Category D Software
Category E Technology

 

C) License Management

Controlling and managing your licenses is a critical part of Export Controls Management. Using the right system can save you time and costs. All of your licenses and permits can be managed from one location which give you the ability to see what licenses are currently available and valid for each jurisdiction you trade with. Licenses also come with specific preconditions, which have to be complied with at all times. National government authorities also have the right to review your license management operation during any site audit. Your licenses are managed in one central location, so everyone in the company – wherever they are – sees all the licenses currently available in every jurisdiction and the preconditions for their use.

 

I. License management systems have the ability to control, manage all national government authorizations (licenses, permits and agreements) until the licenses have expired or has been closed.

II. Manage your internal authorizations including open general licenses until the license has expired or been closed.

III. License management systems system can automate the usage of each license, which gives you the ability to accurately track the usage against specific products and product.

IV. License management systems also have the ability to store all import and export authorizations with corresponding approvals, applications and correspondence thus providing a complete audit trail.

 

D) End Use Agreements

An End Use Agreement is an agreement between two parties, the seller and the buyer. This agreement defines the use of a “specific product”, so that it can only be used in a specific way and over an agreed period or location.

The End Use agreement also protects the seller and is a vital part in any trade compliance operations. If the purchaser decides to use the specific product, in a different way and this usage contradicts the original end use agreement declaration, the purchaser could potentially face sanctions.
For any software, which is purchased, downloaded and finally installed, an End Use License Agreement is generated between the software user and the software provider or licensor. The End-Use License Agreement or EULA is agreement which controls the use of the software between the named parties.

End User Agreements can be used in various scenario and industries. The End User agreement form will contain product description, dates and be counter signed by the client senior management. End User agreements can be classed as a legal agreements between the buyer and the seller and should be reviewed on a regular basis.

 

2) Customs Management

Customs Management Systems are designed to support your businesses, local and international trade operations. All international trade and supply chain operations rely on logistics import and export processes being effective, as it’s the right customs processes and declarations being used, which allows shipments to move quickly across national borders.
Customs Management Systems are designed, so that they comply with international trade regulations and local laws. Successfully customs management systems also forms the basis of an active trade compliance strategy, which is also designed to protect you, your business and commercial reputation from penalties, imprisonment and from being blacklisted, all of which could lose your company revenue and stop your export privileges. International Trade Accreditations or Trusted Trader schemes including Authorized Economic Operator (AEO) & C-TPATS are becoming vital in international trade.
Certified companies already have a clear advantage, when exporting, especially to the United States as they are stating that there part of the supply chain is secure. (Please visit Zlios Customs Management Page for more information)

Customs Management Components
i. Customs Import Operations.
ii. Customs Export Operations.
iii. Importer & Export Trader Identification Requirements ( EORI )
iv. Customs Document Management & Audits.
v. Product Classification Process.
vi. UK Customs Authorisations Processes.
vii. International Trade Accreditation (AEO & C-TPATS)

 

3) Data Protection

The Data Protection Act 2018 is the UK’s implementation of the General Data Protection Regulation (GDPR).
The Data Protection Act controls, how personnel information is used by businesses, organizations and by the UK Government.
Data Protection also has impact on your Active Trade Compliance Strategy and Global Logistics Operations. It’s important that the operations data is stored correctly as per GDPR requirements.
Everyone responsible, for using personal data has to follow strict rules called ‘data protection principles’. They must make sure the information is:

I. Used lawfully, fairly and transparently.
II. Used for specified purposes.
III. Used in a way that is adequate, relevant and limited to only what is necessary?
IV. Accurate and, where necessary, kept up to date.
V. Kept for no longer than is necessary.
VI. All data is securely managed including protection against unlawful or unauthorized processing, access, loss, destruction or damage.
VII. GDPR fines can be 4% of total global revenue or 20 Million Euros.

 

4) Compliance Penalties

As with all regulations, there are penalties for non-compliance of international trade compliance rules and regulations, which can include fines, imprisonment and the denial of export privileges plus the damage to your business reputations as you could be blacklisted with other trade partners or new clients.

I. US Export Administration Act of 1979 penalties can include 20 years imprisonment plus fines of $1 million dollars per trade compliance violation.
II. GDPR fines can be 4% of total global revenue or 20 Million Euros.

 

5. Technology Compliance

Effective technology systems including Warehouse Management Systems, Transport Management Systems, Customs Import & Export Management Systems plus Enterprise Resources Planning Systems, all need to work together, helping your business to grow safely and effectively.

But these technology systems also need to be protected from cyber-attacks or anyone else trying to hack in and steal your company’s data. These systems contain the operational history of your business including sales, financial and inventory transactions between you and your customers.

There are various international standards (ISO), all of which are designed to support your businesses technology systems.
ISO/IEC 27001:2013 is one of these ISO Standards and it specifies, the requirements for establishing, implementing, maintaining and continually improving an information security management system.

But if a data breach is discovered, it needs to be quickly investigated. If the data taken contains any personnel data, its fall under General Data Protection Regulation (GDPR) and the breach needs to be reported to the local authorities within 72hrs. If the breach is likely to result in a high risk of adversely affecting individuals’ rights and freedoms, you must also inform those individuals without undue delay. There are severe penalties for GDPR data breaches which can really affect your business operations.

Effective technology compliance is designed to protect your systems from cyber-attack and your business from commercial espionage, hackers or data breaches. Today, all businesses are global businesses and they all rely on numerous technologies which allows them to link distant locations together, enabling you to trade globally in a safe way.

 

Why ZLIOS
We have had successful careers working for international commercial operations including global logistics companies, where we have managed complex operations including international logistics, trade compliance and company accreditation projects.   Zlios About Us