TSI Global Consulting: Export Guidance–Proper Compliance Screening Methodology for Commercial and Dual Use Commodities, Software and Technology

In order to ensure compliance with U.S. regulations and avoid costly fines and penalties it is extremely important that ALL export transactions whether they are EAR99, exported under an Export Control Classification Number (ECCN) that is NLR, exported under a license exception, or exported under a validated export license MUST undergo a thorough screen against ALL of the U.S. government denied/restricted parties lists. The screen should be performed just prior, ideally on the same day as the export occurs. In order to ensure compliance with U.S. export regulations you must screen both by company name and ALL major owners/shareholders of the company (i.e. see OFAC 50% rule noted below). Links to access the denied/restricted parties’ lists are noted below. Please be aware that new entities both companies and individuals are added (and a few taken off) to these lists on an ongoing, near daily basis and because of that reality you CANNOT rely on a screen that was performed six months ago, last month, or even sometimes last week to still be valid on the day your export occurs.

Denied Persons List
Entity List
Unverified List
Specially Designated Nationals List [and all other lists maintained by the Office of Foreign Assets Control (OFAC)]

Many companies rely on third party software for screening in lieu of performing a manual screen using the links noted above. While third party software is usually reliable, we highly suggest that you follow a two tiered screening process that includes both an automated and manual screen. At TSI Global Consulting, for our TIER #1 screen we use a free-of-charge tool provided by FEDEX that can be accessed through the Federal Express Global Trade Manager. To access the screening tool you will need to have an account with Federal Express which is free of charge. That is fine for an initial screen, however we highly recommend that you access the actual lists (see links above) and conduct a secondary TIER #2 manual screen in order to ensure that you are screening against the most up to date versions of each list.

CAUTION: Beware of the new 50% Rule that OFAC has adopted for screening against the SDN and other U.S. Treasury Department denied parties lists. There are cases in which a BLOCKED/PROHIBITED entity will NOT show up on any of the lists despite their being a prohibited party to transact business with. According to guidance published on August 13, 2014 by the U.S. Department of Treasury, Office of Foreign Asset Controls (OFAC) any company that is directly or indirectly owned by one or more SDNs as a whole or in the aggregate is automatically considered a Specially Designated National (SDN) even if it is NOT listed as an SDN. Further details on how to be in compliance with the 50% Rule were provided in a separate Guidance sheet that is available by contacting TSI Global Consulting. Please note that the best way to ensure that no party to your transaction is blocked and that you therefore have a “clean screen” is to screen by company name AND THEN TO FOLLOW UP by inquiring with your foreign customers to obtain a list of key shareholders that make up at least 51% of company ownership. Screen all of those individuals against the OFAC lists, as well as all of the other Parties of Concern lists highlighted above. Once you can determine that 51% of the owners are clear than you can be certain that your export transaction is clear of possible OFAC and/or EAR violations.

In the event a company, entity, or person on one of the following lists appears to match a potential party in an export transaction DO NOT EXPORT. Depending on which list the match was found, a match indicates there is either a strict export prohibition, a specific license requirement, or the presence of a red flag. Prior to taking any further action please contact our office so that we can consult the regulations and make a determination on what is needed prior to export.

Disclaimer: The above information should not in any circumstance be considered legal advice. This guidance should be considered general information for export compliance training purposes. Prior to applying this information to a client specific situation or transaction you should contact TSI Global Consulting for advisory assistance and/or obtain counsel on export compliance from a competent professional advisor or legal counsel.

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