Caution: Denied parties - screen with care

Traffic stop light at intersection

When approaching a yellow light, there are two types of drivers on the road: Those who think “better speed up to make this light!”, and those who think “whoa - time to slow down”.

Regardless of whichever belief you subscribe to (whether on or off the road) a yellow light generally symbolizes “caution”.

When it comes to screening for denied parties, the same rules apply.

On August 1, 2018, the US Bureau of Industry and Security (BIS) issued a final rule which added 44 new entities (eight entities and 36 subordinate institutions) to the Entity List.

How exactly does an entity find itself on this list? The Entity List identifies foreign parties - including individuals, businesses, institutions, or government organizations - that the US government believes to be engaging in activities contrary to national security and foreign policy*. Once added to the Entity List, these foreign parties are prohibited from receiving items subject to the Export Administration Regulations (EAR), unless the exporter secures a license.

As an exporter, it is your responsibility to perform due diligence and screen your orders for all listed parties. So what are some signals you should look out for?  

Similar to driving on the road, the screening process uses Red, Green and Yellow “lights” to signal how you should respond. A “green light,” means there were no matches between the entity list and parties involved in the transaction, and you can proceed with the order.  A “red light” means there is an exact match to the Entity List. In this case, you should stop the order until an export license is acquired to proceed.

But if you see a “yellow light”, do you hit the brakes and stop the order in its tracks? Or do you merely proceed with caution?

A "yellow light" in the screening process simply means there is a match or a possible match to an entity on the denied party list. When faced with either match type, it does not mean the order needs to stop completely. Rather, it is a time to hit pause and take a deeper dive: Investigate and perform your research on why the party was flagged, and then assess what possible action(s) you should take in order to proceed. Do you need a license to ship? Or just to review license requirements? Turning a “yellow light” to a “green light” becomes your task at hand (now if only that were possible on the road!)

blurry light streaks down an empty highway

Over the years, many shippers have turned to automation to simplify the screening process. While automation is very useful, it cannot always give you the full picture. It is important to keep an eye out for these different indicators and perform your due diligence when red (or yellow) flags come up. Should you have any questions or concerns, please feel free to reach out to me directly.    

So my question to you is: When you see a yellow light, which driver (or shipper) will you be?


*Sourced from Bureau of Industry and Security