In the current regulatory landscape, trade companies that facilitate the movement of goods don’t have it easy. Regulations dictate how trade should be conducted, the measures that must be taken to ensure security during transportation, and who firms can do business with.
Now this challenge has the potential to significantly impact operations for international cargo organisations. On top of the other regulatory considerations, cargo carriers and forwarders must address international trade regulations and export controls.
The more competitive a carrier is, the more applicable the regulations are and the greater the potential to lead to damaging consequences. Competitiveness often increases with the growth of a firm, its global footprint, and the variety of services it provides. As carriers and forwarders grow and expand their offerings, the risk of non-compliance is heightened by the evolving landscape of trade sanctions and export control regulations.
The US Department of Commerce’s Bureau of Industry and Security (BIS) is one authority enforcing such regulations. Its role is to ‘advance U.S. national security, foreign policy, and economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership.’
Specifically, the BIS drives efforts to prevent the spread of weapons of mass destruction (nuclear, chemical, and biological weapons) and their delivery systems. It promotes the peace and security of the US by improving physical security, using interdiction and sanctions, and actively participating in the Proliferation Security Initiative. These sanctions lead to various restrictions and prohibitions that impact both domestic and global organisations that conduct business in the US.
The Huawei Case
The latest restrictions on Huawei, a well-established manufacturer of mobile phones from China, highlight how quickly sanctions can change.
In May 2019, the President of the United States signed a bill that placed Huawei on a list of prohibited organisations, claiming that this would protect US communication networks. These rules limited the types of business US companies can do with Huawei, with worldwide implications and a particular effect on the transportation sector.
The order authorises the US Secretary of Commerce to block any transaction involving communication technologies, built by companies controlled by a foreign adversary that puts US security at ‘unacceptable’ risk or poses a threat of espionage or sabotage to US networks.
In operational terms, this means that every shipment booking that is issued as a House Waybill or Air Waybill should alert the carrier or forwarder if the entity ‘Huawei’ is named as a party in the shipment. Similarly, items listed on the commerce and control list issued by the Export Administration Regulation (EAR), such as technology and telecommunication, should ring alarm bells and require a thorough check.
Change is a Constant
According to several news outlets, in early July 2019 the US President appeared to be rethinking the Huawei sanctions.
After meeting with China’s President, it was intimated that there may be a partial lift of sanctions relating to certain activities (such as financial transactions) or for the trade of particular goods (such as mobile phones). Those entities could even be removed from the sanctions list altogether.
The level of political change and uncertainty within such a short period of time demonstrates how sanctions are used to enforce foreign policy, and how entities can be listed or removed at the blink of an eye. Despite the constant state of flux, everyone must adapt and ensure their business is compliant with the frequently changing lists. The Huawei case serves to highlight the complexity and volatility of sanctions and export controls.
Regulations like these grow even more complex for global shipping companies when you consider that the volume of shipments processed each day can easily run into the millions. Just one single entity added to or removed from a sanctions list can affect thousands of shipments – and often multiple alterations are made each day. If you then throw export control restrictions into the mix, operations can seem unmanageable.
It is imperative for cargo carriers and forwarders to rely on high quality and frequently updated data to stay on top of the ever-changing lists of sanctioned entities. Up-to-date information is the backbone of a robust sanctions and export compliance process.
The second string carriers must add to their bow is automation. By digitalising and automating the trade compliance process, it is possible to perform sanctions and export compliance checks on every single booking and House Waybill in real-time. This includes screening the shipper and consignee (including their address), and identifying whether the shipped goods are subject to any restrictions throughout the shipping process.
In the face of the monster that is the current regulatory landscape, the combination of up-to-date data and automated screening can alleviate complexity and mitigate the risk of sanctions and export control violations. An added incentive is that, beyond regulatory protection, this approach can also drive efficiency across the business.
By implementing the right trade compliance data and technology, carriers can ensure they are well-poised for growth and equipped to seize opportunities without risk.