The US Government's Consolidated Screening List - Still an Inadequate Search Tool

Screening remains a critical element in any truly comprehensive global trade compliance program.  Based on recent estimates there are now more than 400 lists globally including a wide variety of debarred, denied, embargoed, prohibited, proscribed, restricted and sanctioned entities.  That number continues to grow.  Doing business with an entity on one of these lists has resulted and may result in significant fines and penalties.  You and your organization can also end-up on one of these lists. 

For those who have the false impression that the US Government (USG) Consolidated Screening List (CSL) is one-stop shopping when it comes to screening, there is no doubt it is not.  If all you check is the CSL you are in no way covering all the lists you need to consider.  The reality is with faulty or incomplete due diligence you put your organization and yourself at risk.  

Material CSL shortfalls include a limited “Fuzzy Name Search” capability with a simple “ON” or “OFF” function and no inherent search record keeping capability.  The CSL currently only covers 11 USG lists representing about 3% of the lists around the world.  Further, according to State Department and savvy industry counterparts including seasoned lawyers, the System for Award Management (SAM), another USG online search tool that consolidates what used to be included on the Excluded Parties List System, is also essential to screen against.  The SAM and hundreds of other lists relevant to international transactions are not included in the CSL.

WARNINGS:  CSL use alone without other much more comprehensive screening tools places organizations and individuals at great risk.  Remember: The US Principal Party in Interest (USPPI) is responsible when transacting with an entity on one or more of these lists.  There are at least several real world cases where the USPPI incorrectly assumed the CSL covered all the relevant bases, when in fact it did not.

FOOD FOR THOUGHT:  Are you screening all the lists that need to be checked and at key points?  Do you rely on a no-cost partial solution that can result and has resulted in violations?  Is your organization at more risk in this area than it should be?  What do you need to do to ensure adequate screening list compliance to minimize exposure, liability and risk in a much invigorated enforcement environment?

Suggestions, comments, inputs regarding the above narrative are encouraged and welcome.  Please contact John Priecko, 703-895-1110, jpriecko@comcast.net.

Suffering Regulatory Fatigue?

Anyone want to make a guess at how many Export Control Reform (ECR) related Federal Register notices have been published?

How many pages of Federal Register notices does that equate to?

Or, as a result of ECR, how many pages have been added to the Export Administration Regulations and International Traffic in Arms Regulations?

Perhaps more importantly, what’s the impact and implications regarding the above on you, your organization and the compliance program?

Are things clearer, easier and simpler than they were before ECR?

Realistically, if you are a small or medium size enterprise (SME) with limited expertise and resources how do you keep up with what’s happening and ensure you and your organization are complying with all the changes?

What advice would you provide others?

A Past Due Level Playing Field

The only association listed on the Directorate of Defense Trade Controls (DDTC) website other than government and multi-lateral organizations is the Society for International Affairs (SIA).  Years ago the SIA became DDTC’s unofficial but de facto outreach, education and training arm.

Much has changed and other “just as valid” associations now exist and provide quality/value-added to practitioners on a wide-range of fronts.  Is this current situation fair to these other credible associations such as the:  American Association of Exporters and Importers (AAEI), International Compliance Professionals Association, National Council on International Trade Development, Association of Trade Compliance Professionals, National Defense Industrial Association, to name but a few?  Some like AAEI existed long before SIA.

Trade and professional associations and their members are very much a part of our community and contribute a great deal to regulatory compliance.  This is especially so in filling DDTC’s gaps in outreach, education and training.  Isn’t excluding all in favor of just one patently unfair?  Isn’t it time to provide equitable treatment to other relevant associations?  At a minimum shouldn’t they be listed on the DDTC website under OTHER WEB SITES or perhaps even a separate category?

So, why is the SIA still favored, listed and promoted by DDTC above all the others?  Does pushing one and punishing the others communicate a fair and level playing field for a qualified list of “at least as relevant” associations?  Is it appropriate, beneficial and healthy professionally to exclude and ignore the others?

Further, with the long-standing DDTC-SIA relationship aren’t there conflict of interest issues?  SIA has unfettered access to DDTC speakers.  DDTC also plays a significant role coordinating and crafting SIA program agendas.  Do other associations have such distinct advantages to the degree SIA does? 

What do you think?

DDTC 2015 Consent Agreements - What's up?

Anyone wondering what happened to 2015 DDTC Consent Agreements?

2015 is the first year since 1996 with no US Department of State Consent Agreements. 

Over the Last 20 years DDTC has averaged just under 2 ½ Consent Agreements per year. The range is 0-5/year. 

So why nothing in 2015?  Is it because: 

-  Industry is doing a better job complying?

-  DDTC is overwhelmed as a result of Export Control Reform?

-  Consent Agreements take many years to work through?

-  There are too many ongoing cases and not enough resources to close them out?

-  Does the number indicate DDTC is shifting gears taking a different approach?

-  There is less emphasis on compliance and enforcement?

-  It’s just an anomaly?

-  Some other reason…?

It’s also worth noting big doesn’t mean better or more compliant.  Over the last 20 years repeat offenders (i.e. those with multiple DDTC settlements) include:  Boeing (4), Raytheon (3), Lockheed Martin (3) and ITT (2).  Those 4 organizations represent 26% of the total number of DDTC 1996-2016 settlements (47).  

Food for Thought/Discussion (pick one):  

-  What’s the impact on you or your organization when there are no DDTC Consent Agreements in a given year?

-  What can be taken away from DDTC Consent Agreements that impacts your organization’s compliance program?

-  What’s the deterrent effect of DDTC Consent Agreements on you, your organization and industry

License Exception STA - A Continuing Saga…

For those of you upset by and/or frustrated over US Government (USG) insistence on using Export Administration Regulations (EAR) license exception Strategic Trade Authorization (STA), expect more of the same.

This appears to be the only case where the USG forces an EAR License Exception down industry’s throat.  This does not happen on the State Department side.  Using or not using an International Traffic in Arms Regulations exemption is at the discretion of the registrant.

Industry still complains about STA saying it’s too complex and an administrative burden.  In the view of many, getting a license proves easier and less problematic.  The Bureau of Industry and Security (BIS) points the finger at industry indicating those who don’t use STA and can, are uneducated, uniformed or simply don’t understand.  Yet, BIS has amended the exception 16 times.

Another consideration is workload.  If you use STA, the exposure, liability and risk is all yours.  If you submit a license, effort and decision making shift to BIS.  One consequence and reality of Export Control Reform (ECR) are shifting responsibilities from the USG to industry.  Either way, resources are a factor. 

It’s also worth reminding practitioners BIS routinely audits exporters who use STA.  In this context the word “audit” is not politically correct; thus, BIS prefers “review.”  Call it what you will, but they ask for proof it’s being used properly.

Further, STA use is a metric measuring ECR success.  STA use is low and has been since its inception.  There is no doubt BIS is on a quest to increase the numbers, thus a reinvigorated effort to do just that. 

As always there are at least two sides to the story; however, at the end of the day, aren’t trade compliance professionals adults who can and should make their own well-informed business decisions on using or not using an exception or exemption? 

In the spirit of an open/honest dialogue what do you think?