The 5 biggest challenges in Trade Compliance
how to overcome

The 5 biggest challenges in Trade Compliance

In a sea of global trade turmoil is it possible to find a safe harbor? Yes, says our Mark Brannan who explains the biggest challenges in compliance management and how to fix them.


Considering Donald Trump and his tariffs, the U.S. trade war with China, the renegotiation of trade agreements in North America, the EU and Asia Pacific, Britain’s pondering of its hard, soft and no-deal Brexit, the up and down cycles of economies worldwide, and changes to compliance rules and regulations from the EU, U.S, and UN (and the difficulty in tracking them), there have been few eras in history that posed so many challenges to those involved in global trade.

In fact, the World Trade Organization expects escalating trade tensions and tighter credit market conditions in important markets will slow trade growth in 2019.

It says the dip will be the result of a rise in actual and proposed trade measures targeting a variety of exports from large economies. 

“While trade growth remains strong, this downgrade reflects the heightened tensions that we are seeing between major trading partners,'' said WTO Director General Roberto Azevêdo. ''More than ever, it is critical for governments to work through their differences and show restraint. The WTO will continue to support those efforts and ensure that trade remains a driver of better living standards, growth and job creation around the globe.”

Mark Brannan
Mark Brannan

Mark Brannan, International Business Development Director, has compiled his personal list of the five biggest challenges standing in front of your company and success in today's volatile trade markets.

Brannan says everything from difficult-to-predict politicians to changes in technology to shifting regulatory bodies can impact your bottom line but offers some advice on the best way to deal with them all and still ensure you can keep the wheels of progress turning in your favor and not  stopped at the border.


1. Expect the unexpected

In 2016, President Trump promised an unpredictable US foreign policy if he were to win the presidency. 

“We must as a nation be more unpredictable,” he said. “We are totally predictable.” 

An unpredictable foreign policy inevitably makes export control regulations more subject to change. It also makes the job of export control practitioners that bit harder. 

Keeping an eye on the news for foreign policy changes is therefore always advisable. Any change in the global security environment can directly impact financial sanctions and export controls, and with this also on international supply chains and business decisions regarding certain markets.

Solution: AEB’s Trade Compliance Management software.

AEB Trade Compliance Management covers all the main elements of export controls – screening for critical business partners, country embargoes, critical goods, and critical end-use – and offers end-to-end integration into your processes and system environment. 

Trade Compliance also automates the complex process of classifying your products and helps you easily manage licenses and permits. A central Trade Compliance Monitor lets you keep an eye on high-risk transactions. The result: end-to-end security in a single solution.

2. Global sanctions

On May 8, 2018, the United States officially withdrew from the Joint Comprehensive Plan of Action (JCPOA) after President Donald Trump signed a Presidential Memorandum ordering the reinstatement of harsher sanctions. 

This has caused an international split, with the EU enacting an updated blocking statute on 7 August 2018 to protect EU companies doing legitimate business with Iran from the impact of US extra-territorial sanctions. 

These conflicting regulations create a very complicated business environment for traders. But, it’s not just Iran. The U.S. administration is showing a very tough stance through CAATSA – the Countering America’s Adversaries Through Sanctions Act – which additionally brings in sanctions against Russia and North Korea. 

And then there are sanctions (imposed by the U.S. and other nations) on a wide range of countries including Venezuela, Burma, and South Sudan. Businesses need to keep abreast of the changing sanctions environment and manage their business relationships accordingly.

Solution: AEB Export Controls

Export Controls checks the countries, goods, and intended end-use of your business transactions for compliance with current bans and licensing requirements. You have complete control in deciding which countries and bodies of legislation you wish to include in the screening.


3. OFAC 50% Rule

In 2014, following the initial sanctions against Russia for its involvement in Ukraine and annexation of Crimea, OFAC published its 50% rule, which holds that an entity is blocked if one or more blocked persons, directly or indirectly, owns a 50% or greater interest in that entity, whether individually or in the aggregate. 

Companies must therefore not only check whether a business partner is on a sanctions list, but additionally confirm whether there is a greater than 50% ownership of that business partner by sanctioned parties. 

Many companies currently screen for directly sanctioned parties only. This is not sufficient in light of the U.S. OFAC 50% Rule and the EU equivalent; companies must also check for ownership by sanctioned parties.

Solution: Again, AEB Export Controls.

Our content partners augment the official sanctions lists offered by AEB with restricted party lists, watchlists, and enforcement lists valid around the world. 

You can also define your own restricted party lists. Compliance Screening even lets you enforce bans on indirect provisions from EU embargo regulations and adhere to the OFAC 50% rule. 

And if you need a PEP list or wish to screen your business contacts for negative media reporting, you’ll find the content you need.


4. Intangible technology

Intangible technology presents an ever-increasing export control challenge. Export controls do not apply only to physical merchandise. Sanctions apply to software and technology. 

System descriptions, technical specifications, and blueprints need to be checked, since such documents may contain information subject to licensing requirements. 

A license may be required merely to make software or technology available online, send it by e-mail to a foreign business partner, or bring it (in hard or soft copy) on a business trip abroad. The regulations in this area are complex. 

And, they have become a mainstream challenge affecting all kinds of businesses and academic institutions, so it’s important to check legal compliance before transferring technology.

SolutionAEB Technology Transfers Management.

This secure web-based application provides an easy way for you to manage technology transfers taking place throughout your organization. 

Employees are able to submit requests to the export controls administrator(s) to determine whether the activities they are undertaking are covered by existing export licenses or authorized  clearances. 

If these already exist, then the administrator is able to advise the employee of the corresponding license via the web-based application. 

Otherwise, as the administrator is notified of the requirement at an early stage, the application process for a new export license can commence.”

5. Multi-jurisdictional regulatory compliance

Multinational companies having the challenge of complying with the laws and trade control regimes of multiple countries. 

Although this is a commonplace situation, it doesn’t mean it’s easy. Different countries and trading blocs have their own foreign policies and national interests which are reflected in their trade control regulations. 

Sometimes these are conflicting (as in the case of the U.S. sanctions on Iran and the EU counter measures) and sometimes a delicate balancing act is required to navigate these and remain in full compliance with all jurisdictions. 

In order to tackle this challenge, businesses must have very good oversight of all their global operations and compliance activities. 

Solution A: AEB Export Controls.

Businesses that hope to thrive in the global marketplace need to understand and manage applicable bans and restrictions. The key to this is checking export transactions against the relevant laws and regulations. And that’s exactly what Export Controls from AEB does for you.

Solution B: AEB Product Classification.

Product Classification from AEB offers intuitive wizards, reliable process management, and automated suggestions based on a learning algorithm to simplify how you classify your products. Each product can be classified according to the relevant regulations (e.g. U.S. EAR, EU Dual-Use Regulation) thus providing the foundation for effective export controls management.