Three Trade Compliance Issues For High Tech Manufacturers

Manufacturers of high tech products often face restrictions and controls if and when they ship goods across regions and countries. In this QAD Precision Report, we look at the three most pressing compliance issues for high tech enterprises.

Innovation, at its core, is spreading new ideas to new people. For high tech manufacturers, this means spreading product across audiences, regions and even countries. Unfortunately, the global trade landscape isn’t especially open to the constant movement of goods and ideas. There are many rules and regulations that govern how manufacturers transfer goods across borders.

Adhering to customs and international trade compliance regulations is crucial for high tech manufacturers. There are some very real consequences attached to these seemingly innocuous laws. Monetary fines, penalties and shipping issues (read: delays) are a very real possibility. Furthermore, all of these outcomes put the customer experience at severe risk. 

High tech manufacturers can address many of these issues with better record keeping and documentation. This is one of the biggest pitfalls of the current global trade compliance landscape. Maintaining an effective trade compliance program is a great way to take proactive steps towards optimizing customer satisfaction.

Below, we’ll explore three of the top trade compliance issues for high tech manufacturers and tips on how to overcome them.

Restricted Party Screening

Export compliance for high tech goods often requires restricted party screening (also called denied party screening or sanctioned party list screening). This ensures that manufacturers are not trading with people involved in crime, terrorism or other illegal activities.

Screening customer names against all important government and international lists is an arduous task if done manually. However, it is possible to automate this process at the beginning of every transaction. 

Screening can also be automatically done before shipment. This is a best practice. Denied party lists are subject to daily changes.

Furthermore, sometimes only specific entities or individuals are able to receive certain high-security shipments. If this person isn’t available, it’s common to get sign-off from a warehouse employee who happens to be present. Unfortunately, this practice violates trade compliance laws and can lead to serious fines. Particularly with certain types of technology, licensing restrictions may limit who can handle specific shipments and who cannot.

Licensing Control

For high tech manufactures looking to spread their innovations overseas, it’s important to be aware of certain licensing controls and regulations. 

It’s common that manufacturers that create technology in one country cannot simply ship goods without restriction to another country. For example, if an item is shipped from a non-US country but contains a substantial amount of US technology or IP. 

Even though this item is not shipped directly from the US, it is still subject to US export controls. That is because the US government may declare that restricting these goods is vital to national security.

Manufacturers must manage these licensing agreements extremely carefully. They must also monitor and record every interaction and checkpoint in case of an audit. This is important because it shows authorities that you have undertaken all necessary due diligence.

A cloud-based global trade compliance solution can help take the guesswork out of licensing. Licensing requirements and regulations can be stored by critical metrics such as country, item, date or value. This ensures no licensing issues slip through the cracks with the potential of fines, penalties or loss of export privileges.

Sanctions

It’s important for high tech manufacturers to keep a steady pulse on changing government export controls and sanctions. These sanctions can include shipping bans on countries like Iraq and Cuba. 

These blanket bans sit alongside detailed caveats on transferring high-security technology across borders. The consequences of doing so are monumental. For a preview of civil penalties, take a look at Don’t Let This Happen To You. This is a publication of actual investigations of violations by the US Bureau of Industry and Security (BIS).

To stay up-to-date on sanctions, it’s important to have trade content that is constantly updated and refreshed. Daily updates to all new regulatory agency data — including the lists of sanctioned countries — ensures ongoing compliance with international trade regulations.

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Further Reading

3 MINUTE EXPLAINER: WHY YOU SHOULD AUTOMATE TRADE COMPLIANCE

IF YOUR TRADING PARTNERS ARE CRIMINALS, SO ARE YOU

SIX REASONS HIGH TECH AND MANUFACTURING FIRMS NEED DENIED PARTY SCREENING