1. The screening question
Before importing, an importer should establish that neither the goods, the supplier nor the route is subject to a restriction.
Three screens, done in sequence.
2. The goods screen
Dual-use and military
Goods that could serve military ends, or that are on a dual-use list in the destination, the origin or a third country.
The destination’s own controls apply to the import. The origin country’s controls apply to the export. A third country’s controls may apply to re-export.
Sanctions
Goods subject to sectoral sanctions, particularly in the technology, energy and defence sectors.
Prohibited goods
Counterfeits, narcotics, wildlife products, cultural relics, certain chemicals.
3. The supplier screen
Entity lists
The United States maintains several: the Specially Designated Nationals list, the Entity List, the Unverified List, the Military End User List.
The European Union maintains its own consolidated list.
The United Kingdom, Australia, Canada and others maintain national lists.
The United Nations maintains the consolidated sanctions list.
China maintains its own unreliable entity list and export control lists.
Ownership
The ownership of a supplier matters where a sanctioned party holds an interest, since sanctions frequently reach entities owned above a threshold by a listed party.
Screening frequency
At onboarding, and again at each transaction where the relationship is not continuous.
Lists change, and a supplier cleared last year may be listed this year.
4. The route screen
Destination restrictions
Embargoes and country-level restrictions.
Transshipment risk
Where the goods move through a third country, the risk is diversion.
The documents: the transit documentation, and the evidence that the consignee is the genuine end user.
Free zone and bonded area risk
Free zones can be used to obscure the end destination. Where the consignee is in a free zone, the end-use documentation becomes more important.
5. The Chinese import side
China operates its own import controls, including for dual-use items, solid waste, and certain categories.
An importer into China screens against the Chinese lists as well as their own.
6. The red flags
A buyer who asks for the goods to be shipped to a different address than the invoice.
A buyer who asks for the goods to be relabelled.
Payment from a third party unconnected to the transaction.
Unusually generous terms from a buyer in a restricted market.
A consignee with no apparent use for the product.
7. The documentation that emerges
Where the screening identifies concerns:
The end-user certificate.
The end-use statement.
The non-diversion undertaking.
The evidence of the buyer’s business.
These are the same documents China’s export control regime requires, which is convenient: a well-documented Chinese export already supports the destination-side screening.
8. The record
Screen results, for each transaction and each counterparty.
The list version used.
The date of the screen.
The outcome.
Retained for the applicable retention period.
9. The proportionality
A consumer goods importer does not need a programme sized for a defence electronics business.
The proportionate version: onboard screening, transaction screening where the counterparty or product changes, the destination’s entity list checked, and records kept.
10. Closing view
Sanctions and restricted goods screening is a documentary exercise with a legal consequence, and its effectiveness depends on doing it consistently rather than thoroughly once.
The lists change; the process has to run again.
*This article is based on international sanctions and export control regimes including those of the United Nations, the United States, the European Union, the United Kingdom and China. Importers should obtain specialist legal advice on specific transactions.*