Denied & Sanctioned Parties

U.S. government agencies as well as International organizations and foreign government agencies publish lists of entities and companies that are denied or restricted from doing business with. In the event a company, entity or person on one of such lists appears to match a potential party in an export transaction, additional due diligence is required before proceeding. Typically, depending on which list the match was found, a match would indicate the either of the following situations:

• A strict export prohibition;
• A specific license requirement for exporting to or making a business with the sanctioned entity; or
•  The presence of a "red flag" in this transaction with the sanctioned entity.

According to agencies which publish the denied and/or sanctioned party lists, prior to taking any further actions, companies and organizations are to consult the requirements of the specific list on which the company, entity or person is identified by reviewing the webpage of the agency responsible for the list. Violation of the regulations would cause criminal and administrative penalties against the companies and organizations. Moreover, violators may be subject to denial of their export privileges, which essentially means the company is prohibited from participating in any future transaction. It is also noteworthy that the company business reputation would be severely damaged resulting from a bad publicity of a non-compliance.
In the U.S., government agencies generally add the entities, individuals and companies to the restricted party lists for several reasons. They commonly define such reasons as in the following:

• A foreign party, such as an individual, business, research institution, or government organization, for engaging in activities contrary to U.S. national security and/or foreign policy interests.
•  A list of individuals and entities that have been denied export privileges. Any dealings with a party on this list that would violate the terms of its denial order are prohibited.
•  Some foreign entities are prohibited from receiving some or all items subject to the U.S. Export Administration Regulations (EAR) unless the exporter secures a license. Those persons/entities present a greater risk of diversion to weapons of mass destruction (WMD) programs, terrorism, narcotic trafficking, financial criminal activities, or other activities contrary to U.S. national security or foreign policy interests.
• In certain cases, a government agency has been unable to verify the end-user in prior transactions. Typically, the presence of a party on this list in a transaction is a “Red Flag” that should be resolved before proceeding with the transaction.

Many companies and organizations enjoy using applicable license exceptions in their transactions when the export license requirement exists. However, in most instances, license exceptions that are otherwise available for the export, reexport or transfer (in-country) to a party cannot be used if the party is listed in the denied party lists. Rather, such transactions require a prior export license and are usually subject to a policy of denial.

About the Author:

Marina Truhan
International trade compliance expert with a focus on export compliance, denied party screening, export classification, EAR, ITAR, deemed export and encryption items. 
For details on denied and sanctioned party screening process and how to automate this process, you can consult Intredex Export Compliance services. Intredex assists companies with services such as restricted and denied party screening, export classification, eccn, and with achieving the EAR (Export Administration Regulations) and ITAR compliance with developing procedures for export transactions in alignment with the U.S. Government laws and regulations.