Export Compliance: Understanding Restricted Party Screening

All exporters—regardless of size—must comply with U.S. export regulations.

Export compliance entails that you are following the rules and regulations established by the U.S. government. Among those rules is a restriction on doing business with entities the government deems a danger to U.S. interests.

Failure to comply is a violation of U.S. law and may result in civil or criminal prosecution, as well as denial of exporting privileges.

Restricted Party Screening

Restricted/denied party lists are government lists of people and organizations U.S. companies must not or may not do business with without authorization.

There are several reasons why a person or company may be added to a restricted party list. They may pose a risk to national security or international security, have violated export control laws, or are involved in activities like terrorism or tax evasion.

Restricted party screening (or denied party screening) refers to the process in which a company checks a potential customer or business partner against one or more of the restricted party lists to ensure they are not doing business with a restricted party.

Restricted party screening isn't something that a company does once and then it's over. It's a common best practice to screen a party multiple times:

• Account setup—Screen potential new customers and partners. Don't waste time courting a customer if you can't do business with them.
• Order acceptance—Before confirming a new order, rescreen the party. Restricted party lists can and do get updated.
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• Pre-shipment—Screen a party again before delivering the goods.
• Before payment release—Make sure a party and their associated banks and intermediaries don't appear on any lists before sending money.

Companies should screen all the parties in an export transaction, including the buyer, ultimate consignee, intermediate consignee, freight forwarder, banks, other parties involved in the payment and shipment of the goods, and any known individuals, entities or companies that own individually or in aggregate 50% of any of these parties.

Agencies that Oversee Restricted Party Lists

In the United States, the primary restricted party lists are published by the Department of Commerce, Department of State, and Department of Treasury. However, several other agencies produce lists as well. These agencies recommend that companies perform restricted party screening periodically and repeatedly throughout the movement of goods in the supply chain.

The U.S. Consolidated Screening List (CSL) pulls includes many of the lists from BIS (e.g. Denied Persons List, Entity List, Unverified List, Military End-User List), DDTC (Statutorily Debarred Parties) and OFAC (Specially Designated Nationals (SDN) and certain non-SDN lists). It's a great starting point, but you must still apply rules like OFAC's "50 Percent Rule."

Consequences of Non-Compliance

It is important for all exporters to perform restricted party screening of all parties in each transaction. The exporter is ultimately responsible for ensuring that goods do not end up in the hands of any individual or company on any of the restricted party lists.

The Export Control Reform Act of 2018 (ECRA) gives the Bureau of Industry and Security (BIS) authority to regulate dual-use items and less sensitive military items under the Export Administration Regulations (EAR). Under these regulations, civil penalties for exporting to violating these regulations are the greater of $374,474 per violation (inflation adjusted; current as of January 15, 2025) or twice the value of the transaction. Criminal penalties can reach up to $1 million per violation and/or up to 20 years in prison.

Items controlled by the Office of Foreign Asset Controls (OFAC) and the Directorate of Defense Trade Control (DDTC) can impose similar penalties and deny future export privileges.

You can find out more about the devastating consequences of violating export compliance regulations in the BIS publication, Don't Let This Happen To You.

If an exporter comes across a party on one of the restricted party lists, they are encouraged to report this to the agency that published the list.

Using Software for Restricted Party Screening

Shipping Solutions Professional export documentation and compliance software includes a Restricted Party Screening tool that allows you to quickly screen all the parties in your export transactions against more than 300 different lists with just a single click of a button.

The screenings are automatically stored in an audit trail, so you have a record of your export compliance efforts. This is especially important if your company gets audited by the Office of Export Enforcement (OEE) or the Federal Bureau of Investigation (FBI) or another agency with jurisdiction over exports. Most U.S. export regulations require that you maintain these records of your screenings for at least five years, although recent updates to the OFAC regulations now set a minimum 10-year timeframe.

Being able to provide a history of your denied party screenings, as well as all your other export compliance efforts, will help demonstrate you are doing your due diligence to maintain compliance, which the BIS says is a "strong mitigating factor" that can protect you from facing fines or penalties in cases where an export violation may have occurred.

Hundreds of companies use Shipping Solutions to quickly and easily create accurate export documents while staying compliant with U.S. trade regulations. See how Shipping Solutions software can help your company with export compliance. Register now for a free online demo.

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This post was originally published in October 2017 and has been updated to include current information, links and formatting.