Global Trade Santosh Iyer, Kuehne + Nagel TEID, Ethics and - - PowerPoint PPT Presentation

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Global Trade Santosh Iyer, Kuehne + Nagel TEID, Ethics and - - PowerPoint PPT Presentation

Dec 18, 2023 479 likes •1.02k views

Managing Trade Compliance risk in Global Trade Santosh Iyer, Kuehne + Nagel TEID, Ethics and Reputation Society Hidiv Kasr, Istanbul, February 20, 2018 Agenda for our discussion 1. What is Trade Compliance? 2. Understanding the risk! 3.

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Managing Trade Compliance risk in Global Trade

Santosh Iyer, Kuehne + Nagel TEID, Ethics and Reputation Society Hidiv Kasrı, Istanbul, February 20, 2018

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Agenda for our discussion

1. What is Trade Compliance? 2. Understanding the risk! 3. How are Sanctions enforced? 4. Why are we concerned? 5. Current updates 6. How do we manage the risk? 7. Trade Compliance at Kühne+Nagel

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Important Announcement

Discussion held in this forums should not be considered as professional or qualified advise. Participants are requested to seek professional support when required from qualified practitioners.

Santosh Iyer, Kuehne + Nagel 4

Caution

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What is Trade Compliance?

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International trade

Santosh Iyer, Kuehne + Nagel

Complex chain of process with Domino effect

Supply chain planning Packaging Contract & LC Incoterms Export Licence Logistics supplier Export documentation Quality control HS Classification Customs Clearance Customs Inspections VAT refund Original Documents Pre-Advice to customer Payment Import Licence Valuation Free Trade Agreement Rules of Origin Duty & Taxes Customs Clearance Delivery

Pre-shipment Origin Post-shipment Destination

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Trade Compliance

Santosh Iyer, Kuehne + Nagel 7

Complex web of regulations applies to goods in International trade

Sanctions, Boycott, Embargo

  • Iran, Syria, Russia, North Korea Sanctions
  • Israel Boycott & Qatar Boycott
  • UN Sanctions list
  • Specially designated persons list

Customs Compliance

  • HS Code classification
  • Customs valuation
  • Transit & transshipment procedures
  • Rules of Origin

Tariff and Non Tariff barrier

  • Anti dumping duties
  • Safe guard duties
  • Sanitary and phytosanitary measures
  • Free & Preferential Trade Agreements

Export Controls

  • Dual use goods
  • Arms & Ammunition
  • Sensitive goods and materials
  • High tech goods
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Understanding the risk

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Important Announcement

Sanctions, Embargoes and Boycott are used as foreign policy tools and it is acceptable to not agree with the objectives, reasons and principles behind their usage. The objective of this forum is to understand the risks in global trade resulting from Sanctions, Embargoes, and Boycott and exchange ideas to manage the risk.

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Caution

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Generally imposed by developed nations

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Understanding Sanctions

▪ Sanctions defined – Deliberate government inspired withdrawal Or – Threat of withdrawal of customary trade, financial relationship or seizure of assets ▪ Sanctions defined – Economic tool to force a change in foreign policy of a target country Or – To bring about a general change in its behaviour

Santosh Iyer, Kuehne + Nagel

Can be explained in various ways, easily defined as

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Understanding Sanctions

  • Old history: first known example is in 432 BC, when Athens sought to choke the

economy of the city-state of Megara by excluding its merchants from Athenian controlled territories

– Back then sanctions contributed to war (in that case, the Peloponnesian War) rather than averting hostility

  • Recent history:

– South Africa ( Success) – Burma ( Success, time will tell the complete story) – Iran ( Partial success) – Sudan ( Partial success) – North Korea ( Failure) – Syria ( Failure) – Cuba ( Failure)

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History of Sanctions

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Understanding Sanctions

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Stated objectives

Human Rights ( Myanmar) Counterterrorism (ISIS / Al Qaida) Regime change (Syria) Non proliferation (Iran / North Korea) Conflict resolution ( Crimea / DRC) Cybersecurity (Russia)
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Geopolitical Risk

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Understanding Sanctions

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Embargo vs Sanctions

Embargo

  • Full or complete import prohibition. No
good is allowed to be imported from the embargoed country. Also called an “absolute embargo”.
  • Example: The US has an import embargo against
Cuba and Syria. No good can be imported from Cuba
  • r Syria.

Sanctions

  • Restrictions on dealings with countries,
persons or entities & prohibition of certain types of goods. Also called an “partial embargo”.
  • Example: The EU has an import / export sanction
against North Korea for arms and related material and for items that can contribute to North Korea’s nuclear-related, ballistic missile-related or other weapons of mass destruction-related programs.
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Understanding Sanctions

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Types of Sanctions

Comprehensive

  • Similar to complete Embargo
  • Blocks all trade with sanctioned countries.
unless licensed
  • Iran
  • Syria
  • North Korea
  • Cuba

List based

  • Prohibits from engaging in activities with
persons and entities who are listed on Specially Designated Nationals and Blocked Persons list, unless licensed
  • Iraq
  • DRC
  • Lebanon
  • Sudan
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How are Sanctions enforced?

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How are Sanctions enforced?

  • CHAPTER VII, Article 41

– The Security Council may decide on measures, not involving the use of armed force are to be employed to give effect to its decisions, and it may call upon the members of the United Nations to apply such measures. These may include complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations

  • Despite inflicting intended human distress, sanctions are often justified as a more

‘ethical alternative to war’.

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Charter of the United Nations

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How are Sanctions enforced?

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Who enforces these regulations?

UN Security Council EU External Action HM Treasury UK DFAT, Australia METI, Japan MAS, Singapore BIS, USA OFAC, USA DOJ, USA
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Why are we concerned?

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Why are we concerned

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Largest fines in recent years

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Why are we concerned

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ZTE case, Chinese company

MARCH 7, 2017
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Why are we concerned

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Power of U.S. Dollar in capturing non US activities

Seller Buyer Buyer’s bank Seller’s bank
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Why are we concerned

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Banks may not support !

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Why are we concerned

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Authorities check End-Use and End-User

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Why are we concerned

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Industries most affected

Aerospace Pharma & Life sciences Energy (oil and gas) Defence Chemical Semiconductor & Electronics Mining Nuclear
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Why are we concerned

▪ Immediate loss of customers if the violator is added to the very public restricted / blocked party list ▪ Inability to participate in RFPs/RFIs/RFQs ▪ De-risking / Blockage by banks ▪ Potential irreparable harm to a company’s reputation ▪ Being designated as a blocked or restricted party would immediately result in – Freezing of the funds or assets owned, held, or controlled by violator – Denying the violator export or import licenses and privileges – Denying or revoking the violator’ immigration privileges – e.g. revoking visas and excluding the violator’s employees from the country – Fines and/or imprisonment

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What are the possible consequences?

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Current updates

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Current updates

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Sanctioned countries and applicable restrictions

Country Currency Restrictions US Flag Restrictions Military Shipment Restrictions Commodity Restrictions Iran Yes Yes Yes Yes Sudan* Limited Limited Limited Limited Syria Yes Yes Yes Limited Crimea (Russia) Yes Yes Yes Yes Cuba Yes Yes Yes Limited North Korea Yes Yes Yes Yes *Most sanctions on Sudan have been lifted in October 2017
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Current updates

  • Iran
  • Qatar
  • Sudan
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Current updates

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Iran Sanctions

Iran and P5 + 1 countries nuclear agreement in 2015, also called JCPOA

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Current updates

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Iran Sanctions history

  • Post 16th Jan 2016
  • 2012 to 2015
  • Pre 2012
  • Iran announces nuclear

ambition

  • Iran declares its

legitimate right to peaceful nuclear energy

  • UNSC raises concerns on

the intentions of Iranian nuclear ambitions

  • Crippling sanctions

imposed by – UN – USA – EU – Switzerland – Japan

  • Brought Iran to the

negotiating table

  • Iran Implements

JCPOA agreed with P5 + 1

  • UN, EU and most other

countries lift sanctions

  • USA lifts only nuclear

related sanctions

  • JCPOA has snap back

provision

  • JCPOA in force till 2025
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Current updates

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Iran Primary sanctions still in place

No USA Banks No USA Flag

No US Dollars

No USA Origin Goods No Dual Use / Military Goods

No USA Citizen / Entity

SDN list No Iran Origin goods to USA EU sanctions list
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Current updates

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Iran: Significant changes in EU & UN sanctions

Most Transport sector Sanctions lifted

Crude oil and Petroleum products Cargo flights

IR ↔ EU Financial support for trade Insurance Export Credit Bank Guarantees Transfers
  • f funds
EU ↔ IR Export key equipment & technology

Oil, Gas and Petrochemic al sectors

IRISL Sanctions lifted
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Current updates

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Iran: Ultimate Beneficial Owner

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Current updates

  • Iran
  • Qatar
  • Sudan
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Current updates

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Qatar Boycott current status

  • 1. Saudi Arabia
  • 2. United Arab Emirates
  • 3. Bahrain
  • 4. Egypt
  • 5. Maldives
  • 6. Yemen

7. Mauritania

  • 8. Senegal
  • 9. Comoros
  • 10. Libya
  • 11. Somaliland
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Current updates

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Qatar boycott Implementation

Saudi Arabia Egypt Bahrain UAE Cargo to/ from Qatar

   

Qatar flagged vessels

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Qatar owned vessel

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Qatari port last / next call

 

Transiting Qatari waters

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Current updates

  • Iran
  • Qatar
  • Sudan
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Current updates

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Sudan Sanctions

  • Future
  • Recent action
  • Background
  • Comprehensive

sanctions imposed on Sudan in 1997

  • Embargo on all US origin

goods

  • US Dollar could not be

used

  • UN and EU sanctions we

also in place

  • President Trump has

permanently lifted most sanctions

  • Sudan still on the “State

sponsor of terror list”

  • There are parties on

SDN list and list based sanctions continues.

  • Business with Sudan is

possible

  • Check with banks

beforehand, and avoid – US Dollars – US origin goods – US banks

  • Avoid parties linked to

Sudanese Government, if possible

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Current updates

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North Korea sanctions

Complete embargo on North Korea, crisis

  • n going.
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How do we manage the risk?

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How do we manage the risk?

  • Knowing your products well is important

– The End Use of the product – The End User of the product – Whether the end user is controlled by an sanctioned entity. – Whether is product is subjected to Export Control regulations both Turkish and Foreign – Are any of the goods dual-use – Are there any license required to export – Are the goods restricted / licensed in the destination country – Does the product contain components of foreign origin ( US or EU origin) – Ultimate consignee address

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Identifying red-flags

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How do we manage the risk?

  • Trade Compliance Risk-Assessment
  • Due diligence on your third parties
  • Negotiating Trade Compliance clauses while contracting
  • Company wide policies, procedures and check-list
  • Train employees on policies, procedures and check-list
  • Periodic monitoring and audits
  • Restricted party screening mandatory for all third parties
  • Insurance coverage must be checked, if not covered under insurance, liability must be

limited through contract clause

  • Recusal policy for US Citizens / Residents, if employed.
  • Stay updated on the latest developments and keep stakeholders informed
  • Avoid nexus with US
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In practice

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How do we manage the risk?

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Why restricted party screening?

Screening is a risk management process that prevents you organisation from engaging in activities with prohibited and restricted entities Restricted Party Lists change everyday Legal prohibitions apply differently depending on facts of a specific transaction Legal prohibitions differ for each list Remember it isn’t just the law its Reputation!

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How do we manage the risk?

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Who to screen – Almost Everyone Clients, Suppliers, Contractors & Business Partners Contracted Employees, Potential New Employees End user, if known All parties to the supply chain – Banks, Freight Forwarders, Agents, Distributors, Re-sellers, etc.

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Trade Control @ Kuehne + Nagel

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Trade Control at Kuehne + Nagel

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Program Implementation

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Trade Control at Kuehne + Nagel

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Focus Areas

Risk assessment
  • Identifying risk
  • Steps for managing risks
Training & communication
  • Workshops
  • E-learnings
Supporting stakeholders
  • Subject matter expertise
  • Engaging with customers
Restricted party screening
  • Automated screening
  • Managing exceptions
Procedures & work instructions Self-assessment Reporting Record keeping
  • Complying with local regulation
  • Minimum 5 years
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Trade Control at Kuehne + Nagel

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Trade Compliance Manager, Pivot of Trade Compliance program

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Thank you

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Thank you

Kuehne + Nagel

45th Floor, Burj Al Salam Building Dubai U.A.E Telephone +971-42109748 www.kuehne-nagel.com Santosh Iyer Trade Control Telephone +971-543065783 santosh.iyer@kuehne-nagel.com