You are joining us today to listen to commentary on Denied Party Screening. We are going to be focused on preparing for what comes next. New regulations have come out and potential rules that you need to be aware of that we will share today. Before we get into all of that, I am going to go through a little bit of housekeeping. I am sure some of you have joined enough of these webinars at this point, you probably can recite this in your sleep. I know I certainly can mine. For anyone who is new, just wanted to let you know that we do have about 45 minutes. Today, we are actually going to have about 50 minutes- 55 minutes of content. As we traditionally do now with these customs webinars, there is a lot to cover.
If you have questions as we go through the content, just remember that you can drop those in the Q&A box that you will see on the toolbar of your screen. One thing that I forgot to mention when I first started, if you are hearing my voice echo, first of all, I am sorry. Second of all, just make sure that you are not joined twice. We often have one or two people that somehow get joined twice on their audio and then have to hear me echo, which is not fun. So, if you are having that problem, that is what is going on.
Another thing I will just note is in the Q&A window when you drop your questions, please just recognize if you have a question that is really specific to your particular product, or even direct industry, we may not be able to touch that on this webinar because we are obviously covering a very broad subject matter of export-related compliance. But we do want to help you and support you as best we can with getting those questions answered. So if we cannot answer them today, we will get you connected with an expert after the webinar. One question I get every time is, "How do I receive the slides or the recording?" We are absolutely going to get that to you.
One way that you can get that is by filling out the survey that you should get from me via email within about an hour or two of us wrapping up this content today. If for some reason you do not get that, do not panic. I always send out an email to all attendees and also really anyone who is registered, because we know sometimes schedule conflicts happen, so that will get to you via email within about 24 hours. So have no fear, it is coming your way. Then finally, how do you subscribe to get these invites? Maybe a colleague had forwarded this particular webinar invite to you. You can scan this QR code, and we will also drop a link in the chat in case the QR code is not working for you. It should, though.
You can actually subscribe to get all of our market updates as well as event invites. Not only webinar invites, but also in person, because we have a plethora of those going on throughout the year as well. Okay, the most fun part that we go through is a quick little disclaimer. As we always mention, just remember, we are logistics compliance experts, but we are not legal attorneys. We are not financial planners, so please just understand that this content is all for educational purposes. It is not to give you direct advice on what to do from a legal, business, or financial standpoint. Our experts today are, however, absolutely experts in their field, or their respective portions of our field. I want to introduce them to you today. Normally we go into a very quick, "Here is some titles," and speed on through.
In the spirit of the content of today, which is really knowing who you are doing business with, thought we would introduce our people a little bit more so you know who you are learning from today. We have Sila Barr. She is our Manager of U.S. Export Customs Compliance. Sila is located in our corporate headquarters in Seattle, and she has been overseeing Expeditors export compliance for about 10 years. We appreciate all of her expertise. She is a licensed customs broker, and you probably recognized her if you have joined our U.S. Customs Market Update. She often pinch hits for speakers and jumps in there when she can. We appreciate her expertise. She is originally from Southern California. She loves traveling, food, and especially traveling for food. Sila, we think alike. I love that, too. We have with us Niko Kritsonis.
He is our Customer Engagement Manager for Tradeflow. Niko has also been with us for some time. He leads customer engagement for Tradeflow, as well as onboarding for new customers. If you are not familiar with Tradeflow, he will give you a little bit of an explanation of what all that team does. Niko started with Expeditors at the beginning of 2020 in our Seattle customs brokerage team, and he really has focused since on creating brokerage processes that work to make us more efficient in a district, then now also with Tradeflow. As I mentioned, he oversees that process of onboarding and customer engagement, making sure our Tradeflow customers are getting the most out of those tools and services. From his standpoint, he is really into tending his large garden with his wife they built this summer. Niko, we will have to trade tips on that.
Also started a garden this summer. He also enjoys training his German shepherd puppy and working on classic cars. Here is just a little bit about our people. As we said, in the spirit of today's webinar, it is focused on knowing who you are working with. I am going to pass this off to Sila, who will get us started. Sila, you are muted, sorry.
I sure am. I love when I'm muted and on video so that everyone can see that I'm talking and on mute. It's the best.
We at least know you're making the effort.
Yeah. Effort's 90% of it, right. Awesome. Welcome, everyone. Thank you guys all for attending. So happy to have you here. Happy to be able to speak with you here. Big thanks to Niko for inviting me to co-present on this webinar with him. Let me jump into the agenda here. It's kind of broken up into a few parts, as you see. The first part we're going to devote to talking a little bit about the BIS Affiliates Rule itself. Don't worry, we'll talk about what that means. We'll go into the status of the rule currently. We're going to delve into a little bit of information about the rule how it applies, and some due diligence expectations that BIS has outlined as part of the rule.
Then I'll turn it over to Niko, and he's going to go over a little bit more information on party screening strategy. With this particular rule, what has changed with maybe how we need to approach the concept of party screening, maybe a whole screening strategy that you want to employ and some good items that make up best practices for a good screening strategy. And just as a side note, he will be talking about Tradeflow as a screening solution. We do have a little bit of a sales pitch in here, but don't worry, we're not going to hit you over the head with anything. But in light of this rule, it's also really good to know some options that might be available out there.
Then we'll close it with some takeaways, both potential impacts that could be coming out of this particular rule, and also actions that you can take now to try to help prepare for when this rule gets implemented. Before we jump into it, I also just want to level-set some language we're using on the webinar. I know there's probably a wide variety of people joining us today from the U.S., but also maybe from outside of the U.S. as well. Because the regulations we're talking about are U.S. regulations, they're part of the Export Administration Regulations here in the U.S. Because of that, most of this webinar is very U.S.-centric. When you hear terms like export, you can assume we're talking about an export from the United States.
If we're talking about sales, we're talking about sales from a U.S. party to a non-U.S. party, things like that. It is a little bit U.S.-focused. The other term I want to highlight is the term Denied Party, which is fairly commonly used, but that might also be more commonly replaced by restricted party. Really when we say Denied Party, what we're talking about is an entity or a person that appears on one or more government lists. More than just the U.S. has these government lists. I think many, many governments around the world have similar lists. What these lists do is they either prohibit doing business with particular entities, or they restrict certain types of business being done with those entities.
When we say the term Denied Party, or Denied Party Screening, we're talking about this collective of these government lists that might have prohibitions or restrictions associated with them. Okay? Let's dive into it. Let's talk about the BIS Affiliates Rule. I have that here in quotes because the actual name, as with many, many government regulations, is much longer. We have affectionately been calling this rule, which is the Expansion of End-User Controls to Cover Affiliates of Certain Listed Entities. That's its formal name, formal government name. That rule, we refer to that as the BIS Affiliates Rule. Okay? This rule, the BIS Affiliates Rule, is what we're talking about today predominantly. This was originally published back in September of 2025. It was published as an interim final rule.
That interim kind of means that BIS is publishing it and saying, "Hey, we'd love to hear additional comments. We're pretty sure this is going to be what we want to publish. However, trade, we seek feedback from you on how to implement this rule, certain provisions of that rule, things like that." BIS published this rule as an interim final rule, and they did receive comments. Comments were due by November, excuse me, end of October of 2025. Then in my opinion, they very quickly turned this around into a final rule. Comment period ended October 29th, 2025, and the final rule was published on November 12th, 2025. Normally a final rule when it's published, takes effect generally pretty immediately or by dates outlined within the rule. This one, BIS published it with a stay, a one-year stay of the provisions in the rule.
What that means is essentially they suspended the effective date, for lack of a better word, of the rule for one year. It was published November 12th, and they backdated that extension of the effective date back to November 10th, 2025. Very confusing. I will say this is not the first time this administration has published something with retroactive dating. They seem to like to do that. Starting November 10th is when our one-year period ends, which means that if nothing changes, if no additional actions are taken on November 10th, 2026, this BIS Affiliates Rule will truly come back into effect. Meaning all of the stayed provisions that were outlined in the final rule that was published in 2025 will now be truly effective and enforceable by BIS.
Now, this is really up in the air at the moment, and I have not checked the news in about an hour and a half, so please bear with me if I miss something that changed. As of right now, this rule potentially will be extended. We have no confirmation of this actually from BIS. But on September 24th, Treasury Secretary Bessent was reporting to news outlets that the U.S. and China had reached a trade truce, meaning that certain provisions and regulations that the two countries are working on would be postponed another two months through January 10th of 2027. However, BIS has not put out anything official on that. Speculation is that the BIS Affiliates Rule is kind of part of this trade truce package, but we have nothing official. As of right now, the effective date of this rule will be November 10th, 2026.
However, it's possible it will get extended to January 10th, 2027. We just don't have any details on that. That's just the word on the street. Okay, so let's talk about what the BIS Affiliates Rule actually is. As the name might suggest, the colloquial name might suggest, it was published by BIS, which is the Bureau of Industry and Security, they're a division of the Department of Commerce here in the U.S., and they regulate dual-use items and other items of national security concern. Really what this rule does is it introduces a concept of ownership as a criterion for how to apply the restrictions that are imposed by certain lists administered by the BIS.
Really what this means is, and we're going to talk about what lists this affects here in a second, but if you have a party and that party is owned 50% or more, directly or indirectly, by another party, and that other party is on the Entity List, let's say, for example. That means that the party that you're dealing with will also be considered an entity on the Entity List. So they'll also be a listed entity, and those restrictions are going to pass down to that owned party, even if that owned party does not appear on the list themselves. Really this is a way to kind of expand the network of these BIS controls that are affected today by these particular lists. Okay?
The reason BIS put this in place is, one, they looked at OFAC's 50% Rule, which we'll kind of touch on in a minute a little bit, and they said, "Hey, great. This framework already exists, and we think we could utilize that to" Ultimately, their goal is to help prevent diversion of controlled technology, controlled items to listed parties. BIS is under the impression that there are lots of loopholes in play right now, where listed entities that are not supposed to be receiving certain items under the EAR are able to receive them through their affiliates network, through more complex ownership structures, things like that, because only that entity is listed and none of their network is considered as controlled. This rule was really put in place to try to really help prevent diversion of items through these types of affiliates and ownership networks.
Let's talk about the three lists that this affects in the rule. The first one is called the Entity List, which I've already alluded to a couple of times. The Entity List is a list that's owned and administered by BIS, so they are the ones who make the updates to this list. They can add or remove parties from the list as needed. The Entity List really targets parties that the U.S. has deemed have a national security or foreign policy concern. There's a lot of different reasons that someone could be added to the Entity List, or a company could be added to the Entity List. But really those are kind of the main categories of reasons that a party might be added. What the Entity List does is it imposes supplemental license requirements.
The EAR already has a base of license requirements that apply, right? And the Entity List is like an additional set of requirements on top of that for any of the parties that happen to be on that list. So now there's more license requirements you kind of need to wade through. Generally speaking, the scope of the restrictions is dependent on the entity that is listed itself. Every time a party is added to the Entity List, there's also a lot of text and context given as to why they were added, and also specifically how they are restricted. A lot of them, I will say, do say all items under the scope of the EAR are restricted from going to that party, right?
But each one has its own different set of criteria that kind of needs to be looked into to determine what you can and can't deal with for that particular entity. Then we have the Military End User List, the MEU List. This is quite a bit of a smaller list, but it's also administered by BIS, so they can add and remove parties as they see fit. It targets military end users or military end users. This one is much more narrow in scope. And it's really here to, again, control which foreign militaries are getting certain items of control from the U.S. This also imposes additional license restrictions on top of the ones that already exist on the EAR.
If you are dealing with a party on the MEU List, again, you may be able to proceed, but there is all sorts of criteria it would need to go through to find out if your commodity can go. It depends on where they are located, right? All this kind of stuff. So there is additional analysis to determine if you can proceed. Then we have the Specially Designated Nationals list. Those of you who are my compliance friends may be like, "Why is this one here? This is an OFAC List." Which is true. My compliance friends may also say, "But OFAC already has a 50% rule." Which is also true. But SDN List, even though that one is administered by OFAC, the BIS actually has a complementary set of regulations to the SDN List.
The BIS has a whole section in the EAR that actually addresses the SDN List and certain parties listed there, and imposes additional EAR license requirements to certain parties on the SDN List. Okay? The BIS is trying to help out OFAC in this particular case and say, "Hey, we can cover some additional stuff in these cases." So the OFAC will still have its own If a party is listed on the SDN List, OFAC still has its own set of requirements. But in these certain cases, an SDN party may also come under purview of the EAR and have license requirements under the EAR as well. Okay, so these are the three main lists that, well, two main lists and then one, I would say subset, subsection of another list that will fall under this 50% ownership change.
Okay, so let us look at a couple of examples of ownership. The first example I want to talk through is aggregated ownership. Please note, I realize that these ownership examples are fairly simplistic, and I know that ownership gets crazy out there. Ownership structures are way more complicated than this a lot of times. But for purposes of illustration, I have kept them a little bit more on the simple side just to help communicate some concepts. So let us say you have a buyer that is located in Taiwan and an ultimate consignee that is different, also located in Taiwan. Both of those parties are not listed. Great. Today, without the affiliates rule, theoretically, you would be able to proceed with this transaction, without any Entity List restrictions kicking in. So obviously all the other EAR stuff you have to consider.
However, the Entity List, as of today, would not be in play for this particular transaction. Now, when we bring in the concept of ownership, you now need to start doing a little bit more, discovery on who owns the parties involved in the transaction. If we look at the ultimate consignee in this case, research shows it has three different owners. One owner owns 35% of the company. They are not listed. That is great. But then we have two additional owners, one in Hong Kong, one in China. It does not really matter where they are located, I was just picking destinations, but both of these additional owners are on the Entity List. And this here, we have a combined 65% ownership between these two parties. So we have a 40% and a 25%.
Both of these are on the Entity List, and combined, they own 65% of our ultimate consignee. Because of that passes the 50% threshold for ownership because of the combined or aggregated ownership between these two parties. Now the Entity List restrictions pass on to the ultimate consignee, and the ultimate consignee becomes an entity on the Entity List as well. Even if they are not listed by name on the Entity List, all the same restrictions now apply to this ultimate consignee because of their ownership structure. If we look at another example, this one shows indirect ownership. Again, we have a buyer in Taiwan and an ultimate consignee in Taiwan, and both of those parties aren't listed. Again, today, without the BIS Affiliates Rule, under the EAR, this transaction would generally not trigger any additional list restrictions.
However, in this case, if we look at the ownership of the ultimate consignee here, we see that they have one direct owner that has 55% ownership. The direct owner is not on the list, which is great. But we dig further and we find out that that direct owner also has another owner. The other owner, this is now an indirect owner of our ultimate consignee, is on the Entity List. In this case, because of this traced ownership back to an entity listed party, the Entity List restrictions apply. One thing I want to note here is that there's no real math involved to try to figure out what the actual percentage of ownership of this indirect owner is.
Because the indirect owner owns the direct owner more than 50% and the direct owner owns the ultimate consignee more than 50%, this just flows on through between the parties, and the Entity List restrictions would now apply to our ultimate consignee. There's actually a lot more scenarios, obviously, that this would apply in. It's more than just aggregated and indirect, but these are two examples of ownership that I did want to highlight, and make sure that you guys were aware of how this could apply. One other thing I want to call out from the regulations, the BIS Affiliates Rule itself, is this expectation that has been outlined by BIS, and they've actually added this into the EAR.
The EAR has a really helpful supplement called Red Flags or Know Your Customer Guidance, that's there, which is great, and they have all sorts of things to look for, that include what due diligence might look like for an exporter, things like that. They have added one specifically with regard to this BIS Affiliates Rule. I'm not going to read this whole thing, but essentially what it's saying is if you have knowledge that a party you're dealing with might be owned by a party on the Entity List or the Military End User List, or that subset of the SDN List that the EAR references. If you know that a party is owned by a party that is listed, it's your obligation to go ahead and figure out the percentage of ownership, of those parties.
You need to make sure you understand what percent ownership the listed party has of the party you are trying to deal with. If you are unable to determine that for whatever reason, the expectation here is that you treat it as a listed party. If you know that your party you are dealing with is owned by someone that is on the Entity List, but you just cannot get the documentation to try to figure out by how much, what percentage ownership they have, the expectation here is that you still treat that party as though it were on the Entity List as well, which could mean applying for a license. A lot of times, if you applied for a license, BIS might be able to help determine whether or not they are owned by a party on the Entity List or not.
You might have to apply for a license, you might not be able to proceed with the transaction. They would want you to treat it as though it were a listed party. I really just want to call that out as an expectation that if you cannot make the determination, you cannot just say, "Oh, well, I do not know, it is not available, so I am just going to assume it is not owned 50% or more." If you know it is owned by a listed party, you should treat it as such, is what their expectation is here. This regulation, again, the 50% rule does exist already for under OFAC. But in terms of the EAR and how we are screening, this really does present a shift in mindset, a shift in methodology, especially as how we are looking at parties under the EAR.
It kind of eliminates this concept of a legally distinct entity, which I think for EAR purposes, many people were operating under this concept of legally distinct when doing screening before. Legally distinct no longer really exists, at least in the purview of these three subsets of lists we talked about. Really, the legally distinct expands and opens up to subsidiaries and other foreign affiliates, right? It is really looking at more of a network. Because of that, name and address screening alone is probably no longer sufficient. You really need to look at doing name and address screening plus ownership analysis, right? It really shifts the way that a lot of people are thinking about screening today.
At this point, I am actually going to turn it over to my friend Niko, so he can talk a little bit more about screening strategy, what things have changed, and where you might need to go in order to help comply with this rule.
Absolutely. Thank you so much, Sila, for setting the scene, getting all the definitions out there and really setting the stage for talking about screening and strategy in general. If we just hop onto the next slide here, I want to talk briefly about kind of what was brought up earlier in the webinar about this OFAC 50% Rule and the sort of BIS Affiliates Rule that's coming on the horizon here. Really, the two mirror each other quite well, and the BIS Affiliates Rule took a lot of the sort of structure around this ownership screening or ownership networks from the OFAC 50% Rule. You can kind of go down the list here comparatively left to right. It's still based on a list. It's still looking at not only the name on the list, but looking at the interconnected networks of ownership.
Really what I want to kind of get across here is that because the OFAC 50% Rule has been in place for some time, a little over a decade, the BIS, the folks over at BIS, figure, well, hey, this has been a concept in trade for a while now. Let's fold in the BIS Affiliates Rule right into it and expecting folks to be able to bring that into their screening program, and continue doing Denied Party Screening with that involved. Really, yeah, just highlighting the two, very similar, but there are some distinctions between the two, like the list as previously mentioned. Not to sound like a broken record, but before really it was pretty much a one-to-one match. The folks that I'm doing business with, I have a book of business. Let me screen them against a Sanctions List.
If I get a one-to-one match, I know that, hey, this is potentially a Denied Party and we need to treat it as such. We're really moving away from that to who controls the entities upstream. Really understanding who's that ultimate beneficiary at the end of the transaction here. Really, again, it's that shift from a one-to-one match on a list to further due diligence needing to be done, which I'm going to elaborate here on this next slide. When we're thinking about Denied Party Screening in the framework, we still look at that initial entity that you're doing business with as the starting point. This remains the same. It sort of grounds our screening as a starting point.
Once you do the screening, nothing is changing, but the flags that then pop up from it, is where there's further information that maybe needs to be delved into. Really, again, as we've been mentioning, once the screening has happened and you've seen the results, and you can see potential affiliates, understanding that ownership structure then comes into play, and then decisions are made from there, not just, okay, whether they flagged or not on a Sanctions List. Other things to take into consideration here when we're thinking about BIS specifically, it's not always just the entity that is in focus here. Things like the commodity, what is that item that's being moved? When we're thinking about a transaction as a whole, right? Is the commodity something that's potentially going to flag?
Maybe it's a military end user commodity and that needs to have heightened visibility. Or whether BIS is looking at how it's being routed, where it's going to, where it's coming from, or how it's getting there. It's in the best interest for BIS to sort of look deeper into overall transactions as a whole other than just the entities. So what I would say here is it's easy for the importer/exporter to know what could potentially flag on the shipment because we have this information ahead of time. We know what we're moving, where it's going, or where it's coming from. So there's that extra layer of due diligence that you can do ahead of time, as BIS is focused on these sorts of things. Lastly with this item is, when in doubt, escalate it out.
That's what I always told our team whenever we were in the brokerage department here in Seattle. There's always convoluted items and opaque ownership when we're talking about an ownership in a network. So bringing in legal, bringing in compliance, to help make an informed decision based on the information available, is always going to benefit you at the end, rather than a rash decision on whether or not a company is denied or not. So talking about just generic overview of how screening is done, we broke it down into some simple steps. As I go through these, as I talk about Tradeflow, I really want you guys to think about in your guys' operation, are we hitting these steps? Are there gaps that need to be addressed? Are we needing to enhance any processes?
Because really what I'm going to try to do is provide some best practices and understand or provide you guys with the information from what kind of conversations we're having with the field currently. So the first thing is always to capture. Get as many entities you can, all the entities that you do business with. You want to make sure that you have a concise list of everyone you do business with. From there, it's just screen. When we're talking about screening, we want to make sure that you're screening on all the lists that are relevant for your transactions. So some folks have taken it to the approach of, "Hey, I'm going to screen everything under the sun so that I get the largest level of due diligence as possible." Where others are looking at, "Hey, I'm only doing business in Europe.
Let me screen the relevant lists that are relevant to the European Union," maybe. So, pretty much just going through the steps from there. Once you've screened and you've gotten results, you need to investigate those results and come up with a decision of whether or not this is an entity that is potentially denied, or whether or not this is an entity that we can continue doing business with. Once that decision's made, I'll get into this a little bit further, but there's that archiving of information to ensure that moving forward, if somebody else comes in and takes a look at that same entity, they know the previous results, as well as being able to call back to what decisions were made and when they were made. Then at the end of the day, this is a cycle.
You wouldn't want to screen an entity one time and then move on and not re-screen them again. Re-screening is absolutely necessary as there's changes to not only the folks that you might do business with, but also changes to Sanctions List. I'm going to get a little bit more in-depth here shortly on that. Before doing that, I'm going to plug a little bit about Tradeflow very briefly here. Tradeflow is a software that is. You can think about it as a data repository. We have four different centers which we house data in. The second one, which is what we're talking about today, is that Trade Partner Centre. This is where we house trade partners. We do screening, provide results, and can house records.
Alongside that, we have our Trade Reference Centre, which is that first box, which is just trade information that you might search anywhere, in the corners of the internet. But we house it all in one section. We also have the Product Management Centre. This is where you can house products for sending to your brokers and have all the information that your broker might need housed alongside those products. We get integrated with brokers, and go about business that way. We also have Shipment Management Centre, which is taking the Trade Partner Centre, taking those products, building documents, and being able to send them out to stakeholders. But today, we're talking about the Trade Partner Centre, so let's dive into that a little bit more. Okay. So very similarly to a few slides ago, breaking down the general points of how to go about screening.
This is just a little bit about how Tradeflow screens. Again, it's a cycle. It never ends. Constantly being reviewed and re-reviewed for potential hits on Denied Party Screening Lists. We'll start here in the green square. This is where folks might have additions to their Trade Partner Centre. They get new entities added in. Those then become the current version of your guys' truth. So this is your book of business. These are all the folks that we do business with in today. Tomorrow it might change, and so you might have to get back to the circle. Anyways, all of those entities get screened. A risk assessment score is applied to those parties. Users are notified. Users go in, review the screening, save the results, and then continue going about their business. So this is, again, a cycle. It's continuous.
I'm going to continue to hit on that fact. There's two main cadences of screening that I think are very important and I want to highlight here, in terms of that cycle. The first one is that daily one, and that's that green highlighted box from the previous slide. This is any entity that maybe their name changed, an address changed, a contact changed. Those changes that then get pushed into the system are then screened on a daily basis. So any changes to your current address book then gets screened. So that's pretty common, folks, when they do business with a new entity. They screen them, they get a result, and they continue moving forward. The one item that a lot of folks might be missing from their screening cadences is that monthly screening.
Which is actually, instead of looking at the changes to your book of business, it is looking at changes to Screening Lists or Sanctions Lists. What it is doing is saying, "Hey, you have screened everything this week. It all looks good." Then the monthly screening runs, and we might pick out, "Hey, that one entity that looked good a week ago now has a potential red flag, and so we want to check that out." We have both of those screening cadences running for any particular org in order to cover both changes to your address book or your book of business, as well as changes to Sanctions List as well. Very important distinction on the two. If we are talking about results, again, it is not black and white, it is not true or false.
A lot of the times when folks are coming to us, one of the biggest concerns is, "Hey, we want to be able to sift through those false positives." We have mechanisms of doing so, but really false positives is one of the biggest pain points when it comes to Denied Party Screening because so many companies have Inc at the end of it, or LLC, or they might have a common name of an owner, that sort of thing. So ensuring your system, however you guys might do Denied Party Screening, has a way to sift through false positives is going to be very important. The next thing is you can mark something denied, mark something not denied. Those are pretty simple and straightforward, but there is also that conditionally denied result that could come through.
Which means it is one of those situations where maybe you are doing business with a certain country or entity, but you have got a license or a permit or an exception in order to do that same business. What you want to do in that case is not only flag it as conditionally denied, so it is almost like a third option from denied or not denied, then save any kind of documentation that you might have regarding that scenario, that exception, along with that record so that the next time it gets screened, you have got that information available. But also, say new folks come in, you have got to do training, they also have the same knowledge of what was decided previously. That is a key important piece, which I am going to elaborate here shortly.
Reporting and talking about reporting, really, it is what you are getting out of the system, right? A lot of folks, when they come to us, they are asking, "Hey, this is a tedious manual process. We have got 1,000+ parties that we work with, and then their ownership structures. How can we ensure that things are being automated so that we are not having to go in there every day and spend the time and effort to do that?" So, making sure your system is automated is really key. Making sure your whole team has visibility. What I mean by that is everyone has got the ability to jump in and view the results or even jump in as a backup to do the screening and do the review as well.
Because at the end of the day, you don't want to have those results or records saved on someone's C drive so that maybe they're out sick and you need to have some answer or you need to do some screening. So having full visibility and access to a certain system or Excel spreadsheet or however you're managing it is very important. The archived results point, really what I'm getting at here is once an entity is screened, they're constantly being put back through that cycle for screening. So it's important to note when they were screened, what the results were the first time, who made that decision, why the decision was made, having those notes saved. The next time a potential hit happens with that, going through that same process.
What that does at the end of the day is it creates a story around this trade partner that you're using or this entity that you're doing business with, and sort of the journey through screening them. So you can pass a red face test if it's ever in question to how have you screened in the past, what were the results, and you're able to show that picture. Last couple items is folks are looking for things that are integrated. This little graphic here at the bottom is just showing with Tradeflow, we push out an SFTP file to an ERP system. They kick back new entities or edited entities into our system. They get screened, results get pushed back. Again, it's this constant cycle. I keep saying constant cycle and it's kind of leading to this item of consistency.
Ensuring that you're consistently screening, both in that daily manner and even that monthly manner, maybe a weekly manner. Just making sure it's consistent and you're picking up anything that's falling through the cracks or ensuring that things aren't falling through the cracks here. So really just in terms of reporting, having that full picture and being able to do the work effectively and efficiently, without necessarily having to step away from the day-to-day tasks that you normally would have to do that add value. The last here to wrap Tradeflow back into BIS here, we have partnered up with Kharon to provide BIS ownership structure screening. That was like a Sally sells seashells by the seashore. Tradeflow, we have this mass screening capability.
We've brought in Kharon as a partner to then bring in the OFAC 50% Rule and BIS 50+ screening ownership structures to then provide greater visibility for risky entities for any of the folks that decide to do screening with us. With that, I'm going to kind of plug, we do have a webinar at the end of the month in October with Kharon. I'll be speaking with them in case you are curious more about what Kharon is and how they go about the theory behind their ownership structures. I'll pass this back to Sila to round out the key takeaways.
Thanks, Niko. Just waiting for my video to kick in. And we're back. Okay. Yeah, thanks so much. I think a lot of the things that you mentioned in the Tradeflow tool that it's doing are things that businesses want to consider for sure in their general screening practices, as well. With that, let's just bring it home with some of the key observations and takeaways from this particular rule. It's a complicated one. There's a lot of really good questions in the chat with regard to how will I do this. That's a great question. It's really difficult. There's no prescribed method. There's not one nice source database of information that exists that BIS recommends. This potentially is quite difficult to do. In terms of impact, we're looking at quite a few things here.
Obviously there's more parties in scope, mainly because this rule really expands the universe of parties that are subject to these list restrictions. I think between the Entity List and the MEU List today, there's probably around 3,500 parties listed. However, that number could potentially exponentially increase once we consider ownership structures and who all of those listed parties also own in their network. Obviously, I don't have that number of all of the parties out there that are owned by a listed entity today, because it's very difficult information to get to. As you can imagine, that will increase the universe of parties that we're talking about that are on the Entity List or on the MEU List, right? You're going to need more information to be able to do proper screening and proper ownership analysis.
A legal name and address, which is maybe what you have today, probably isn't going to be enough for doing a good, complete ownership analysis in the future. Under the BIS Affiliates Rule, you might need to consider taking in registration numbers. You might need to get additional pieces of information about the business in order to try to make that determination on who they are owned by or how they are owned, what the structure looks like. As many of you have had questions on in the chat, there likely will be difficulty obtaining information. Ownership information is very difficult to obtain. It can be very difficult to obtain, especially depending on certain countries. Some have nice business registries available and add a lot more clarity. Other countries don't release that information. Information you are able to find might be outdated.
Parties might not want to share information or release that information with you. Getting this information could potentially be pretty difficult to obtain. Not impossible, but it is more of a challenge. I will say, BIS, when they published this rule, they do mention in the rule that they did look at the OFAC 50% Rule that OFAC already has pertaining to the SDN List today, and their thought process was, well, you guys are kind of already doing this research for the SDN List, so use that same structure to apply to the Entity List. In BIS's mind, for a lot of companies, this structure should already exist because of the SDN List restrictions that exist today. Not that that is helpful per se. I just wanted to give that additional context in terms of where BIS's thoughts and expectations might be at here.
Obviously, the reviews become more complex when we're talking about a potential listed entity. Not only the ownership review itself. Obviously, ownership structures can be really complex. There could be direct ownership, indirect ownership. There might be multiple owners, and those owners have multiple owners, right? These networks really get big. That part is more complex. Additionally, EAR restrictions are more nuanced than OFAC restrictions are. If we want to compare the two, the OFAC 50% Rule today, if there's a party on the SDN List and you have a party that is owned by them 50% or more, that's pretty much it for the transaction. It's done. There's not really a lot to navigate there. That's it.
With the EAR, though, there might be ways to proceed or there might be ways you want to be able to proceed with the transaction, but that requires obviously understanding what the commodity is, understanding the EAR rules and how they apply, and how those rules apply to your particular listed entity, and the particular list you're dealing with, and the destination and, and. Right. The EAR is a lot more nuanced in terms of how the regulations work and how the controls work. Okay? Then, not to harp on it, but there are penalties involved if we're talking about potential impact. Now, the penalties themselves are not new. Obviously, violations of the EAR have had penalties tied to them for a very long time, so this is not a new concept.
However, if you consider kind of all of these other impactful pieces, the expansion of the universe of parties that potentially get sucked into this, the complexity of analysis, management, how difficult this is going to be to manage, things like that. Obviously, with more complexity, with more things in scope, your risk for penalties potentially increases there as well. The current maximum amount of EAR violations is $374,474 or twice the value of the transaction, whichever one of those two is greater. Not really a scare tactic, but just something to consider is that these penalties really are not to be trifled with, I will say. They're pretty large amounts that could have a pretty severe impact to an organization, right? With that, though, we did want to cover some actions you can take now.
Obviously, this isn't going to be an exhaustive list of all of the things that you can do or should be doing. These are just some things that can be done now to help get prepared for this rule if you haven't already started taking some of these actions. I would say one of the first things to look at is just understanding your exposure, getting your arms around your exposure. So take a look at your book of business today. Take a look at your customers. Take a look at your vendors, your distributors overseas, who your distributors' customers are, ultimate consignees, all of these types of things. Start looking at your supply chain essentially today and understanding as much as possible the ownership structure there and where risk might lie. You may also identify risk.
You may identify that certain parties do happen to fall under this 50% ownership provision, right? But understanding what your supply chain looks like and who you're dealing with, the earlier you start that, the earlier you start getting information on that, the better. It will obviously help you make a lot more decisions going forward. It also could be recommended to start prioritizing with higher risk destinations. Meaning, destinations like the UAE, which BIS has that listed as kind of a transshipment hub for other locations for diversion of EAR controlled items, right? Places like that that are a little bit higher risk to diversion could be a good place to start. You could also start by looking at your commodities, the more high-risk commodities, advanced semiconductors, any type of chemicals, anything that is really highly controlled under the EAR.
Those might be places to focus more, who you are selling those to and who those people are selling those goods to. Business models, things like that. You want to start looking at the more high-risk items, if you need to start whittling down your overall picture. You could also look at transactions that already exist that may extend you past November 9th. Again, this is assuming that this rule would take effect on November 10th, which we do not have confirmation on at this time. But you really want to start looking at the transactions that already exist in your network that may extend you beyond that. So, for example, sales that have already been made, that you have not fulfilled yet or will not be able to fulfill for a while.
Make sure that those transactions are really in the purview of whatever the screening procedures are you are going to employ here, so that way you can take action on those before they potentially become an issue down the line. It is always a good time to assess your screening program. I think there has been a lot of good information on what a good screening program should entail. But really, you want to assess what you have going on and understand, do you even have the data that is needed to do this type of analysis? Do you have just a name and address of the parties involved? Do you have a more complete business profile for them? Do you have business registration numbers? Do you have DUNS numbers? All that kind of stuff, right? How complete is the profile today?
Because the more information you do have on the parties you are dealing with, generally speaking, the easier it is going to be to try to do some of this ownership research, right? I think it is also a good idea to kind of single out who in your organization has the expertise to do this type of analysis, has the bandwidth to do this analysis. How will you be doing the analysis? How are you going to tackle it? Are you going to have individuals look at it? Are there going to need to be escalations so those people can look at it? Who is going to be doing the EAR analysis to determine if the things apply, all of the restrictions under the EAR apply, right?
Identify people in your network that can do this work today, if you're going to have people doing that work, so that they can be woven into escalation paths as needed if they're not already there. Obviously, you want to make sure, and you may already have hold patterns established, escalation procedures established, licensing, things like that. You may already have this as part of your plan, but it's always good to revisit it and make sure that it addresses what the affiliates rule would bring into the table, right? Also, you want to make sure your company really understands what your escalation thresholds are. As Niko addressed, a lot of times if you're using software, or some sort of data to do your screening, there could be tons of false positives.
Most of those false positives these days come with some sort of a percentage match, right? So how comfortable is your company? Do you want everything from a 1% match up to be escalated and reviewed? Are you comfortable with 75% and above? There's no official guidelines on that, right? That's going to be part of that internal company discussion on where you feel comfortable with that. That number can shift, obviously, but having that procedure and understanding where your tolerance is a good way to try to help get your arms around the universe of what you're screening. Then you want to take a look at your external providers. Well, I can't say most people, I don't know that.
If you're using an external party to do Denied Party Screening for you, or if you're purchasing software or purchasing data in order to do that screening, make sure you're talking to your service providers to understand what they can provide in light of the affiliates rule. So does the screening provide ownership visibility? Does the screening provide percentage ownership visibility? How often is the data updated within the tool itself, and how frequently is the screening done if it's a software that's doing it on your behalf? How do you get at audit trails to try to understand what screening was done when if you need to produce that type of information, right?
If you don't already have that relationship and that type of procedure established with your external service provider for screening, it's a really good time to make sure you have all that documented and shored up, so that it can be very easily accessed and/or presented if needed. Then just start working on contingency plans. If you do identify transactions that are going to go beyond November 9, and they happen to involve customers or parties that are potentially owned by a listed entity and would come into the purview of this rule, make sure that you have a way to understand if you're going to cancel the contract, how you're going to deal with the purchaser whatever you need to do, make sure that everybody's clear on what the plan is for any existing transactions that are identified.
Make sure you are communicating all of the requirements that may come as part of this rule to your organization. Procurement, design arms, manufacturing arms, anyone who is shipping anything anywhere. You want to make sure that everybody understands any new procedures that come into play in light of this rule, everyone is on the same page, and everyone understands how this might affect things going forward. Then just work on developing a plan for how to affect this in November, if this rule does come into play. Again, November 10th is the current date. We do not know for sure if that will stick or not. It is potentially extended to January 10th, but we have not seen anything official from BIS yet. We are all watching that closely.
These are just some things that you can start working on now and start thinking about and start talking about within your organizations, to be able to try to get ahead of this rule as much as possible. Okay, and with that, Samantha, I think I am going to turn it back over to you.
Hey, great timing, everyone. That is a lot of information to cover in a short time, and it looks like our fantastic team in the background has answered most of the questions. If any of you did have questions that are lingering out there, hopefully we have responded, and we will get back in touch with you with some more details. I do also just want to encourage you all to join future webinars. I am going to drop a couple of links in the chat right now that will get you registered. We of course have our next U.S. Customs Market Update coming later in the month of October. I believe it is the 22nd. That first link will get you registered for that event.
Then, as always, in case you did not know, you can go to expeditors.com/events, and you will be able to see all of our events globally that are ready for registration. Not only here in the Americas, but we host events really across the globe. Our Europe and Asia team is always busy with those as well. You can spread the word to your colleagues as well in other regions. We appreciate you all joining us today. You will again get a survey from myself via email in about an hour or two, and that will ask you just to answer a couple of quick questions. Very simple. We just honestly want your feedback about this webinar and also what you would like to see in future webinars. At the very end of that, just pay good attention.
As soon as you hit submit, you will get a little thank you message, and there will be a link right there under the thank you message that will take you to the materials. If for some reason you exit out of it, have no fear. I will send an email tomorrow that will make sure you have it in your inbox. We will definitely work hard to get it to you. Again, thank you all so much for joining us. We look forward to seeing you on the next event.
Thank you everyone.
Sila and Niko, thank you.
Thanks, Samantha. Hope you guys have a great week.