Maritime compliance: the KYCs of cargo screening

Overview

What is cargo screening and why is it important?

Cargo screening is a crucial process that ensures the safety, security and legality of goods being transported across the globe.

The aim is to prevent the transportation of dangerous or illegal goods that could threaten people, property or even the countries involved.

At MCaaS, we understand the significance of cargo screening and have developed an extensive database and enhanced validation process for trade compliance.

Our unique processes involve the extraction of unstructured commodity descriptions and data from booking files, flagging missing or incorrect Harmonised System (HS) Codes, and matching commodity descriptions with the proper codes.

We screen cargo against dual items, military and US/UN/EU lists, among others, to comply with applicable laws and regulations.

The cargo screening process includes data cleansing, validation, and screening against commodities and counterparties involved in the booking files.

This involves comparing the information obtained from various sources, including the bills of lading, packing lists, commercial invoices and purchase orders.

This process helps to validate that the information is accurate and complete.

Knowing your cargo

There are six KYCs for cargo screening – we explore the first three below:

1. Know Your Controls
Export controls refer to government regulations that restrict or prohibit the export of certain goods, e.g. military and dual-use goods – i.e. goods that have both civilian and military applications, technology (e.g. encryption software) or information to foreign countries or entities. Export controls aim to protect national security, advance foreign policy interests and prevent the proliferation of weapons of mass destruction (WMD). Export controls vary by country and can be administered by different government agencies, e.g. the US Departments of Commerce, State and Defence. Companies that export controlled items must obtain export licenses or other approvals from the relevant government agency before exporting items.

2. Know Your Codes
“Knowing Your Codes” is an essential aspect of international trade.
Accurately identifying the correct HS Codes for the goods being traded is critical for proper screening. The HS Code is a six-digit standardised code system developed by the World Customs Organisation (WCO) to classify goods and customs officials use it worldwide to assess applicable duties and taxes. Incorrectly classifying goods can result in delays, penalties or even cargo seizure.

3. Know Your Countries
“Knowing Your Countries” involves verifying information about the country of origin, country of loading, and country of destination for the goods being exported – including the relevant ports and terminals. This process is crucial in ensuring compliance with trade regulations and sanctions imposed by international bodies. In cases where specific export licenses are required, additional checks must be carried out to determine if the destination country is high risk. This is to prevent the trade of restricted or dangerous goods and to ensure proper cargo screening, which is essential for maintaining the legality, security and safety of the goods being transported.

These are three out of the six KYCs that we cover in the guide.

You can read the full guide here.