Michael 00:05

Welcome to the webinar everybody. We're here today to talk about navigating a new era of aerospace compliance. As global sanctions and export controls continue to evolve, the stakes for the aerospace industry in particular have never been higher.

That Import Genius, we've seen this firsthand. Demand for trade data has surged, particularly in response to recent geopolitical events. And while we serve a wide range of industries here at Import Genius compliance has become a critical focus, especially for those in the aerospace world. So today we're gonna explore the challenges and some opportunities in this extremely complex landscape. And I'm thrilled to be joined by two distinguished experts. We have William George and Jared Knights with us today, who will share their insights and some real actionable strategies to help you safeguard your operations and reduce, reduce your commercial risks. So before we get started, lemme turn it over to the panelists and have them introduce themselves. Why don't we start off with Jared Knights? Jared, can you tell us a bit about yourself?

Jared 01:15

Yes. Thank you for having me today, Michael. My name is Jared Knights. I'm the director of Quality assurance for an aerospace parts distributor at AvAir here in Chandler, Arizona. I've been in this position for about eight years, and over the last couple years we've also taken over the role of export compliance and logistics. In addition to that, I also work with the Aviation Suppliers Association on the Quality Committee as chairman of the committee. We share best practices and tactics such as these to protect each other and kind of industry practices and work with each other to establish a good industry practices to protect each other.

Michael 01:52

Great. Thanks Jared, and I really appreciate your time today. William George and ImportGenius.

William 01:58

Hey, Mike. Thank you. Yeah, my name is William George. I'm the director of research here at ImportGenius. I've been with the company for a little over six years now, and during this time I've been working with our trade data to find ways to tell stories and derive useful insights. And following the expansion of the invasion of Ukraine by Russia, we've discovered that there is a lot of value to be gained by looking at aerospace parts that are traveling into that region of the world. This has gotten increasingly complex and I'd love to share with you today some tips about how to understand and unravel this ball of yarn.

Michael 02:32

Terrific. And I'm, I'm looking forward to your real, real world trade data presentation, which will be later, a bit later in the, in the webinar. Great. I'm Michael, I'm the founder and CEO of ImportGenius. We are a provider of trade intelligence. We've been providing a shipment level global trade data since 2017. We serve a variety of use cases, everything from helping buyers to find suppliers, helping suppliers find importers to the financial sector, and in increasingly due diligence and know your customer use cases such as sanctions, especially in the aerospace and the microchip industries. In the last few years, for obvious reasons, we've been supporting more and more companies trying to keep their supply chains clean and, and stay outta trouble. So why don't we start with some questions for the panelists and then we'll, we'll get to your presentation. William, you're gonna show us how trade data can really be used on a case by case basis to make due diligence determinations. And then towards the end, we'll take some questions from our audience, but please, along the way, if some questions pop in your head audience, just drop them into the chat and we'll pull from those towards the end of the webinar here. So first question I'd to talk about industry trends. The aerospace export compliance landscape has undergone very significant changes, seems like changing every day, and obviously since the onset of the war. So Jared, what shifts are you seeing in how companies approach export controls and trade compliance?

Jared 04:11

Well, beginning with the addition in 2020 of the Chinese military end users to the OFAC sanctions list and the controls around them, we started to see a little bit of elevated risk in our industry where there previously had been a safe environment. Then when the invasion of Ukraine happened in 2022, the sanctions came overnight. It changed our entire landscape for compliance. And as time progressed, we started to see the efforts to evade sanctions that have proliferated over the last three years. With those efforts, we've had to implement new tactics and stops to weed out those bad actors, and it is still a constantly changing landscape as they learn our tactics to attempt to further evade those. So it is a constantly changing landscape and it's something that we're, we're dealing with on a daily basis. I think you're muted, Mike.

Michael 05:07

Jared, how, how have these developments impacted operational strategies at at AvAir and how you think about risk management and, and what extra work now is involved in that process?

Jared 05:20

As, as we started to recognize the areas where we were seeing material be transshipped into Russia following sanctions as a company, we had to decide one of the best things we could do is put overarching policies in place to try to mitigate a lot of this risk. So one of the policies we put in place in regards to countries under general prohibition eight, those countries were listed on, had been listed under that general prohibition since 1992 due to their diversion of materials to countries like Russia and Iran. So in our case, we adopted a policy to only do business with the airlines in those countries, and that further mitigates the risk for doing business with any other brokers in those countries and keeps us out of harm's way.

Michael 06:02

Interesting. Why don't we talk about leveraging trade data, that that's obviously where ImportGenius comes in. And from my perspective, trade data has gone from a, a nice to have to a must have in terms of the, the tools of the trade here for compliance. So William, how does ImportGenius fit into the broader framework of compliance? And can you share an example of where trade data provided actionable insights to mitigate a compliance risk?

William 06:29

Yeah, absolutely. Thanks Mike. So trade data can be used both proactively and reactively. I'll start with an example of reactive use because those are, those tend to be more public and more known to us. There was a case last spring where a number of executives at a Dutch company, which was founded by a Russian businessman, were arrested for funneling microchip components used for missile production into Russia. Records in our data led to that outcome after journalists spotted them. And that's a story where there was, you know, some public private partnership where a state actor stepped in after the damage had already begun to be done. But from a more proactive perspective, you can also use this data to screen customers right as they get into the sales funnel. And I think Jared might have some more examples of what that can look like.

Michael 07:17

Yeah, Jared, yeah, you want, you wanna touch on that where that's a great point. We're in the sales cycle, you know, you, you, you receive a new lead, this is a, let's say a new buyer you've never, never heard of before. At at what point do you start the diligence work

Jared 07:33

That's, we recommend that it's something you start immediately, as soon as you have contact with a new customer, the customer can review, the customer can be reviewed, and your sales team can know whether they can proceed with that company or not. If there's any sanctions in place, you can immediately stop that transaction. Once you have the order, once you have an actual order that is the best chance, your first chance to immediately bet the order, the end user, the item that's being exported, so you can be sure that you're safe in that transaction. If in cases where you don't do that, we've had a few cases where a salesperson takes an order, they think it's okay, and it gets to the point of that order being about to ship, and then it gets stopped for export compliance. And it's a strain on resources because you lose the time that that person takes to take the order and then you have to refund the money that the buyer's already paid. And you've wasted a bunch of time when you could have been selling to a good customer

Michael 08:25

And you have one, one fairly upset sales person as well.

Jared 08:28

I'm sure. Yeah, usually an upset customer as well.

Michael 08:32

So, yeah. Yep. So William, you, you touched a a bit on the fact that trade data can be used, you know, retrospectively, but, but it also has some predictive value before perhaps a, a regulatory event occurs. So Jared, you want to tell us a a bit more in the, the nuts and bolts around, around how you do this diligence work. I mean, it sounds like it's not as simple as pushing a button and scrubbing a business name against a denied party list or a couple of the, you know, government maintained databases, although that's obviously important and maybe that's your, your starting point, but that's, that's not where it ends, at least not for you. Can you walk us through some of the, the things you do tactically?

Jared 09:15

Yes. So one of the first things we'll do is look at the company, verify that that is actually who's contacting us. We'll use like a free, who is service to verify the internet domain and that email address is coming from that domain. But after that, looking at the company, one of the first things we do at this point is look at ImportGenius. A typical scenario we'll have a new customer, we've never heard of them. They're trying to buy brakes, usually large breaks 777 aircraft or a 747 aircraft, and they want them shipped to an unknown freight, freight forwarder into a country that is not part of the sanctions regime. In this case, if we review the trade data from ImportGenius in advance, and we see that this company has 400 shipments of airport of aircraft parts into Russia after the sanctions, we can easily classify this as a potential violation that we do not wanna be a part of under us general prohibition 10, if you suspect there's a violation, you cannot proceed the transaction. So using that trade data has helped us avoid those situations in the past countless times.

William 10:18

And Mike, just to touch on this a little bit further, there's also the opposite here where you can see that a company has a history of safe trade and you can get a sense that they're a good person to do business with. Or you might notice that there is no trade history whatsoever, and that could be an indication that perhaps this is a recently spun up shell company and trigger further review.

Michael 10:38

So, so is, is it fair to say the, the the pattern that you come across that gives you the most confidence is obviously not the sketchy transactions, but again, I get a little bit of echo there. Thanks, sir. I, is it fair to say that the, the, the shipping patterns historically that give you the most confidence in working with a new customer would be obviously not a pattern of sketchy shipments, but no shipments is also sort of, its its own red flag. You wanna see history and you know, the safe interactions with non prohibited countries and entities. How long of a track record gives you, you know, how many, how many years of trading history gives you that, that kind of confidence?

Jared 11:32

An easy answer to that is trading before the sanctions were in place, a lot of these companies we have seen were started either overnight just at the invasion of Ukraine or since then, any trading before that indicates that they may have been part of this industry or a good company doing business prior to the sanctions being in place. And they werent established just for that. Other than that, a lack of information, a lack of information can be a red flag. That is one of the red flags that have been issued by the BIS and Financial Crimes Enforcement Network in their joint releases, they have told you if there's no internet history, you have no information on this company. You need to do more, more diligence.

Michael 12:15

Yeah, thanks Jared. William, in analyzing $80 million of parts shipped to Russia ImportGenius uncovered visible ties to, to some very major brands. So how can companies use trade data, big, big companies, big brands to prevent those types of violations and and protect themselves and and are those necessarily violations?

William 12:36

Yeah, so this story you're referring to was a lead we brought to the New York Times in 23, and this actually lined up with, but was totally incidental to enforcement work that was happening at the time, which wound up making the story pretty incredible because it, it was published about two days after major arrests, even though we'd been working on the story with no knowledge of the, the other process for months. So it looked like the journalist had done incredible, Anna Swanson had done incredible work putting this together, you know, with like zero time after the announcements. But yeah, so we, we saw, you know, Boeing and Airbus and another other major brands implicated there, but that did not necessarily mean that Boeing or Airbus had themselves engaged in any bad action. But what they could do, and what they have departments that do in fact do, is use this data to track how their parts are being distributed in the world to understand, okay, so we sell to a US distributor and then they move into a third party distributor, they, they keep getting, you know, four or five links down the chain and you can begin to identify if you're one of these companies where those bad actors might enter the supply chain and then work proactively with law enforcement to protect brand reputation.Because when this gets reported on, it's easy for the big names, you know, your Boeing, your Airbus, or in microchips Texas instruments to, you know, get the headline there and that's not a headline you're gonna want.

Michael 14:02

Yep. Certainly not Jared. Let, let's talk about legal standards. What legal standards does  AvAir adhere to when evaluating potential transactions? And, you know, how do you navigate the quote unquote should have known standard versus more  explicit regulatory obligations?

Jared 14:22

Well, the legal, the legal standards, obviously the, the first one that we adhere to is the Export Administration Regulations than US Law. We also have to adhere to European Union sanctions because of our location in Ireland, but we also adhere to our own internal policies. And those internal policies allow us to offer a level playing field to all of our customers, regardless of the country they're in. They're all playing by the same rules as far as the, you should know environment of trade data and what you should be when transaction I, I really think that trade data should be something that companies consider when it's readily available. I think that that information being readily available is something that cannot be ignored anymore. A lot of people do wanna put their head in the sand with export compliance and they will say, well, this company is not on the sanction list.It doesn't matter to me what they do with it after that. And that doesn't protect you and it doesn't protect you from criminal prosecution under US law if you're not doing your due diligence. So the way we found, the way we found ImportGenius was a simple Google search. So if you can do a simple Google search on that company's name, and the third result that pops up is free of ImportGenius information showing that company shipping into Russia, that's not something you can ignore. That the first discovery of ImportGenius saved us from a potential violation. So once we confirmed with our attorneys that this did put us in the realm of US general prohibition 10, and we had ImportGenius at hand, it was information where we had none before. And there's a lot of companies out there, especially those with limited resources that will look at a transaction, they'll look at the OFAC sanctions list and that's all they have for information in front of them. So if you're looking into trade data, it gave us an answer where there was none before it was a light in the dark. And that's why I told you I like your, your logo is the light bulb because it really is, it was for us where there was no yes or no information, we had something. So it was definitely a huge help and it's something you can't ignore.

Michael 16:21

So, so your, your general algorithm is, first you check out sort of the, the comp, the, the very basic fundamental stuff like the, the company's registration information in their home country, the who is on the website and, and then the, the government maintained denied party list and, and then trade data or, or, or does trade data under your typical, you know, work,

Jared 16:47

It'll be the government government denied parties list will always be our first check once we've confirmed who that company is. So it will be sometimes the who is trade data to make sure we know who we're dealing with. Once we have all of our know your customer information, then we will go to the OFAC list and then ImportGenius is usually second. So that's, that's our quick check if nothing pops up, those are two red flags that are cleared right away.

Michael 17:12

Okay, great. So, you know, in some cases you're investing or, or, and, and or your team quite a bit of time and, and research on a, on a just one, you know, one new transaction and then you get to a decision point if that decision is negative or even if it's positive, I guess, does that information get shared at all among the industry? Is there sort of a, you know, a, a handy private green light list or blacklist or, or anything like that? To, to what extent is there sharing among these, these findings with, within your industry, if at all?

Jared 17:48

I, I wish there was a magic list we could note go to, but due to the US antitrust laws, we, I, I can't call you and say that this company gave me the wrong answer and you shouldn't sell parts to them either. But what we can do as, as an association, as the Aviation Suppliers Association does, is hold seminars and webinars like this to share these tools and tips and tricks to look at these bad companies. So we're all looking at them the same way and we're seeing the same things. There are, I'm sure there are discussions among companies that, Hey, I saw this and yes, I saw that too. People can feel more confident in their decisions. The other, the only other resource we have in our industry as far as communication is reaching out to our customers when we can. So in cases where an unknown company comes in from a country without sanctions like China, and they wanna buy a part for our existing customer that is an airline in Ethiopia and they say, no, we want you to ship it to China, it's for this Ethiopian airline, we can contact that Ethiopian airline. And in many cases they have said, no, that is not for us. This company is lying to you. So that's about the only thing we can do in our industry is reach out to each other to confirm answers and work with each other on tips and tricks and tools.

Michael 19:02

Does that pattern that you just described, does that happen with any frequency?

Jared 19:11

Once every few months? We get that.

Michael 19:14

Very interesting. So the Aviation Suppliers Association did, did I get that right? Okay. And, and we'll, we'll drop a link in the chat for the audience. That sounds like a great association to be part of. Well, any other tools, institutions, you know, public government maintained sites or resources that you'd recommend? Jared

Jared 19:35

Obviously I'm gonna recommend ImportGenius to a lot of people who is websites, the free resources that are out there. UK is running what is called the Trade Integrity Project right now, but it's not as easy to look into as it is for other information. I think the trade data that's at hand is something people really need to be grabbing a hold of.

Michael 19:56

Okay. And and BIS also

Jared 20:02

Yes, yes. BIS, department of Commerce, Bureau of Industry Security has a lot of training videos on their website. I believe it is actually called the training room on that website. And I think we have the link to share as well.

Michael 20:14

Okay, great. And it's obviously, it's such a dynamic landscape that the continuing education is, is critical. Jared, in terms of memorializing the diligence that you've done, you know, you, you've watched the BIS best practice videos, you're, you're part of the, the Aviation Supplier Association. How do you memorialize the work you've done on each case so that you've, you've covered yourself, you've covered the company.

Jared 20:43

It's something that I recommend to everybody. It a simple Excel spreadsheet keeping your decisions in, in place, keeping your decision tree, a decision tree that records that. We use a smart sheet, it's a Microsoft version of the Excel sheet, but our inputs go in, we have a decision process and we show that we have cleared our red flags. We show that we have reviewed the sanctions list ImportGenius, and that we consider this a safe transaction. We can house all the details in there. And I, I suggest everybody keeps one of those because the ultimate way to feel safe is when you, when you get to a point where you're about to proceed with the transaction and you say, okay, I can answer all of the questions. If they come to me and say, why did you ship this part to this person in this country? I can say, this is what they told me for an answer. This is our due diligence. This is what we did, and we had no red flags.

Michael 21:37

Great. Yeah, that's, that's super important. With the new administration, we're just a, a, a few days into a new administration now and, and just the generally evolving regulations in this space. How do you see the landscape changing in the next few months, the next few years, and has anything changed already in just a few days now that we need to be aware of?

Jared 21:59

The one thing that has changed since the new administration is that when during the elections and during the campaigns, we heard that people saying that the sanctions were stupid and they thought that the sanctions were going to be eliminated immediately. And now what we've seen is a reverse of that. They're saying there may be more sanctions on Russia, but I think inevitably to see any of this change, tosee any sanctions change, there has to be peace between Russia and Ukraine before any of the sanctions are lifted. I think once we see that, we may say, may see sanctions lifted quickly and may see some permissions to ship parts to airlines for the safety of flight since that license is already available. But beyond that, I don't see them being lifted fast enough for anybody to be happy about it.

Michael 22:44

Right. Well, yeah, it wouldn't be a panel without asking you this question, although I, I think in the context of sanctions, it's a, it is a very important question. What keeps you up at night at, at a air Jared

Jared 22:57

Fraud? In our industry, there's a lot of money in the aircraft parts industry, so fraud in our industry is a constant. So these answers that I'm receiving from our customers for our export compliance diligence, were we given fake documents? Did somebody lie to us? Inevitably, if somebody lied to us, we can only vet those answers so far. But that's something that I definitely worry about on, on all cases. Are we being given correct information?

Michael 23:26

Yeah, I I bet that that maintains some amount of background stress for you. Okay. Thanks for those answers, Jared and William, why don't we jump into your presentation using real world trade data and how, how relevant it is in making diligence decisions.

Jared 23:49

Alright, let me share this screen here.

William 23:51

Okay. Is this visible for both of you? Yep. Alright. Yeah, let me, let me get right into it here. So I'm gonna start with a, an example here of an actual actual map of a supply chain that has been directing parts to bad actors in Russia that we've indicated. And so at the beginning of 2022, you could see shipments that were very straightforward. They, they would be in violation of the sanction sanctions regime, but they might go directly from the US to Russia, they might take smaller stops. The Maldives were a big hub at that point, but you would usually see either the straight shot or a very small number of intermediary steps. However, as efforts to catch and prevent that have gotten more complex. So to have the efforts of actors in these chains who are trying to, you know, trick vendors and get goods into Russia.

William 24:46

So as you can see here, you, you can have, you know, stuff going through, through Turkey into the UAE, into Thailand, into Kazakhstan, into Russia. And there are a number of ways that you can actually leverage multiple databases of trade data to catch this. So I think the most important thing that I can share today is this idea of layering data sets. So for each of these data sets, what you can get in addition to, okay, so, so and so shipped to this country, you'll also often have information that will share the country of origin of the goods, the federal destination point, sometimes the, the ports they've traveled to. And each of these pieces can give you a much bigger overall picture when layered together. So if I jump back to this map here, you can see how different data sets provide us with different pieces of insight into other aspects of this by combining them and utilizing the, the overall power.

William 25:45

But before we get a little deeper into an example, let's talk about what specifically the data that we're working with is. So it's important to understand that this, this data, while it is sourcing part from bills of lading, it is not BOL data. A lot of people who are sort of newer to trade data will request BOL data and that is relatively privileged, but there are sometimes ways to get it, for instance, in the US for outbound non-con containerized shipments. But here what we have is a level above VOL data. So this data reflects data collected by customs authorities. And so for that, because of that, it's going to have data taken directly from the, the bills of lading submitted by the shippers to customs, but it's also going to have data that the customs offices use to apply tariffs. So this can mean things like currency, conversion rates, specific points in time, and other, other fields used for internal data collection. Our countries of interest for the aerospace compliance use case are gonna be Russia, Turkey, Kazakhstan, India, and Uzbekistan. We are looking to obtain data for more countries, and I will update you as soon as that becomes possible. But the main question here is why not the us? Because if you're a US based parts distributor, you would think that the first thing to look at is outbound US shipments. And Jared, when you fill a part order, are you delivering this to the customer by boat usually, or is this gonna be by plane?

Jared 27:13

I would say 80 to 90% of our shipments go by air freight.

William 27:17

Thank you. And that's where you run into a problem, which is that US air freight records are not currently publicly disclosed. We are working on legislation to fix that, but at the moment, 50% of US trade by dollar value is in air freight. And that is a huge gap in visibility, especially when you're in an industry where 80 to 85% of your, your outbound shipments could be invisible. So you need to catch this from other countries datasets. So here's, here's an example. Let's say an order comes in and your, your sales team receives an order from this specific Turkish buyer. We know now that this company is on ofac SDN list and they were listed on October 30th. So if you were to check them out, be very clear, you know, no steps really required, just a quick Google search, you should not sell to them. But how about prior to October? So if you look at the top box here, this is an example of some Turkish customs records from our, our website. And you can see that there were is activity linking this Turkish cellar to Russia in the first half of 24. So immediately I think that would be enough, and correct me if I'm wrong, Jared, to raise a lot of red flags on the transaction.

Jared 28:32

Absolutely.

William 28:33

And so this shipment here, actually this, this search was for turbo shaft, not the, the Turkish shipper because turbo shaft winds up being the actual consignee here. And I, I thought it was fun to indicate how in addition to the shipments from the US into Russia, you can see that turbo shaft is also helping route goods from China into Iran. And now at the bottom here you can see these are shipments from Turbo Shaft or Treetops another one of their associates to C seven S seven airlines, which is a heavily sanctioned Russian air carrier. One other thing to point out is in the, the upper box on the far left corner under product you see p slash n these are actual part numbers that have been logged in the product descriptions. So if you have access to those part numbers or a database of part numbers, this can be useful for tracking where very specific shipments have wound up going.

William 29:28

So yes, the real intermediary here is Turbo Shaft fce and they have really been heavily sanctioned their, their Turkish, their, their Turkish company as well as the UAE based version and to zoom out, oh yeah, so just some tips and tricks. We talked about the cargo origin destination, but you really want to focus on buyer and seller names and addresses and then product descriptions in detail. As I pointed out in the previous slide, you can get part numbers, you can get company names and those company names can also show up in produce your name and trademark. And sometimes that can be Boeing, it can be Airbus or if you're unlucky, depending on what the shipper's filled out, Jared, as I think you've seen it can be the name of the distributor who was tricked into selling.

William 30:17

So here, very quickly before I wrap up, is a, an example of the kind of map you can make by layering all of these data sets. And I would like to highlight that we are not indicating in any way that the US companies indicated here have engaged in any negative activity. We're just saying that this is what appears in our data as linked to a publicly sanctioned entity. So you can really begin to build out maps both of the, the whole chain for one transaction, but also how these companies don't operate in a vacuum. And very frequently they will cooperate with other companies engaged in similar activity. So you can start to work in multiple directions and trace out larger networks. And this can be useful if you're looking at this from say the, the big brand perspective. If you, you're an Airbus and you're at Boeing trying to get a picture. If you're working on this from more of an investigatory perspective as well, maybe you're working on this reinforcement angle or you're a journalist here, you can really begin to get a sense of scale and shape. So yeah, thank you very much. Just my to recap here, data layering and that's really where you begin to get a, the full picture of what's going on and that can involve overlapping hundreds of shipments and sometimes you make these, these edge connections based off of one piece of data that appears by sifting through that mountain.

Michael 31:39

Yeah. So William, a couple questions for you and thank you for that on thank you. On the importance of address, I, I think we've been speaking, you know, just generally about company names, like what does the company go by? Maybe there's a variation or, or a subsidiary connection, but what is the importance of just the address as a, as a standalone data field for investigation and and diligence purposes?

William 32:05

So the address, I think actually in a second, Jared can speak to this, but the address often can be shared between entities. So you might have a, a new company that's appeared, but OFAC has a number of, for instance, Hong Kong addresses, which have been list have been blacklisted for business. And yeah, it's, it's very, it is often easier on the sort of the lower effort side of the, the Shell company spectrum to reuse addresses that you have access to versus finding new PO boxes. Is is this what you've been seeing Jared?

Jared 32:41

Yes. And that is, that was the reason that OFAC has specifically sanctioned, I believe as 15 addresses at this point. But because of the, because of the activity that was going on at those addresses, they were shut down one company and start a new one when they would get in trouble and then parts would start moving to Russia and Iran immediately again. So they the entire office or building. And that has also been a red flag for us. We have had companies, I don't know if they didn't know it or if it was just another subsidiary, but they pop up and immediately we see the address and know that they're a sanctioned entity based on that address. That's another thing that's very important to watch.

Michael 33:20

So you, so you always wanna search the address separately and do a diligence workflow on the address no matter how, how clean or, you know, relatively scarcely populated in the trade data. The company name is

Jared 33:36

Ab Absolutely. That's something that we've had as a very valuable tool check in the address. It is not uncommon for a company to give us an address that doesn't physically exist. We have also, in one case, it, it's almost a joke, but we were asked to ship parts to Leon, Western Sahara is not even recognized as a country. It, I, I couldn't get a physical address and we don't know how they were planning to ship there, but that is where they wanted us to ship. So you wanna look at that address. It's always very important, especially in the cases of freight forwarders. Freight freight forwarders are being used by a lot of these companies and they will give you an address in Turkey or UAE or China that doesn't actually exist and then have you ship to a real freight forwarder and that freight forwarder is the one transferring the parts into a sanctioned area.

Michael 34:25

And, and you might not learn about that intention to divert the shipment until way later in the transaction, right?

Jared 34:32

Correct. Yeah. Doing your, doing your diligence upfront will give you the red flags that show you there might be something wrong there.

Michael 34:39

Gotcha. Remember folks, throw your questions in the chat. We already have a couple and we're gonna get to those in a a moment here. W William, as you were going through those graphs and, and the, the layering I, I noticed you mentioned a few core databases that you and, and our compliance users rely on. We have customs data from well over 20 countries. H how do you decide where to look? I mean, you know, it's, it's a very sophisticated platform. It's not a one button, you know, it's type of a name or an address in and everything gets searched. How do you decide where to start and how do you know where to end?

William 35:16

So that's a great question. That very substantially industry by industry. There, there are a number of ways we do this. One of the ways we do this is at the beginning of our process, you know, back in 2022, we began just searching everywhere and seeing really what came up. And initially that was really Russia. We were only seeing this in Russia because we had not yet obtained the Turkey, Kazakhstan, or Uzbekistan databases. But as we began to notice those countries showing up in these trans shipment fields, we, that informed our data acquisition efforts and we obtained those data sets. And similarly we're, we're spreading out into other countries where we see that kind of activity. But also we speak with users, we speak with people on the enforcement side and we watch journalism closely. We contribute to journalism. And you'll notice also trends in macroeconomic data where countries that have suddenly, you know, not had significant trade with the US or with Europe that are part of the Eurasian economic union will have just surges in trade as correspondingly imports drop in Russia. And that right there is an absolute red flag for any industry that has to deal with compliance issues, where all of a sudden if you've got a buyer, one of those countries, you can know that the likelihood that there's gonna be a problem with that shipment, that you might have to have a difficult conversation with somebody later on about it, really has skyrocketed.

Michael 36:39

So you really keep a close eye on, on the macro trends to know where the hotspots might be regionally where trans shipment might be occurring to, to circumvent sanctions.

William 36:52

Exactly. And then also also what we can see as, you know, countries in that sort of data layering thing where you'll, you'll notice an implicated country in a transaction and it just makes you curious, it makes you wonder.

Michael 37:07

Yep. What are some countries where you're seeing the, the corresponding drop on the, on the Russia side and the corresponding increase on the, the country X side? Can you, can you mention a couple of those?

William 37:20

Yeah, I mean the, the countries that we have, we've obtained Kyrgyzstan as well. Georgia is up there.

Michael 37:28

Okay. So the, these are places where you're searching is not exhaustive in until you've checked those databases as well.

William 37:36

Exactly.

Michael 37:36

In the import genius platform or whatever your trade data platform of choices. Great. Well why don't we, thanks. Thanks, William. Why don't we take a look at the questions here. We have a few in the chat. I will read the first one here. Hi. I work for an aircraft leasing company. We predominantly screen our counterparties against various sanctions slash adverse media screening tools for entities not well known to us who require further due diligence. How can import genius be an extra layer in mitigating our compliance risks? So they're already, you know, using adverse media screening and the various sanctions tools. How can they use us to, to go a step further, William?

William 38:23

Yeah, so I'm happy to take this one. The, a fun concept to think about is the idea of the pre regulatory signal. And this can also be sort of connected to the media idea, like getting ahead of the news here, which is very possible with this data. There are increasing eyes on this, but if you, you know, stories take a while to come out. Sanctions take a while to be approved. So if you, as we discussed earlier, have access to these databases and do exhaustive searching, run the addresses, run the entity names, figure out what other entity names they might be doing business as, try to get a sense of, you know, ha have there been name changes? Can you can, can you guess what, what might show up that could link you to their customs records in the databases? Maybe nothing shows up. Maybe you see a, a healthy history of trade and maybe you see the kind of evidence that could be used to immediately discount them as a business partner.

Michael 39:29

Okay, another one. What is, this is from posed by Jared. A common question that you get is how can we trust this data? You wanna, you wanna take that one? Yeah.

Jared 39:40

Yes. I've, I've shared this tool with multiple other companies in our industry and when I started looking at it, I had the same question, how do I trust this data? How do I know that it's ours data? How do I know this accurate data and something that we can rely on to block transactions and stop sales because that's ultimately what we're doing is costing the company revenue because it's a risk. But when we looked at it, one of the first things I did was look at our data prior to sanctions. I can match up import genius data to our database. And when I've been speaking to other companies, one of the, one of the people I know very well, he is a vice president at another company here in Arizona. He said, okay, how do I know this is real? And I pulled up his company's information and read off a part number and told him, well, in 2021 you sold this part to this Russian airline before sanctions. And he stopped for a second. He said, okay, I have to look into things. And he had his answer, I think satisfied his curiosity pretty quickly. So using your historical data, you can see your own transactions on import genius. And I, I haven't found another website that I have that much confidence in right now.

Michael 40:49

Jared, what what do you do when you, when you get to a decision that's a, a negative a no, we're not gonna do business with you. How much of your, your findings do you reveal to the, the prospect? Or is it just a no, you shut 'em down and that's, it

Jared 41:08

Depends on the situation. If we are, if we are asked by a known trading partner to ship to a suspected trans shipper, somebody that's been in the industry, this company's been around for 25 years, and I suspect they may not know this information, I will share the information and I'll tell 'em, look, this is what we're using for tools and this is how we're looking at it. This is who we think your customer is. And 99.9% of those cases I get, oh wow, thank you for that information. But with other cases with the customers, if we're just telling the customer this is what we see, in most cases we will share the information. This is what we're seeing, this is why we can't do, do business with you. And it prevents a long argument. In some cases if you just say, I'm sorry, we can't do business because we don't feel comfortable. You have to go back and forth with that customer. If you're cut and dry with them and you give them the information, these are the search results we have, there's usually not a lot of argument with that. So it prevents a lot of that resource absorption.

Michael 42:09

Here's, here's a question, William, why don't you take this? One is, is the, is the shipment data ever contested? So, you know, we aggregate trade data and we, we provide what was filed with the government agencies, but are there ever mistakes or how can you validate a shipment that you, you see in one data set, Williams is, we have 20 plus countries. Do, do you ever find, you know, cross validating the shipment with the trading, with the second trading party's country to give you an extra level of, of confidence when making an assessment or, or a decision?

William 42:51

Yeah, so that can definitely happen that that's not possible in every situation, but it is highly, highly satisfying when we're able to map shipments between different databases more often what we're able to confirm is a consistent pattern of trade activity. But another thing that we've done, and part of the purpose of our research team is to, to work with a number of partners who have access to resources beyond our trade data, where they can embark upon investigations informed by our records, and then validate them through interviews and, and through other means. So our, our media record and, and other work also stands as a testament to the data itself.

Michael 43:38

So, so, so sometimes trade data is just a starting point and then can be validated by other, other data sets depending on who the stakeholders are in, in the, in the process. E

William 43:49

Exactly.

Michael 43:49

Okay. Another question from the chat room is, can you clarify where you get transaction information from? Thank you.

William 43:57

I'm happy to take this one. And yeah, so that's, that's a question we receive frequently and it's a really complicated question, both because it connects to sort of core aspects of our business and also because the answer to that is different for almost every country. And what I can really speak to is, for instance, for, for the US trade data, we get that data directly from the government, from the US government through a, a formalized process. But for other countries, yeah, at every customs department has, its its own way that that data may or may not be allowed to enter the public domain. I mean, there are many countries we don't have records for that we, we truly wish we did. China, for example, had a, a very difficult and expensive way to get records that was shut down in August of 2020, right. As Covid was at, its at its height.

Michael 44:46

Yeah. Sometimes data sets do come and go or will be delayed sometimes for several months. One benefit to having 20 plus country data sets in our system is that we can often paint, you know, a, a, a mirror image partially at least of a, of a country that we otherwise don't have data for. Or perhaps the data's on a very long lag or delay. And that, that comes in handy I'm sure in your work.

William 45:16

And back to Erica's question, where specifically we get the transaction information from all of these records originate with customs departments. All of these records are the result of information that's been submitted to customs and then additional data that customs adds to that for their own internal processes and tariff assessment.

Michael 45:38

So if a shipment does not appear in customs data, William, what does that mean to you? If a, if a shipment that you, you're expecting to see, or you know, you're doing an evaluation on a company or a a product segment and you don't see something, what does that mean to you? Does that mean it didn't happen?

William 45:55

Well, the thing with this data is that you can never use it to prove a negative. All you can do is use it to identify what does appear in the data. So the absence of a record, it can mean a number of things, maybe a freight forward or hand handle the transaction. And so you're looking at it and you don't see the cons of your shipper. You hope to, that happens all the time in US data, maybe the, the shipper filed for confidentiality and you need a lot more details to be able to unmask their shipment. Perhaps you've got the wrong address. There are many ways that a shipment might not appear, but when it does, you can be certain that that shipment was real and did occur.

Michael 46:33

So the, the, the absence of evidence is not evidence of absence. Yes. But if it's there, it's 99 point something percent that shipment really happened. Maybe there's a typo or something, you know, could be off a clerical error, but if it's there, it, it happened.

William 46:47

And yeah, the final caveat here is, especially in the Russian records, it depends on what the shipper submitted to customs. So as, as Jared has seen, sometimes US companies appear when actually they were higher up the chain, but the documents make it look like they were, you know, directly a counterparty of the shipment.

Michael 47:06

Right. All all relies on the, the input source.

William 47:11

Exactly.

Michael 47:11

Great. Well, hey, we're at time. Really appreciate everybody's participation. Looks like we got through all of the questions. We, we can keep the conversation going. How, how can folks who want, want to ask additional questions or wanna learn more about Import Genius or maybe pick Jared's brain, how, how can they contact you? Jared,

Jared 47:30

They can contact me via LinkedIn. Anybody in the industry who has my email can contact me directly. But on LinkedIn I'm active and I'm, I'm there,

Michael 47:38

So, okay, LinkedIn. Good for you, William. And, and also of course William@importgenius.com.

William 47:44

The, the email's better, but LinkedIn works too.

Michael 47:47

Okay, great. And then Import Genius is also offering anybody in the aerospace industry who's interested in learning more about trade data for compliance. A 30 minute session with an analyst over Zoom who will take you through real live trade data and, and happy to use actual companies that, that perhaps you've dealt with in the past or you're concerning working with now. And do some, just do some real work in the system and, and show you the types of insights that trade data could provide that you might not be be getting now. So if you're interested in that, you can go to the website and fill out any of the web forms. Just mention that you've attended today's aerospace compliance webinar or we have a special email address set up for this purpose. It's easy to remember. It's air@importgenius.com, air. You can send an email there and we'll schedule a session between you and an analyst and there's no obligation for that. So again, thanks everybody, appreciate your participation and stay safe out there. Thanks.

William 00:00

Thank you.

Michael 00:00

Cheers.

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