Things you didn’t know you shouldn't be selling
Updated: Apr 22, 2021
So it's a lazy Saturday and you’re napping in front of the TV, taking a well-deserved few hours away from your new eCommerce business, when you hear a series of pings on your phone. You see a series of notifications that your merchant account has been blocked and you can no longer receive payments or withdraw your funds. A flurry of thoughts runs through your mind: How dare they? Are they even allowed to do this to me? And what on earth does “activity not in line with our terms and conditions” even mean?
Twenty minutes and two energy drinks later, slightly more awake, you begin digging through the forms and questionnaires your payments processor has sent over - and the problem seems to be with the otherwise innocuous ‘authentic Iranian saffron’ listed on your site. How can this one tiny grocery product which you hardly sell any of have caused such a fuss?
So what went wrong exactly?
Let's start off by understanding the concept of sanctions. You can form a base understanding from one of our previous articles, but in summary, there are specific restrictions in terms of both people, places, and products you need to adhere to when dealing with international trade and foreign currencies. As a general rule, if you accept credit card payments, most of the card associations require compliance with all major sanctions programs because they can never be sure which country the payments will be processed through and the networks themselves (Visa, Mastercard, etc) are registered companies in most of these countries and thus have to comply, so by proxy, you do too.
In this specific example, the ‘authentic Iranian’ part of the saffron product label was the one which got your account into hot water, because of the blanket sanctions on Iranian primary exports entering the US financial system - in this case, a payment processor that has links to the US. This may sound a little bit excessive, but trust us, we've seen it happen.
Military… You’re kidding, right?
For the specific purposes of US Sanctions compliance, it's important to understand the concept of the 'Military End Use' and dual-use goods (may be for military or civilian use) expands well beyond the scope of the things that may normally spring to mind i.e. 4x4s with rocket launchers. Here are some examples of things that are often sold in the open market that you should be extra careful with:
Laser and electronic sensors - including certain types of emitters and optical drive sensors.
AI and rapid-coding software - usually related to tracking, monitoring, facial recognition, and app-writing or source code generation software.
Servers, networking, and communication equipment - whole regular PCs may not fall within this category, a powerful enough server may meet sanction thresholds.
Microchips, transistors, and radio equipment - these can include several types of inoffensive seeming hobby equipment e.g. HAM radios, quadcopter drones, radio-controlled airplanes mislabeled as ‘UAVs’.
Lubricants and mechanical parts, used in servicing of military vehicles - many of which have identical parts to commercial vehicles.
Jewelry including gemstones - these may be subject to specific thresholds deemed as ‘gifts or personal consumption’ and very likely may be subject to a sanctioned counterparty in the destination country.
Art and antiquities and collectibles - a common conduit for money laundering and terrorist financing due to its cash-intensive and opaque pricing and have many dealers and brokers who could be a sanctioned counterparty in the transaction.
Sometimes it's not the ‘what’, but rather the ‘who’ that gets you.
Moving on to military end-users, which also include service providers to the military (i.e. contractors, universities, and research centers). Selling products to a sanctioned country’s military is most often completely restricted regardless of product category and quantity unless you have a special license. However, customers like these are ‘institutional buyers’ usually with larger orders so you’ll be able to do some due diligence in advance to determine the actual risk. Bear in mind shipping an entire container of radio antennas to a military base is not the same as sending one handheld radio to a retail customer who happens to be a soldier stationed on that same base - but bear in mind that the latter would still probably trigger an account inquiry as well.
What am I supposed to do?
For starters, it's important to know where you're allowed to ship to. You can automate your shipping information and label generation module of your eCommerce site to include prohibitions. There are two approaches to this:
Do not include any potentially violating destinations (countries or special regions) in your delivery options.
Have the violating destinations as part of your list but populate messages that prompt the customer to choose to send the goods to somewhere you do ship to. It is important to remember not to go into too much detail about why you aren’t shipping to these countries to avoid any tip-off liability.
Pay special attention to the fine details of a sanction if you find your business falls within a risky category. It may still be possible to send your products over to a sanctioned countries provided it falls within a specific product category, sometimes you will be able to ship a good if it falls within a specific price range (e.g. a USD100 or USD200 limit), if the products you sell are deemed as personal use and not commercial in nature, or if you have a special license.
If you’re shipping larger quantities, like a shipping pellet’s worth, it's important to start performing some form of customer due diligence to know who your customer is and what they could probably be using the product for. If the order is large enough for you to be arranging the freight yourself (rather than using a courier or postal service) you should also get to know who your shippers are and whether they themselves are on a sanctions blacklist.
This seems overwhelming, I'm just doing eCommerce as a side business!
To be perfectly honest, we agree with you and we understand why this is frustrating - after all, why should I need to follow the laws of another country that has nothing to do with me or my customers? The problem is even if you don’t believe in sanctions compliance, sanctions compliance believes in you. So, it's in your best interest to take a serious look at it.
Always seek legal advice from an eCommerce-savvy lawyer who will be able to advise you on sanctions and trade laws and let you know if your products and markets are safe to operate in. Finally, you can consider working with a consultant to do an annual health check on your business model and advise you on what you shouldn’t sell in specific markets or perhaps even get your eCommerce team trained in sanctions compliance so that you’ll have the internal capabilities to comply with the latest standards. These are all things we offer at DiCoRm, so reach out to us today for a no-obligation consultation on how we can best help your business stay on the safe side.