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Generally, how far downstream does the US State Department expect companies to vet vendors for sanctions violation? Due diligence this many layers deep is expen

Generally, how far downstream does the US State Department expect companies to vet vendors for sanctions violation? Due diligence this many layers deep is expensive, especially if hostile (investigative work to proactively discover dishonest sourcing reports.) I would think it would vary by industry--e.g. animation is obviously less stringent than medical devices so would have fewer reporting and certification structures already set up. Does anyone have experience dealing with this?

jsiepkes 3y ago
So all that's required would then just be to outsource it to a bunch of companies who then outsource it and then claim you have: "no knowledge"? You're the one outsourcing, so it's your responsibility. The entire chain.
- 1123581321 3y ago
  Yes, of course, but I was asking what level of due diligence is expected to verify that the chain does not violate sanctions. In other words, when a problem like this is discovered, the US State Department will assign more blame to the company if their attempts to avoid violating sanctions fell below a threshold; what is that threshold for the arts industry.
  - KptMarchewa 3y ago
    > Yes, of course, but I was asking what level of due diligence is expected to verify that the chain does not violate sanctions. The same as you were employing them directly.
  - StressedDev 3y ago
    You should ask a qualified lawyer. No one on this forum is going to know the right answer.
- toasterlovin 3y ago
  Yeah, but "outsource it to a bunch of companies who then outsource it" is literally how the economy works. The most mundane product you can imagine has a network of upstream suppliers that is essentially incomprehensible in its complexity.
  - mhsred5 3y ago
    At some point maybe stop outsourcing and just do the work. Boeing used to make airplanes. Now they outsource the work of "make the airplanes" and all it cost them was their reputation. Less outsourcing, more just doing the work please.
    - johngladtj 3y ago
      Ok, so you expect the airline to mine the ore to make the tools needed to mine the ore needed to make the aluminum used in the packaging of the snacks they give out on board? Think about exactly where this ends.
      - jsiepkes 3y ago
        There is a difference between ordering specialist work (i.e. someone makes something to your exact specifications) and buying ore on a global market. But sure, even in case of ore you have a responsibility to make sure it isn't being delved by slave labour.
    - toasterlovin 3y ago
      Even when you “stop outsourcing and just do the work”, you’re just subtracting a ~4 bit integer from a ~16 bit integer.
- aembleton 3y ago
  Do you have to check just for the product that you're selling or for the inputs into that product? Do you have to check that the tablets, keyboards and mice used by your employees and those of outsourcing companies were not made in North Korea? Do you have to check that the ink used on the keyboards weren't made in North Korea? Do you have to check that the coal for the power station for the keyboard factory didn't come from North Korea?
colechristensen 3y ago
The entire chain all the way down is sanctioned, the US can and will climb up and down that chain to punish sanctions violations. A company like Disney will have to have a Sanctions Compliance Program and like any other compliance regime, there are standards, external auditors, etc. to make sure enough is being done, and "enough" can be a bit of a moving target. If you get caught having sanctioned suppliers, those standards and auditing get kicked up a notch, if you did a really bad job maybe fines or criminal charges. There isn't ever a sense of "I'm doing enough and therefore the sanctions violations happening are no longer my fault". It's somewhat up to you to determine your risk and tailor your compliance program to address them and to adjust if you're ever wrong. How guilty you are is a function of how good a job the state department thinks you're doing trying to avoid sanctions violations.
- 10000truths 3y ago
  > How guilty you are is a function of how good a job the state department thinks you're doing trying to avoid sanctions violations. Is the standard for this codified in clear language anywhere, or is it merely based on the whims of some federal prosecutor/judge? If I make digital watches, and I buy coin cell batteries from a supplier who buys battery precursors from a supplier who buys LiCoO2 from a manufacturer who buys lithium-rich brine from a supplier who buys lithium mining equipment from a sanctioned entity, how much of the full brunt of Uncle Sam's retribution can I expect to come crashing down on me?
  - beaeglebeachh 3y ago
    Feds have 99+% conviction rate and infinite money and time, meanwhile you sit in cage and deal with frozen accounts while trying to pay your attorney. They imprisoned weev for doing arithmetic on wget'ing a public website. Worst sin is angering the gods. I would imagine most the time theyll probably just ask nicely for you to stop, then bury you if you don't, but for political or convenient targets they seem fine going straight for the throat.
    - acdha 3y ago

jsiepkes 3y ago

So all that's required would then just be to outsource it to a bunch of companies who then outsource it and then claim you have: "no knowledge"? You're the one outsourcing, so it's your responsibility. The entire chain.

1123581321 3y ago
Yes, of course, but I was asking what level of due diligence is expected to verify that the chain does not violate sanctions. In other words, when a problem like this is discovered, the US State Department will assign more blame to the company if their attempts to avoid violating sanctions fell below a threshold; what is that threshold for the arts industry.
- KptMarchewa 3y ago
  > Yes, of course, but I was asking what level of due diligence is expected to verify that the chain does not violate sanctions. The same as you were employing them directly.
- StressedDev 3y ago
  You should ask a qualified lawyer. No one on this forum is going to know the right answer.
toasterlovin 3y ago
Yeah, but "outsource it to a bunch of companies who then outsource it" is literally how the economy works. The most mundane product you can imagine has a network of upstream suppliers that is essentially incomprehensible in its complexity.
- mhsred5 3y ago
  At some point maybe stop outsourcing and just do the work. Boeing used to make airplanes. Now they outsource the work of "make the airplanes" and all it cost them was their reputation. Less outsourcing, more just doing the work please.
  - johngladtj 3y ago
    Ok, so you expect the airline to mine the ore to make the tools needed to mine the ore needed to make the aluminum used in the packaging of the snacks they give out on board? Think about exactly where this ends.
    - jsiepkes 3y ago
      There is a difference between ordering specialist work (i.e. someone makes something to your exact specifications) and buying ore on a global market. But sure, even in case of ore you have a responsibility to make sure it isn't being delved by slave labour.
  - toasterlovin 3y ago
    Even when you “stop outsourcing and just do the work”, you’re just subtracting a ~4 bit integer from a ~16 bit integer.
aembleton 3y ago
Do you have to check just for the product that you're selling or for the inputs into that product? Do you have to check that the tablets, keyboards and mice used by your employees and those of outsourcing companies were not made in North Korea? Do you have to check that the ink used on the keyboards weren't made in North Korea? Do you have to check that the coal for the power station for the keyboard factory didn't come from North Korea?

colechristensen 3y ago

The entire chain all the way down is sanctioned, the US can and will climb up and down that chain to punish sanctions violations. A company like Disney will have to have a Sanctions Compliance Program and like any other compliance regime, there are standards, external auditors, etc. to make sure enough is being done, and "enough" can be a bit of a moving target. If you get caught having sanctioned suppliers, those standards and auditing get kicked up a notch, if you did a really bad job maybe fines or criminal charges. There isn't ever a sense of "I'm doing enough and therefore the sanctions violations happening are no longer my fault". It's somewhat up to you to determine your risk and tailor your compliance program to address them and to adjust if you're ever wrong. How guilty you are is a function of how good a job the state department thinks you're doing trying to avoid sanctions violations.

10000truths 3y ago
> How guilty you are is a function of how good a job the state department thinks you're doing trying to avoid sanctions violations. Is the standard for this codified in clear language anywhere, or is it merely based on the whims of some federal prosecutor/judge? If I make digital watches, and I buy coin cell batteries from a supplier who buys battery precursors from a supplier who buys LiCoO2 from a manufacturer who buys lithium-rich brine from a supplier who buys lithium mining equipment from a sanctioned entity, how much of the full brunt of Uncle Sam's retribution can I expect to come crashing down on me?
- beaeglebeachh 3y ago
  Feds have 99+% conviction rate and infinite money and time, meanwhile you sit in cage and deal with frozen accounts while trying to pay your attorney. They imprisoned weev for doing arithmetic on wget'ing a public website. Worst sin is angering the gods. I would imagine most the time theyll probably just ask nicely for you to stop, then bury you if you don't, but for political or convenient targets they seem fine going straight for the throat.
  - acdha 3y ago