The Compliance Corner Podcast Episode 3: World-class manufacturing is tricky enough. But exporting? A conversation with Ward Parsons

Intro

Welcome to the EU Sanctions Helpdesk Compliance Corner Podcast. In this series, we get deep into the EU sanctions landscape, all with a focus on helping SMEs with their sanctions compliance. The EU Sanctions Helpdesk is an initiative created by the European Commission. It supports SMEs by providing essential guidance and resources to navigate sanctions compliance and tackle related challenges in their daily business activities.

Podcast host Dimitrios Chaidas

Welcome back to another episode of the Compliance Corner. I am Dimitris Chaidas, key expert on communication at the EU Sanctions Helpdesk. 

And today I have the pleasure of speaking with Ward Parsons, sales and marketing manager at Håkansson Sågblad, a Swedish bandsaw blade manufacturer. Håkansson Sågblad exports 95% of its output worldwide. Ward has a career marked by international collaboration and strategic leadership, and he's played a key role in shaping the company's global outreach and customer engagement. 

His approach blends technical know-how with a deep understanding of market dynamics, helping Håkansson grow in international markets. Ward, it's great to have you with us today. Thanks for joining. 

Ward Parsons 

Great to be here. 

Dimitrios Chaidas 

Let's dive right in. Please tell us about the company and make us a bit more familiar with what it does. 

Ward Parsons 

Håkansson Sågblad has been in the business of manufacturing since 1890. We started manufacturing actually our first type of blade in 1890 with a unique way of hardening blades. We started making new blades, continuing making blades through the 1940s. 

We've made our kind of premier standard blades since 1975. We've always worked in blades and only in blades. We manufacture them here in Åmål, Sweden, using Western European material. 

We're a small company. We're actually the smallest quality player we believe in the world. We've only got 34, 35 guys, including all the factory and all of the front office staff. 

We've got two, three, four sales guys. Our turnover is about 10 million euro a year. And we, as you mentioned, export 95% of our material around the world. 

Only about 5% of our material is sold here in Sweden. And we actually use a distribution business model. We sell to distributors in various countries. Who then sell on to end users with some value add, and that's required in our industry. 

Dimitrios Chaidas 

That was a great introduction. Thank you, Ward. Now, EU sanctions can sometimes create challenges for businesses operating internationally. 

How would you say they have impacted Håkansson Sågblad's operations? 

Ward Parsons 

We've been impacted from our point of view on two different fronts. We manufacture products, and 60%, 65% of our products could be considered dual-use, which for me is a product issue. And then we have the trading issue. 

The CIS countries, the Russias and Ukraines and the Belarus and all the Stans used to be actually a fair portion of our business, 15 to 20% of our business. Of course, after March ‘22, the Russian and the Belarus market was completely shut down immediately, although we retained and continue to trade actively and well with our Ukrainian partner. So from our point of view, we have two ways of looking at this issue on the sanctions. 

One, the product, which is a customs and product level, making sure that we abide by the correct HS code that we need to use. And then we have the banking issue when the banks refuse to take monies or question whether we're allowed to trade with an organisation. So the sanctions have really disrupted, especially the CIS countries. 

And let's keep that kind of locked down to those countries, which was a good market until it was no market. 

Dimitrios Chaidas 

That's right. I understand that compliance plays a big role in your work. I'm curious, have you faced any challenges keeping the company compliant? 

Larger organisations usually have more resources to handle this. So I'd love to hear what's been most challenging for you. And how you went about tackling those issues? 

Ward Parsons 

Well, the first compliance issues were from the customs organisation for the import, export of the products. Our HS code was not in the initial branch or the initial section of sanctionable items. And we're talking, of course, CIS countries, not Russia, not Belarus. We stopped trading immediately. So now we're talking about these Pakistans, the Kazakhstans, Kyrgyzstans, all those guys. 

So customs was actually our first issue. Our banks were not paying [attention]... it wasn't that they weren’t paying attention, but maybe there was no focus. So we actually had to work with our local Swedish customs organisations where they would actually come in and inspect our products to make sure that the HS code dual-use element was not being played. It was not being sold into the CIS countries. 

And this was tricky because we didn't know what were the actionable or sanctionable until we deep dived into the documentation from the EU and the US to understand what HS codes and at what level. And actually that was me. That was us. We had to do it at the sales level because we don't have the lawyers, we don't have the staff, or the expertise. And this was a slow process. 

The Swedish customs were actually very fair. They understood exactly what was going on and the difficulty. Because we sell to distributors, we don't have an exact idea who the end user is. 

And they came and they inspected. We talked about specific cases, specific companies, specific shipments. And they were very fair. They went away and they came back saying, okay, well, remember to do your checklist, which I'll talk about in a moment. Try to perform the due diligence you can. And of course, anything explicitly illegal you do not do. And we don't make anything explicitly sanctionable. It's dual-use. And the HS code is broad enough where it covers dual-use items as well as non-dual-use items. So it's something that we've had to adjust and work with. That's on the product level. 

I think it was in, and then we get on to the know your customer from a bank's point of view. And this is where it gets really kind of tricky. The bank started talking to us about who your customers are and we have a process. We had a process, but the banks wouldn't, I don't want to say wouldn't allow it, but it wasn't sufficient. 

They kept coming back to us saying, “well, what about this situation? What about that situation?” And the banks, however, kept pushing back saying, “well, you have to do more, do more”, but they wouldn't tell us what. 

So we have actually created our own documentation, our own process. We show it to the banks and it's good enough until it's not good enough. So that has been our largest, as it were, challenge, was to get the banks to move from know your customer to off of the CYA spirit. 

And that's really our challenges, which we still have now. The work we did with you guys was helpful. We'd already done the process. We'd reached the same conclusion you had, but our conclusion was not good. We forwarded the, not the stamp of approval because you didn't approve it. Your organisation said to the best of our knowledge and research, this looks like an okay customer to sell to on these product ranges. 

We didn't hear anything back from the banks. And so it's more of a monkey's closing their eyes, I guess. I'm not going to mention names, so I can do that. 

Dimitrios Chaidas 

Exactly. For those listening to us, maybe we didn't mention it already. The company represented by Ward is a recipient of our free customised due diligence support service. 

And this is why we're happy to have him with us today. Ward, actually, you made a nice link between the challenges you face and what the EU Sanctions Helpdesk does, what it aspires to achieve and help SMEs with challenges like the ones you mentioned earlier. First, how did you come across the Helpdesk? 

Ward Parsons 

It turns out, I'm looking through my emails and I mentioned to my management team that I found you guys via LinkedIn. So it was something on LinkedIn. I said, hey team, I found these guys here, okay, there we go! 

Dimitrios Chaidas 

That's a great start. All right, then after using the service, I would like to ask you what practical benefits have you noticed? Meaning, how has it helped Håkansson in day-to-day compliance and managing risk? 

You somehow touched upon it already, but if you can share with us more, that would be fantastic. 

Ward Parsons 

Well, it gives us, to be quite honest, validation that our own work is accurate. You know, it's a classic situation, we don't know what we don't know. We have a process which we devised and created based on our bank's requirements and they gave us various things to do. 

So we came up with our own tools and our own processes and came to a conclusion that you guys came up with as well. I gave you the same information that we used and, you know, it's not very empirical, but it worked because the data is the data, you can't change it. Names are names, companies are companies and so forth, so forth. 

So what your service has given us is not a stamp of approval, but at least another view into the customers that we may work with. You know, the idea of four eyes, looking at something to make sure that we're not missing a key problem because we are export driven, this could kill us. If we don't do a good job, this would shut our business down and it's something that we take very seriously. 

So your service helps us maintain a good, not cover, but a good, another viewpoint into the same data that we come up with, same results that we come up with. 

Dimitrios Chaidas 

Exactly. Trust and confidence are key when it comes to business and especially when it's about sanctions and complying with a landscape that is really quite dynamic and changes frequently. You referred to the support you received from us, but I still want to ask you about the Helpdesk. What is the most practical aspect of it? 

Ward Parsons 

Well, to be honest, yeah, it helps us create the paper trail to make sure that we have the right documentation, the owner certificate, the export declarations, the re-export agreements, the HS codes, and what products are in the codes. So it helps us actually keep that data organised. So in that sense, as I said, you guys were kind of a sanity check. 

Dimitrios Chaidas 

I was wondering whether you liaise with the Swedish national competent authorities while checking our service, whether you received some input from them? 

Ward Parsons 

No, no. And that may be lack of time. It might be, I don't know the exact person, but when I saw the post that you guys made on LinkedIn, pretty easy, so boom. And you know, it's all about opportunity. And so I see this, I can go that way and it's efficient. And I suspect that your organisation may have more resources than the Swedish organisation. Although it'd be great if the Swedish organisation would do this and perhaps they do. 

Dimitrios Chaidas 

Indeed. I mean, the support we provide supplements, the national competent authorities, including the Swedish, of course. So we don't necessarily substitute them, but we rather come to supplement because sometimes, you know, absence of resources can be a challenge. And this is where we come in to help and provide this free service, as you mentioned. 

Ward, from what we gathered so far, your experience with compliance matters. And since you've been through this process, are there any tips or lessons learned you could share with other SMEs? 

Ward Parsons 

The main thing is, of course, you have to know your product. You know, if you're dual-use, you know what it is. You have to know all that and clearly state what it does. 

That's actually the easy part. The hard part is banks is because there are no strict rules that they can follow. So our feeling is it's almost made up as they go along. 

And if you talk to Philip, he's going to say this. And if you talk to Robin, she's going to say that. So you've got to find... my first advice is find the right person at your bank. Make sure they have high enough power to make a decision because they can stop anything and they just well may. 

The other issue is back on the products is, for instance, in our case, some of our products are dual-use and some of our products are not dual-use. We were fortunate that on our website, we were able to see clearly what this product does and clearly what this product other product cuts, for instance. 

And I could see our customs organisation hitting our website a great deal investigating what we're selling. This gives them peace of mind. So I would highly recommend that small companies have a good website with descriptive information about the products they're selling so that everybody sees with open arms what you're doing and what you're selling. It just makes life easier. 

And of course, what would be perfect is if the banks had better clarity from the EU. If they had a checklist, then half of our problems would go away. [But] because they don't have a checklist and they're just trying to make sure they don't get in trouble. They have a different set of boxes to check than we do. And if they had a better list of exact requirements and they would pass it to us, we would have done that months ago. But they do not have that and they will not pass us a specific checklist because, of course, that makes them responsible, which I can understand, if not agree with. 

Dimitrios Chaidas 

Fantastic. Thank you for taking the time to share your insights with us, Ward. I wish you the very best in your compliance journey. 

Ward Parsons  

Thank you. 

Dimitrios Chaidas  

And for our listeners, remember, if you need support, the EU Sanctions Helpdesk is here to provide the help you need.

Outro

Thank you for listening to this episode of the Compliance Corner podcast. Are you an SME with questions about sanctions? Then make sure to take advantage of our free, customised support service found at eu-sanctions-compliance-helpdesk.europa.eu.