[2026 Edition] Customer Due Diligence (End-User Screening) in Practice — How to Cross-Reference the Foreign User List and Entity List

This is Hamamoto from TIMEWELL.

"Can we really trust this counterparty?"

When conducting international business, the reliability of your counterparties is critically important. In export control in particular, you have an obligation to verify that counterparties are not organizations involved in the development of weapons of mass destruction or military institutions.

Failing to carry out this verification creates risk of violating Japan's Foreign Exchange Act — and "I didn't know" will not be accepted as a defense.

This article explains the specific methods for customer due diligence (end-user screening / customer screening) in practical terms, including how to use Japan's Foreign User List and the U.S. Entity List.

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Summary (What You'll Learn from This Article)

• Obligation to conduct customer due diligence: Exporters are required to verify intended end-use and end-user
• Foreign User List: METI's list of organizations of concern (748 entities)
• Entity List: The U.S. BIS-managed list of export-restricted parties
• How to conduct investigations: Combining list cross-referencing, web research, and direct verification
• The scale of the task: Cross-referencing multiple lists, multilingual handling — a massive workload

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Table of Contents

1. What Is Customer Due Diligence (End-User Screening)?
2. Why Is Customer Due Diligence Necessary?
3. How to Use the Foreign User List
4. The U.S. Entity List and Consolidated Screening List
5. Step-by-Step Customer Due Diligence Process
6. How to Identify Suspicious Transactions (Red Flags)
7. How to Streamline Customer Due Diligence with AI

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What Is Customer Due Diligence (End-User Screening)?

Definition

Customer due diligence (end-user screening) is the process of verifying the intended end-use and end-user of exported goods or provided technology, and reviewing whether any national security concerns exist.

In English this is also called "Customer Due Diligence," "End-User Screening," or "Customer Screening."

Three Elements to Verify

Customer due diligence involves verifying three elements:

Element	What to verify
End-Use	What the exported item will be used for
End-User	The organization or individual who will actually use it
Intermediary	Trading companies or agents in the transaction chain

Where Customer Due Diligence Fits in Export Control

Customer due diligence occupies the following position in the export control process:

[Step 1] Export Classification (List Control Check)
    ↓
[Step 2] Customer Due Diligence (End-Use and End-User Verification) ← Here
    ↓
[Step 3] Determining Whether a License Application Is Required
    ↓
[Step 4] Export and Shipment Control

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Why Is Customer Due Diligence Necessary?

Legal Obligation

Japan's Foreign Exchange and Foreign Trade Act (FEFTA) imposes a duty to verify intended use and end-user on exporters.

Under catch-all controls in particular, a license application is required in two cases:

Requirement	Content
Objective requirement (Inform)	When notified by the Minister of Economy, Trade and Industry
Subjective requirement (Catch)	When the exporter itself becomes aware of a concern

In other words, "I didn't know" is not a defense. Failing to investigate what you should have investigated is itself a problem.

Risks if Violated

Exporting to a party of concern without conducting proper due diligence creates the following risks:

Risk	Content
Criminal penalties	Up to 10 years imprisonment, fines up to 1 billion yen (for corporations)
Administrative sanctions	Export ban for up to 3 years, public disclosure of company name
Reputational damage	Collapse of social credibility
Transaction termination	Major business partners terminating transactions

Liability Even for Negligence

FEFTA violations are subject to administrative sanctions even when they result from negligence. "I trusted the counterparty" or "I had no means to check" are not valid defenses.

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How to Use the Foreign User List

What Is the Foreign User List?

The Foreign User List is a list published by Japan's Ministry of Economy, Trade and Industry (METI) identifying "overseas entities where concerns about the development of weapons of mass destruction have not been dispelled."

Item	Details
Jurisdiction	Ministry of Economy, Trade and Industry (METI)
Number of entries	748 entities (as of September 2025 revision)
Covered countries	15 countries and regions
Update frequency	As needed (revised several times per year)

Countries and Regions on the List

Major countries and regions represented include:

• China
• North Korea
• Iran
• Pakistan
• India
• Syria
• Russia (added)
• Others

How to Use the List

Step 1: Download from METI's website

The Foreign User List can be downloaded free of charge from METI's website.

Step 2: Cross-reference counterparty names

Cross-reference the names of your counterparties against the organization names on the list.

Step 3: Watch for name variations

Be alert to name variations such as:

Pattern	Example
Language differences	English name vs. local language name
Abbreviations	University → Univ.
Old/new names	Organizations that have changed their names
Affiliated organizations	Subsidiaries, affiliated institutions

How to Respond if a Match Is Found

Exporting to an organization on the Foreign User List requires a license application, unless it is clear that the export will not be used for the development of weapons of mass destruction.

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The U.S. Entity List and Consolidated Screening List

Why You Also Need to Check U.S. Lists

Under Japanese law, the only list that Japanese exporters are legally required to check is the Foreign User List.

However, checking U.S. lists is also recommended for the following reasons:

Reason	Content
Secondary sanctions risk	Sanctions from the U.S. for transacting with U.S.-sanctioned parties
Re-export of U.S.-origin items	Products containing U.S. components are subject to U.S. law
Counterparty reliability	Appearance on a U.S. list is a warning signal
Global standard	Many companies check U.S. lists as a matter of course

What Is the Entity List?

The Entity List is a list of export-controlled parties maintained by the U.S. Department of Commerce's Bureau of Industry and Security (BIS).

Item	Details
Jurisdiction	U.S. Department of Commerce (BIS)
Number of entries	Hundreds of organizations
Effect	Export prohibition for U.S.-origin goods and technology
Update frequency	As needed

The Consolidated Screening List

The Consolidated Screening List is a "unified screening list" provided by the U.S. government.

It allows cross-search across multiple regulatory lists, enabling efficient verification:

Lists Included	Administering Agency
Entity List	Department of Commerce (BIS)
SDN List	Department of the Treasury (OFAC)
Denied Persons List	Department of Commerce (BIS)
Unverified List	Department of Commerce (BIS)
Military End User List	Department of Commerce (BIS)
Others	Department of State, etc.

How to Check

The U.S. government provides an online searchable tool:

1. Access the Consolidated Screening List website
2. Enter the counterparty name
3. If a hit is returned, verify the details

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Step-by-Step Customer Due Diligence Process

Overview of the Investigation Flow

[Step 1] Collect Basic Information
    ↓
[Step 2] Cross-Reference with Regulatory Lists
    ↓
[Step 3] Additional Research (Web research, etc.)
    ↓
[Step 4] Direct Verification (if needed)
    ↓
[Step 5] Determination and Documentation

Step 1: Collect Basic Information

First, collect the following information about the counterparty:

Item	Content
Legal name	Corporate name (local language and English)
Location	Country, city, address
Industry	Business activities
Representatives	Executives, key persons
End-use	Intended purpose of the exported item

Step 2: Cross-Reference with Regulatory Lists

Cross-reference against the following lists:

List	Purpose
Foreign User List	Japanese legal obligation
Entity List	U.S. regulatory risk
SDN List	Sanctions target verification
UN Sanctions List	International sanctions verification

Step 3: Additional Research (Web Research, etc.)

Even if not on any list, conduct the following additional research:

Research method	What to check
Official website	Business activities, customers, business partners
News search	Presence of negative news
Registration information	Verify existence as a legal entity
Industry information	Reputation in the industry

Step 4: Direct Verification (if needed)

If concerns remain, verify directly with the counterparty:

Item to verify	Specific questions
End-use	"What purpose will the product be used for?"
Re-export	"Do you plan to re-export to any third countries?"
Military connections	"Do you transact with military or military-affiliated institutions?"
Declaration	Obtain a declaration regarding end-use and re-export

Step 5: Determination and Documentation

Based on the investigation results, determine whether the transaction can proceed and create a record:

Determination	Action
No concerns	Proceed with transaction; retain records
Concerns present	Request additional clarification; consider license application
Cannot proceed	Halt the transaction

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How to Identify Suspicious Transactions (Red Flags)

What Are Red Flags?

Red flags are warning signs indicating that a transaction may have national security concerns.

If any of the following signs are present, additional investigation is required.

Red Flags Related to the End-User

Sign	Details
Company information unclear	No website; business activities unknown
Potential military connection	Relationship with Ministry of Defense, military, or military research institutions
Connection to listed organizations	Subsidiary or affiliate of an entity of concern
Suspicious location	Possible shell company

Red Flags Related to End-Use

Sign	Details
Cannot explain intended use	"I can't say what it's for"
Use and product do not match	Agricultural company purchasing high-performance measuring instruments
Excessive quantities	Orders disproportionately large relative to the scale of operations
Declining technical support	"We don't need any support"

Red Flags Related to Transaction Conditions

Sign	Details
Cash payment	Paying cash for high-value products
Unusual pricing	Willing to pay far above market price
Urgent ordering	"Please ship immediately"
Avoiding documentation	"No contract needed"

Red Flags Related to Shipping

Sign	Details
Shipping destination mismatch	Ordering entity and shipping destination are in different countries
Routing through free zones	Transit through regions with lax regulations
Multiple transit points	Unnecessarily complex routing
Special packaging requests	"Please package it so it won't stand out"

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How to Streamline Customer Due Diligence with AI

Challenges in Customer Due Diligence

Customer due diligence involves the following challenges:

Challenge	Details
Multiple list cross-referencing	Foreign User List, Entity List, SDN List, etc.
Name variation handling	Multiple languages, abbreviations, old and new names
Identifying affiliated organizations	Tracking subsidiaries and affiliated institutions
Keeping up with list updates	Following frequent revisions
Enormous volume	All new and ongoing transactions must be covered

There are real limits to what can be done manually.

The Reality of Investigation Workload

Estimated time per customer due diligence investigation:

Task	Time required
Basic information collection	15–30 minutes
List cross-referencing (multiple)	30 minutes – 1 hour
Web research	30 minutes – 1 hour
Documentation	15–30 minutes
Total	1.5–3 hours per case

With 100 new counterparties per month, that's 150–300 hours per month.

How TRAFEED (formerly ZEROCK ExCHECK) Solves This

TRAFEED (formerly ZEROCK ExCHECK) is an export control-specialized AI agent that automates customer due diligence.

Function	Content
Multi-list screening	Batch screening across multiple lists
Name variation handling	Automatically detects similar names
Affiliated organization detection	Automatically identifies subsidiaries and affiliated institutions
Real-time updates	Automatically reflects list revisions
Automated report generation	Automatically creates investigation records

Results After Adoption

Metric	Impact
Investigation time	90% reduction (3 hours → 20 minutes)
Missed checks	Zero
List update response	Real-time
Record management	Automated

Lists Covered by Screening

TRAFEED (formerly ZEROCK ExCHECK) integrates screening across the following lists:

List	Country/Agency
Foreign User List	Japan (METI)
Entity List	United States (BIS)
SDN List	United States (OFAC)
Denied Persons List	United States (BIS)
Military End User List	United States (BIS)
UN Sanctions List	United Nations

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Conclusion

Key Points for Customer Due Diligence

• Legal obligation: Exporters are required to verify intended use and end-user
• Check multiple lists: Foreign User List + U.S. lists
• Additional research: Even if not on lists, verify that no concerns exist
• Red flags: Suspicious transactions require additional investigation
• Retain records: Document and retain all investigation results

What Companies Must Do

• Establish a customer due diligence process
• Conduct list cross-referencing without gaps
• Train employees to recognize red flags
• Retain investigation records appropriately
• Be prepared — "I didn't know" is not a defense

The Reality of Due Diligence Work

• 1.5–3 hours of work per case
• Multiple lists, multiple languages, name variation handling
• Keeping up with frequent list updates
• Manual processes alone have real limits

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TIMEWELL Customer Due Diligence Support

TIMEWELL offers solutions to streamline customer due diligence (customer screening).

Consult About TRAFEED (formerly ZEROCK ExCHECK)

• Implementation consultation: Diagnose your company's current due diligence process
• Demo: Experience AI-powered screening
• Customization: Optimization tailored to your industry and transaction patterns

"Is this company safe? AI delivers the answer."

For questions about streamlining customer due diligence, please feel free to reach out.

Book a free consultation →

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Reference Information

• METI Foreign User List
• U.S. BIS Entity List
• Consolidated Screening List
• CISTEC Transaction Screening

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