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Federal Register | Revisions to the Export Administration Regulations To Enhance U.S. Homeland Security: Addition of Three Export Control Classification Numbers (ECCNs) and License Review Policy

Federal Register | Revisions to the Export Administration Regulations To Enhance U.S. Homeland Security: Addition of Three Export Control Classification Numbers (ECCNs) and License Review Policy

12 Things Your Overseas Supplier Can Do To Expedite US Customs Clearance

Are you losing sleep at night worrying that your latest import order will not clear customs in time to meet your company's or customer's requirement? Or worse, are you wondering if the shipment will clear at all due to some 'administrative' error? Trade compliance can help.

The U.S. Customs and Border Protection (CBP) has 12 suggestions that you can make to your overseas suppliers to ensure faster customs clearance of your merchandise.

1. Include all information required on your customs invoices.

2. Prepare your invoices carefully. Type them clearly. Allow sufficient space between lines. Keep the data within each column.

3. Make sure that your invoices contain the information that would be shown on a well prepared packing list.

4. Mark and number each package so it can be identified with the corresponding marks and numbers appearing on your invoice.

5. Show a detailed description on your invoice of each item of merchandise contained in each individual package.

6. Mark your goods legibly and conspicuously with the country of origin unless they are specifically exempted from country of origin marking requirements.

7. Comply with the provisions of any special laws of the United States that may apply to your goods, such as laws relating to food, drugs, cosmetics, alcoholic beverages, radioactive materials, and others.

8. Observe the instructions closely with respect to invoicing, packaging, marking, labeling, etc., sent to you by your customer in the United States. He or she has probably made a careful check of the requirements that will have to be met when your merchandise arrives.

9. Work with CBP to develop packing standards for your commodities.

10. Establish sound security procedures at your facility and while transporting your goods for shipment. Do not give narcotics smugglers the opportunity to introduce narcotics into your shipment.

11. Consider shipping on a carrier participating in the Automated Manifest System (AMS).

12. If you use a licensed customs broker for your transaction, consider using a firm that participates in the Automated Broker Interface (ABI).

To learn more about export trade compliance, contact Compliance Assurance today.

When Was Your Last Internal Compliance Audit?

Now that you have written your compliance manual and trained your team you are "compliant", right? While that is a great start, an effective Export Management and Compliance Program (EMCP) requires internal and external trade compliance monitoring and periodic audits. In fact, the BIS considers the existence and result of an internal/external audit to be one of the nine principles of effective compliance programs for great weight mitigation in BIS's administrative cases.

When was the last time you had a thorough review of your trade compliance program? Was it performed by an unbiased, independent person or by the same individual who is responsible for the success or failure of the program?

Your company's accounting auditors would have no credibility unless they performed an independent and unbiased audit of a significant sampling of your financial transactions. By the same token, you should not accept the credibility of your trade compliance program without a similarly competent and thorough audit of your import and export transactions.

A Good Video On Export Controls In the UK

Export Trade Compliance - What Every Contract Manufacturer Needs to Know About Export Compliance

Contract manufacturers (CMs) have become the de facto production division for many U.S. companies. The reasons for this continued trend include outsourcing non-core competencies (i.e. manufacturing), reducing supply chain costs, reducing capital expenditures, and building flexibility into production operations.

The CM's customer who exports is required to comply with the U.S. Department of Commerce Export Administration Regulations (EAR) and the U.S. Department of State International Traffic in Arms Regulations (ITAR). The EAR has jurisdiction over "dual use" items, that is, those items with both commercial and military applications, while ITAR has jurisdiction over defense articles. But what about the CM's export compliance requirements?

CMs must first establish whether or not the assemblies or products they produce are under the jurisdiction of ITAR or EAR. For this reason it is important that the CM have a good understanding of their customer's business. Receiving drawings stamped "ITAR Controlled" are a sure bet that the products fall under ITAR jurisdiction. Are the assemblies used in defense, satellite or aerospace applications? Are the items used in telecommunications or commercial applications? If so, what are the end articles produced and what are their end-uses? CMs will likely already know the answers to these questions, which will help to determine the commodity jurisdiction.

Items under ITAR jurisdiction are defined on the U.S. Munitions List (USML), which can be found in CFR 22, Part 121. In addition to ammunition, missiles and explosives, this list includes military vessels, vehicles, aircraft, training equipment, protective personnel equipment, military electronics, optical and guidance control equipment.

It is imperative that the CM knows that the USML includes components, parts, accessories, attachments, and associated equipment specifically designed or modified for use with the equipment in each of the USML categories. Consequently, the subassemblies that a CM produces are controlled on the USML. In addition, ITAR Part 120.10 controls technical data which is required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of defense articles. This includes information in the form of blueprints, drawings, photographs, plans, instructions and documentation.

Items under EAR jurisdiction can be found on the Commerce Control List (CCL) in CFR 15, Part 774. The CCL includes items (commodities, software, and technology) subject to the authority of the U.S. Department of Commerce, Bureau of Industry and Security (BIS) and include "dual use" items as well as purely commercial items. The CCL does not include those items exclusively controlled for export by another department or agency of the U.S. Government. In instances where other agencies administer controls over related items, entries in the CCL will contain a reference to these controls.

If you are unsure of the export jurisdiction of an item or service, you should request a commodity jurisdiction (CJ) determination from the U.S. Department of State, Directorate of Defense Trade Controls (DDTC).

SO, WHAT DOES A CM NEED TO KNOW ABOUT EXPORT COMPLIANCE?

Under ITAR Jurisdiction
• Registration with the Department of State (DDTC). This is required even if the CM does not export the controlled items
• Notification of the DDTC of violations of criminal statutes, changes in senior management, changes in foreign ownership, and mergers and acquisitions
• Maintenance of records concerning the manufacture, acquisition and disposition of defense articles and technical data
• Application for licenses (or use of appropriate exemption) for exports of items on the USML
• Application for licenses (or use of appropriate exemption) for technology transfers of items on the USML to foreign persons or entities

Under EAR Jurisdiction

• Application for licenses (or use of appropriate exception) for exports of items on the CCL and Commerce Country Chart as required
• Application for licenses (or use of appropriate exception) for technology transfers to foreign persons or entities of items on the CCL and Commerce Country Chart as required
• Checking on end-user against government lists of prohibited parties/entities
• Ensuring that items are not intended for prohibited end-uses (i.e. WMD)

Failure to comply with these federal regulations can result in significant criminal penalties (possible prison sentences and fines) and civil action (e.g., fines and denial of export privileges).

For more information about corporate trade compliance or to contact an export trade compliance specialist please visit http://www.wearecompliant.com.

Here are some great examples of "red flags" to check for when screening your export transactions...

Watch CBS News Videos Online

Iron Man 2 Needs Commodity Jurisdiction from State Department

Iron Man 2 has something for everyone, including 'trade compliance geeks' like me. There is an interesting scene where Iron Man Tony Starke (Robert Downey Jr.) is grilled by U.S. Senator Stern (Garry Shandling) where the Senator insists that Starke surrender the Iron Man suit to the U.S. government. Starke insists the suit isn't a weapon but rather a high tech prosthetic device. Starke goes on to say that "I am Iron Man, the suit and I are one. You can't have it!"

Aside from the obvious issue of government seizure of private property, this would be the place to apply for a commodity jurisdiction (CJ) from the Dept. of State where there would be a determination as to whether or not the suit was specifically designed, developed, configured, adapted or modified for military application and; does not have a predominate civil application and; does not have a performance equivalent to those of an article or service used for civil applications.

In the movie, Tony Starke (Iron Man) insists that he has effectively privatized world peace by interfering with rouge regimes' military operations. In the real world this would be considered a defense service and, therefore, the suit would not be considered a predominately civil application. Sorry Iron Man, this item falls under the jurisdiction of the Department of State and you'll need a license to export the suit. As for the confiscation of the suit by the U.S. government, you will need the help of your hottie lawyer Natalie Rushman (Scarlett Johansson).

Top 5 Mistakes Exporters Make

We all make mistakes, but let's face it, some mistakes are costlier than others. It seems like almost anything you do wrong as an importer or exporter of record can cost you thousands of dollars or land you in jail. This is, in fact, the case because someone in your company is certifying that the information on your documentation is true and correct. Any deviation could be construed as a material misrepresentation of fact. But again, mistakes happen so what are the five big mistakes that an exporter can make?

1) Ignorance. We've all heard the old saying, "ignorance is no excuse for the law". The old saying is very applicable in export trade compliance. Therefore, exporters must know their business which means knowing their products and customers. Simply knowing that your products are EAR99 is not enough. Do you know who is buying them? Do you know what they are doing with them and to whom they are distributing them? Of course, you are not expected to be the world's policeman but you have a duty to understand your business and any attempt to "self blind" or cut off the flow of information normally associated with your transaction will likely be perceived as a aggravating factor in an enforcement proceeding.

2) No Management Commitment. All the knowledge in the world will not benefit you or your company if top management does not support efforts to maintain a compliant business. With knowledge comes responsibility and everyone in the company (even Sales) must be on board with your commitment to export compliance (no offense Sales guys!).

3) Lack of Training. This goes hand-in-hand with management commitment. It is not uncommon for companies to have bases no. 1 and no. 2 covered but presume that their employees are being beamed podcasts of regulatory compliance training while they sleep. Training will not only empower employees to make the right decisions to run the business but studies have shown that employees who receive high levels of training are more productive, have higher levels of job satisfaction and are less likely to leave their employer.

4) Absence of an Export Management Compliance Program (EMCP). This is not simply the culmination of items 1-4. It is a system of checks and balances, internal and external audits, etc. to ensure that there is a 'system' in place to prevent mistakes. It ensures that processes and documentation changes as the business changes. A good EMCP can adapt as the company's product, people, markets and structure changes. Many reputable firms have paid stiff financial penalties for mergers or acquisitions of companies that operated for years without a compliance program. A good EMCP will ensure that your company does its due diligence as its business grows.

5) Acting with Intent. This is the single biggest mistake a company can make. Acting "with knowledge", "having known" or "should have known" are all references to acting with intent. This is detailed in more detail in General Prohibition 10 - Proceeding with transactions with knowledge that a violation has occurred or is about to occur. These violations are not the norm for most companies but are certainly the worst nightmare for those that commit them. These are the same companies that generally try to cover up their mistakes with additional lies which become the steroid-laden food of the enforcement agencies and prosecutors. Acting with intent generally brings with it criminal penalties and covering up is an aggravating factor.

Don't be disappointed if you were looking for specifics in the "five biggest mistakes" listed above. You might try and look again at how you are addressing items 1-4 above. If you do, you will probably already know what the five biggest mistakes your company is at risk of making.

Pre-Trade Compliance Consultants Discuss CBP "10+2" and You

U.S. Customs and Border Protection (CBP) has published on January 2, 2008 a Notice of Proposed Rulemaking (NPRM) requiring importers and carriers to electronically submit additional information on cargo before it is brought into the United States by vessel. The Security Filing, also known as "10+2," is another step in the Department of Homeland Security's (DHS) strategy to better assess and identify high-risk shipments to prevent terrorist weapons and materials from entering the United States.

While the aim of the initiative is indeed noble, importers and their forwarders / brokers should understand how this initiative affects them. The proposed regulation will require a single party designated by the importer of record to submit an Importer Security Filing (ISF) containing the following ten data elements at the lowest bill of lading level:

1. Manufacturer (or supplier) name and address
2. Seller (or owner) name and address
3. Buyer (or owner) name and address
4. Ship-to name and address
5. Container stuffing location
6. Consolidator (stuffer) name and address
7. Importer of record number/foreign trade zone applicant identification number
8. Consignee number(s)
9. Country of origin, and
10. Commodity Harmonized Tariff Schedule number (6 digit)

The ocean carrier will be required to submit (1) a vessel stow plan used to transmit information about the physical location of cargo loaded aboard a vessel bound for the U.S; and (2) container status messages, which report container movements and changes in status (e.g., empty or full).

The good news is that most of these elements are already included in existing entry documentation. The bad news is that CBP will require importers or their agents to transmit this information (ISF) to CBP no later than 24 hours before cargo is laden aboard a vessel destined to the United States.

Can your supply chain handle these requirements?

• Can your foreign seller or its agents provide you with this info prior to lading?
• How will you know that the HTS is compliant?
• Can you provide the container stuffing info 24 hours prior to lading?
• Do you know the buyer of your cargo prior to entry?

These are the importer's requirements and your forwarders / brokers are not responsible for managing this initiative - you are! If you are not already, you should be discussing these requirements with your broker now. How will "10+2" affect you?

For more information on “10+2” and pre-trade compliance please visit us at http://www.wearecompliant.com

Trade Compliance - What You Don't Know CAN Hurt You

Dual-use items are any items that can have both military and commercial applications. These items may appear to be innocuous but, in the hands of the wrong people, can be used for destructive purposes. Examples of dual-use items include communications equipment, machine tools, handcuffs, information security, electronics, lasers, and encryption software. In addition, there are thousands of metals, compounds and chemicals that are controlled because they can be used for military applications.

Many firms whose primary business is not considered 'sensitive' are unaware of their obligations under the EAR. Companies are proud to export U.S. products overseas but many have never given much thought to the consequence of these activities or the need for trade compliance consulting.

The penalties for violations of export laws can be severe. Companies considered household names have paid significant fines for violations of U.S. export laws. Many smaller companies have been penalized as well. Recent examples include a Florida company having paid a $1,102,200 civil penalty for illegal exports of fingerprint equipment and other crime control items and a New Jersey-based freight forwarder was sentenced to a $250,000 criminal fine and five years probation as well as a $399,000 administrative penalty for the shipment of items to India without the required export license.

The penalties for violations have recently been increased in an effort to improve trade compliance with the BIS regulations. On October 16, 2007, President Bush signed into law the International Emergency Economic Powers (IEEPA) Enhancement Act. The Act provides for civil penalties amounting to the greater of $250,000, or twice the value of the transaction that is the basis of the violation, that may be imposed for each violation of IEEPA. Willful violators can expect criminal penalties including fines up to $1,000,000 and/or up to 20 years in prison.

Questions Every Exporter Must Ask

· Have we had all of our items, technology and software classified by the BIS or other competent expert?

· Do we know our customer (i.e. do we check our customers against the government lists of denied parties, specially designated nationals, and other required databases)?

· Have our employees involved in export transactions received the necessary training to ensure compliance?

· Do we have adequate recordkeeping practices in the event of a BIS enforcement audit?

· Do we have a formal export trade compliance program in place to ensure compliance to U.S. laws and regulations?

Maintaining control of your exports is not a cost of doing business. Aside from being the 'right thing to do', it can save money, avoid negative publicity and improve export shipment flows. What you don't know can hurt you.