Supply Chain

Five Steps to Export Compliance

By Joe Grignoli, Senior Account Manager, American River International

As an exporter, you are responsible and accountable to comply with all government regulations. There are a number of government agencies engaged in export compliance such as, but not limited to, the Department of Commerce (BIS), Customs and Border Protection (CBP), Census, and the Departments of State and Treasury.

Since 9/11 these agencies have increased their enforcement activities by putting pressure on exporters and their service providers to enhance regulatory knowledge and train personnel.

Listed below are five key steps to help exporters manage a successful export program:

1 Establish a Point Person
Managing a compliant export program requires diligence, recurring training, and senior management support. Having a point person responsible for the export compliance of your company is critical.

This point person must be accountable for:
Record keeping — exporters have an obligation to maintain documents pertaining to related international trade transactions for a period of five years. These documents include purchase orders, payment receipts, correspondence, invoices, packing lists, transportation documents, and AES transactions.

Creating and maintaining Standard Operating Procedures (SOPs)
Development of programs and skill sets for in-house training

2 Determine a U.S. Principal Party in Interest (USPPI)
The USPPI is the party in the United States that derives the primary benefit from the export transaction. If you have reason to know your domestic sale is being exported, you can be held liable for export compliance. You should take measures such as including a destination control statement in your domestic sales contract.

It is the responsibility of the USPPI to:

Prepare the Electronic Export Information (EEI) or authorize a forwarding agent to prepare and file the EEI, with a power of attorney or written authorization
Maintain (for five years) documentation to support the information reported on the EEI
Determine if your product requires an export license
Screen for denied parties and embargo countries

3 Screen against Denied Party Lists
The Department of Commerce, the Department of State, and the Treasury Department each maintain their own denial lists. All parties to the export transaction must screen against these lists once an order is received, then again prior to shipment.
• Denied Person List � individuals and entities denied export privileges. Any dealings with a party on this list that would violate the terms of its denial order are prohibited.
•  Unverified List � parties where the Bureau of Industry and Security (BIS) has been unable to verify the end-user in a prior transaction. The presence of a party on this list in a transaction is a “Red Flag” that should be resolved before proceeding with the transaction.

• Entity List � parties whose presence in a transaction can trigger a license requirement under the Export Administration Regulations (EAR). The list specifies the license requirement that applies to each listed party. These requirements are in addition to any license requirement imposed on the transaction by other provisions of the EAR.

•  Specially Designated Nationals List � a list compiled by the Treasury Department, Office of Foreign Assets Control (OFAC). OFAC’s regulations may prohibit a transaction if a party on this list is involved.

•  Debarred List � the State Department’s list of parties barred by section 127.7 of the International Traffic in Arms Regulations (ITAR) from participating directly or indirectly in the export of defense articles, including technical data or in the furnishing of defense services for which a license or approval is required by the ITAR.

4 Understand Automated Export Systems (AES)
The Shipper Export Declaration has now been replaced by the Electronic Export Information (EEI). The EEI is required by the Census Bureau to compile export statistics for goods leaving the United States and is filed through the Automated Export System (AES).

The EEI is required for export shipments where the value per Schedule B is over $2,500 or for any dollar value if the shipment requires an export license. As of October 1, 2008 AES is mandatory and must be filed electronically.

It is the responsibility of your company to retain a copy of the AES for its records.
This sometimes becomes more difficult on buyer-routed shipments, which does not alleviate the exporter’s responsibility to assure compliance with all U.S. export controls.

5 Know Your Incoterms
Incoterms are international trading terms that define the point in time in which the responsibilities and liabilities switch from the seller to the buyer. Incoterms only deal with the terms of the sale; they have nothing to do with the terms of payment.
As an exporter, you must understand the Incoterms and determine which one is best for each international transaction. The best practice is to select an Incoterm where you have some degree of control over the logistics of the shipment.

Keep in mind that as the USPPI, you are responsible and accountable for export compliance, so having some influence on the choice of forwarder, carrier, and routing affords you the best chance of being export compliant.

As an exporter, you should constantly review the government’s website, www.bis.doc.gov to keep abreast of new regulations and rulings.

Remember, exporting is a privilege, not a right. Not having a compliant supply chain will lead to penalties and fines.