Shipping Solutions Newsletter

The U.S. Bureau of Industry and Security (BIS) introduced a new rule proposal this past fall that increases the number of "suspicious" circumstances—something BIS calls "Red Flags"—that companies must watch for before exporting their goods. (Federal Register, Vol. 69, No. 197, Oct. 13, 2004.) This new rule proposal also clarifies the basis of knowledge on which an individual at a company must act, holding that person responsible for failing to act on a red flag if a "reasonable person" would determine that a red flag exists.

BIS first developed its list of red flags in the mid-1980s as part of its "Know Your Customer" guidelines. Under these guidelines, all companies under jurisdiction of the Export Administration Regulations (EAR) must look for any red flags that may point to a "heightened risk of a problem with the transaction." These red flags may appear in information provided by the customer or by information obtained from a third party such as a credit report or information from a freight forwarder, and may indicate a risk that a customer's claimed end-use, end-user or ultimate destination is not the actual ones.

When a company encounters a red flag, it is obligated to actively investigate the circumstances that created the red flag. For example, if you determine that your customer does not appear to have the appropriate knowledge necessary to operate a particular type of high-tech equipment that you sell, you must determine that the customer is, in fact, going to use the equipment as specified and at the location specified.

Companies must be careful not to "self blind." You cannot, for example, simply tell your sales representatives to avoid asking any questions related to the intended usage of your products. Instead of protecting your company from liability, such a practice would be evidence that you had the knowledge or reason to know that a violation was occuring.

If, after an investitation, a company still has concerns about a particular transaction, they must either step away from the transaction or contact BIS and submit all the relevant information in the form of an application for a validated license or in such other form as BIS may specify. (Visit the BIS website for information on reporting a possible export violation.)

BIS has published a list of 23 examples of red flags in their rule proposal:

The customer or purchasing agent is vague, evasive, or inconsistent in providing information about the end-use of a product.
The product’s capabilities do not fit the buyer’s line of business or level of technical sophistication. For example, a customer places an order for several advanced lasers from a facility with no use for such equipment in its manufacturing processes.
A request for equipment configuration is incompatible with the stated ultimate destination (e.g., 120 volts for a country with 220 volts).
The product ordered is incompatible with the technical level of the country to which the product is being shipped. For example, semiconductor manufacturing equipment would be of little use in a country without an electronics industry.
The customer has little background in the relevant business. For example, financial information is unavailable from ordinary commercial sources and the customer’s corporate principal is unknown.
The customer is willing to pay cash for an expensive item when the normal practice in this business would involve financing.
The customer is unfamiliar with the product’s performance characteristics, but still wants the product.
Installation, testing, training, or maintenance services are declined by the customer, even though these services are included in the sales price or ordinarily requested for the item involved.
Terms of delivery, such as date, location, and consignee, are vague or unexpectedly changed, or delivery is planned for an out-of-the-way destination.
The address of the ultimate consignee, as listed on the airway bill or bill of lading, indicates that it is in a free trade zone.
The ultimate consignee, as listed on the airway bill or bill of lading, is a freight forwarding firm, a trading company, a shipping company or a bank, unless it is apparent that the ultimate consignee is also the end-user or the end-user is otherwise identified on the airway bill or bill of lading.
The shipping route is abnormal for the product and destination.
Packaging is inconsistent with the stated method of shipment or destination.
When questioned, the buyer is evasive or unclear about whether the purchased product is for domestic use, export or reexport.
The customer uses an address that is inconsistent with standard business practices in the area (e.g., a P.O. Box address where street addresses are commonly used).
The customer does not have facilities that are appropriate for the items ordered or end-use stated.
The customer’s order is for parts known to be inappropriate or for which the customer appears to have no legitimate need (e.g., there is no indication of prior authorized shipment of system for which the parts are sought).
The customer is known to have or is suspected of having dealings with embargoed countries.
The transaction involves a party on the Unverified List published by BIS in the Federal Register.
The product into which the exported item is to be incorporated bears unique designs or marks that indicate an embargoed destination or one other than the customer has claimed.
The customer gives different spellings of its name for different shipments, which can suggest that the customer is disguising its identity and/or the nature and extent of its procurement activities.
The requested terms of sale, such as product specification and calibration, suggest a destination or end-use other than what is claimed (e.g., equipment that is calibrated for a specific altitude that differs from the altitude of the claimed destination).
The customer provides information or documentation related to the transaction that you suspect is false, or requests that you provide documentation that you suspect is false.

According to an official with the Office of Exporter Services, the comment period for this rule proposal is now closed and agency officials are reviewing comments. No date has yet been set for the final publication and implementation of the rule.

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New Regulations for Transporting Hazardous Goods Affect IATA Dangerous Goods Form

Recent changes to the IATA Dangerous Goods Regulations include revisions to the IATA Shipper's Declaration for Dangerous Goods. (You'll find a copy of the revised form at our website.)

The first of these changes went into effect on January 1, 2005, and require the inclusion of an additional statement on the IATA Dangerous Goods form. This new statement must now be on all copies of the IATA Declaration submitted: "I declare that all of the applicable air transport requirements have been met."

In addition, on January 1, 2007, the sequence of information that appears in the body of the form has been rearranged to begin with the correct UN or ID Number for the goods followed by the Proper Shipping Name, Class or Division, Packing Group, Quantity and Type of Packing, Packing Instructions, and Authorization.

Exporters who are using Shipping Solutions software to produce the IATA Shipper's Declaration for Dangerous Goods form should make sure they are using Shipping Solutions Professional version 7.10 or later in order to have the newly required statement on their forms.

Subscribers to the Shipping Solutions Annual Maintenance Program (AMP) can go to the AMP website to download the current version of the software with the updated form. Exporters who are still using Shipping Solutions 2000 or Shipping Solutions Professional version 7.0x, should contact Shipping Solutions at 1-888-890-7447 to upgrade their version of the software to the newest version 7.11. These users can upgrade to the newest version at a special upgrade price.

Shipping Solutions will be releasing an update of the software that will include the IATA Declaration's required format change with the UN Number listed first as we get closer to the implementation date of January 1, 2007.

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Thousands of successful exporters are using Shipping Solutions to complete their export documents faster, easier and less expensively than ever before. Why aren't you?

If you're too busy trying to complete your export documents by hand to spend some time reviewing the Shipping Solutions Professional export documentation and compliance software yourself, let us do it for you! Sign up for one of our free online demos and let us give you a one-hour overview of the software.

We'll take you step-by-step through the process of completing your export forms, filing your SEDs electronically through AES, and checking your exports against the various government restricted parties lists and export regulations to make sure your shipments are in compliance, and you—and your company—stay out of trouble.

These free online demos are available on Tuesday's at 1:00 Central Time. All you need is an Internet connection to watch the demo and a phone to listen in and ask questions about the software. It's the perfect opportunity to get your first view of Shipping Solutions or to convince your coworkers and your boss that Shipping Solutions is the perfect solution for your company.

See why Shipping Solutions is America's #1 export software. Sign up for the free online demo today!

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