Shipping Solutions News  
  November 2009
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In This Month's Newsletter:

The Three R's of U.S. Exporting

Do You Need to Learn More About NAFTA?

Changes to U.S. Export Regulations Impact Entity List Transfers

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Export Documentation & Procedures Seminar

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The Three R's of U.S. Exporting

By John Goodrich email | bio

You all know about the three academic R’s, of Reading wRiting and aRithmetic. But are you familiar with the three R's of exporting: the FTR, the EAR and the ITARs?

I am a relative newcomer to exporting having jumped into the fray a mere 18 years ago. I came to exporting after becoming a customhouse broker and working in commercial import departments.

“How different could it be?” I reasoned. “Exporting is just the opposite of importing, right? Everything I know about importing should apply to exporting but in reverse.”

Naively my new employer agreed with me and hired me as the import/export manager for a small trading company.

Then reality struck! I was right. Exporting and importing are indeed opposites, polar opposites. To be certain there are some disciplines that cross over between the two including the concepts of classification, INCOTERMS and the reality that vessels can sink regardless of the direction they are sailing.

What I was least prepared for was the complexity of the export regulations. Now, I don’t want to get in a shooting match over which regulations are more onerous or difficult. Let’s agree that both the import and the export regulations are burdensomely complex. Coming from an importing background, however, I was used to there being a primary point of contact for all imports, that being the U.S. Customs Service (now Customs and Border Protection or CBP). This is the case even when one of a myriad of other U.S. government agencies regulates the import supply chain. Customs plays the lead role in enforcing those regulations too.

It was counter-intuitive, therefore, to discover that U.S. exporting is controlled by more than one set of regulations and more than one primary regulator. It seems everyone wants to get their fingers into the pie. With so many cooks in the kitchen it is no wonder exporters can get confused.

It eventually became clear that just as students must go to school to learn the three academic R’s, exporters also need to be schooled in the three R’s of U.S. exporting.

The FTR – The Foreign Trade Regulations
15 CFR §30
Census Bureau - Foreign Trade

The FTR, formerly known as the Foreign Trade Statistics Regulations, are administered by the Foreign Trade Division of the U.S. Census Bureau. The FTR have a dual purpose. They allow for the collection of statistical trade data, and they also provide the tactical information required by the Bureau of Industry and Security (BIS) and CBP to perform their export oversight roles.

The FTR are, therefore, primarily concerned with the reporting of an export shipment. It is within these regulations that the exporter will find the details about the Automated Export System (AES) reporting requirements and exemptions. The FTR define valuation, export powers of attorney and record keeping requirements. They also address the ever-vexing questions about the responsibilities of parties when the foreign buyer routes the cargo and selects the international transportation.

Referenced within the FTR is the Schedule B. This statistical classification system is also administered by the Census Bureau and can be found at its website.

The EAR – The Export Administration Regulations
15 CFR §700-740
Bureau of Industry & Security

At first blush one would think these regulations would have something to do with promoting better listening skills. One would be wrong.

While the FTR deal with statistical reporting of the shipment, the EAR address U.S. export control policy. The EAR control the export of so-called dual use goods and goods that are not controlled by other regulations. Dual use refers to the idea that the product has a commercial function but it also may be used in applications or destinations the U.S. would prefer it not be used. Most commercial shipments are subject to the EAR.

The EAR are organized under 10 general prohibitions that ask the questions:

  • What is the product?
  • What is the destination?
  • Who is the end user?
  • What is the end use?
  • If any of the above is restricted or controlled, will the U.S. government permit the export from the U.S. under license or a license exemption?

Product controls are enumerated within the Commerce Control List of the EAR. These regulations are intertwined with end user, end use and destination controls. End user controls are complex, partially controlled by BIS under the entity, denied party and other lists and supplemented by lists controlled by the Treasury’s Office of Foreign Assets Control and the State Department’s Directorate of Defense Trade Controls. The EAR include additional special controls for embargoed destinations such as Cuba, North Korea and Syria. In addition to goods, the EAR also control the export of certain software, technological know-how and even certain business practices such as contracting, financing and shipping.

Inexperienced exporters commonly assume that their everyday goods and business practices are not subject to the EAR or any of its restrictions. This is a risky assumption.

The ITARs - The International Traffic in Arms Regulations
22 CFR §120-130
State Department - Defense Trade Controls

For the longest time I thought “I-TAR” is what you said when resurfacing an asphalt driveway. I seem to have been mistaken.

The U.S. State Department’s Directorate of Defense Trade Controls (DDTC) regulates the export of defense articles under the Arms Export Control Act (AECA.) The details of this act are found primarily within the ITARs. Goods regulated by the ITARs are detailed within the munitions list and are subject to an export licensing requirement by the State Department. Logically this list includes weaponry and military equipment. A brief review of the munitions list would imply that it is a simple matter to determine if exports are subject to ITARs. For companies supplying components to the defense industry, however, it may not be as clear. Companies engaged at any level within the defense industry are cautioned about outsourcing production to other countries or exporting any of their goods before reviewing the ITARs.

The ITARs include an expanded list of embargoed destinations that goes beyond the embargoes listed within the EAR. The ITARs also allows for a process of statutory debarment. This is administered by the DDTC through the debarred parties list, one of the primary export restricted parties lists.

Like the EAR, the ITARs are concerned about unlawful distribution of technology or software related to the specifications of defense goods, their operation or their production.

With multiple regulators involved it is inevitable that exporters might get confused about which regulations apply to their goods. Sometimes the regulations reference one another and exporters can make this determination on their own. Both the BIS and DDTC have procedures for issuing commodity jurisdiction rulings to exporters clarifying which regulations apply.

The Three R’s Are Just the Beginning

There is more to an academic education than reading, writing and arithmetic. Mastery of these fundamentals, however, provides a strong foundation for further learning. Likewise, there is much more to U.S. export regulations than the FTR, the EAR and the ITARs. However, understanding these three exporting R’s is the foundation of a strong export compliance plan.

Happy learning!

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Do You Need to Learn More About NAFTA?

If your company has any customers in Canada or Mexico, or if you have domestic customers that ship to one of those two countries, you've probably been asked for a NAFTA Certificate of Origin. And depending on how much money these Canadian or Mexican customers can save in duties under NAFTA, the requests may be frequent and strongly worded.

Keep in mind, however, that not all products qualify for NAFTA. That includes goods that are manufactured or produced in Canada, Mexico or the United States. Before you can determine whether or not your products qualify for reduced duties under NAFTA, you must understand the NAFTA Rules of Origin, you must know and document the origin of each of the components of your products, and you must know and document where your products were finished.

Don't think this is important? If you provide someone with a NAFTA Certificate of Origin and you can't provide documentation that your goods qualify, your company—and the person who signed the NAFTA Certificate—are at the mercy of U.S. Customs and Border Protection, which can penalize you thousands of dollars per violation.

You and your company can't take chances with your NAFTA program. That's why International Business Training (IBT) is offering a series of lunch-time webinars that let you participate from your desktop computer in live, two-hour presentations on the fundamental elements of NAFTA that are important to successfully managing the program:

Each two-hour session is held twice a day so both east coast and west coast attendees can participate over their lunch hours.  Of course, if you've already got lunch plans, we don't mind if you register for the other session that day.

Each two-hour webinar is only $150 per person, and you'll receive a copy of the instructor's PowerPoint presentation prior to the webinar so you can take notes, and we'll mail you a Certificate of Completion at the end of each webinar. Additional employees from your company can attend on the same internet connection for only $50 each.

Seats for each webinar are definitely limited, so don't delay. You can register online or by calling IBT at 1-800-641-0920. You'll be glad you did!

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Changes to U.S. Export Regulations Impact Entity List Transfers

By Richard Vitas Palaikis II email | bio

Before you commence with your next export transaction, be sure that you are aware of the amendments that have been applied to three specific sections of the Export Administration Regulations (EAR) with regard to parties who appear on the Entity List. The sections of the EAR affected by these amendments are:

  • 744.10 - Restrictions on Certain Entities in Russia
  • 744.11 - License Requirements that Apply to Entities Acting Contrary to the National Security or Foreign Policy Interests of the United States
  • 744.20 - License Requirements that Apply to Certain Sanctioned Entities

The Bureau of Industry and Security (BIS) has amended the above referenced sections of the EAR to incorporate license requirements for transfers (in country) to persons denoted on the Entity List, which the regulations had not required prior to this amendment. A transfer (in country) is defined as the shipment, transmission or release of items subject to the EAR from one person to another person that occurs outside the United States within a single foreign country.

The Entity List is maintained by the U.S. government and is meant to provide notice to the interested public that certain exports, re-exports or transfers (in country) to parties (i.e. individuals, corporations, research institutions, governmental and private organizations) denoted on the Entity List require a license from BIS. The license is required because these parties have been known to engage in activities that would give substantiated reasons to believe that exported, re-exported or transferred (in country) items could be diverted to weapons of mass destruction programs, along with other activities that have been sanctioned by the State Department, in addition to any other activity that would be considered contrary to the national security or foreign policy interests of the United States.

So exactly what has changed here? Quite simply, the federal government has amended the above mentioned sections of the EAR to provide an enhancement to end-user control by incorporating transfers (in country) to the license requirements.

These amendments became effective upon publication in the Federal Register on Tuesday, September 8, 2009. Now would be the perfect time to ensure that any pending transactions you have are not affected by this amendment, and if by chance they are, this is the time to make the necessary adjustments! In today’s ever dangerous world, we certainly do not want anything to fall into the wrong hands.

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Sign Up for a Free Online Demo of Shipping Solutions Export Software

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 Tuesdays at 1:00 p.m. and Thursdays at 10:00 a.m. 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 co-workers 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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