Middle knowledge

Middle knowledge    Transshipment is defined by the U.S. government as the 'act of shipping goods to an intermediate destination before reaching their ultimate end user and end use.'
   Who better in the global shipping industry understands this middle ground of cargo transits then the freight forwarders? That's why the Commerce Department's Bureau of Industry and Security wants forwarders to help it update proposed best practices for how companies may avoid involvement in illicit transits, transshipment, and re-exports of items subject to the Export Administration Regulations (EAR).
   BIS said in the Sept. 1 Federal Register that it's updating the list 'in light of the U.S. government's current export control reform efforts and the increased attention that re-export, transit and transshipment trade has generated in recent years, both within the U.S. and globally.'
   While most transshipments are conducted lawfully, the government is acutely aware that some companies use hub ports to disguise the transfer of illicit exports of U.S.-made, unlicensed technologies to unfriendly nations and terrorist organizations.
   'Transshipment hubs typically have substantial commercial, logistical and financial infrastructures, but poor regulatory controls,' said Vann H. Van Dieppen, principal deputy assistant secretary at the State Department's Bureau of International Security and Nonproliferation, in testimony before the House Foreign Affairs Committee's subcommittee on terrorism, nonproliferation and trade on July 22. 'This gap provides an opportunity for proliferators to hide their relatively small number of proliferation-related transactions ' most of which involve dual-use items ' within a very large volume of fast-moving commercial goods.'
   He cited a 'lack of political will to implement and enforce export and transshipment controls. This is due to the misperception that such controls are bad for legitimate business and this is particularly common in countries reliant on revenue from port operations.'
   Schemes used to facilitate illicit transshipments are often quite elaborate. On March 27, 2009, a federal judge in the Eastern District of Virginia ordered the forfeiture of eight vibration test systems and eight humidity chambers, items with potential for ballistic missile components testing, which were detained and seized by BIS's Office of Export Enforcement (OEE) and the Homeland Security Department's Customs and Border Protection. These items were seized after a Canadian company attempted to export them to Syria via the United Arab Emirates.
   Just because the forwarder operates between exporters and overseas importers doesn't make it immune from becoming caught up in this illegal activity, and thus may be subject to enforcement action under the EAR. These actions could lead to hefty fines and penalties, revocation of export privileges, bad publicity and even prison time.
   BIS hopes its best practices for transshipments will help keep forwarders from falling victim to violators. Through its Transshipment Information Exchange, the agency seeks an ongoing dialogue with industry, including forwarders, exporters, carriers, consolidators and express carriers, to identify gaps and best practices in transshipment trade, Gerard Horner, senior trade and industry analyst for BIS's Office of Technology Evaluation, told American Shipper.
   BIS's goals for this information gathering are:
   ' Clearly define transshipment, transit and re-exports.
   ' Identify transshipment problems, gaps and threats facing industry and government.
   ' Identify and analyze approaches to transshipment security that reduce diversion risk.
   ' Finalize 'best practices' list and share those findings with industry and government.
   ' Inform and educate industry and government of these best practices so that trade with minimal diversion risk flows efficiently as possible without unnecessary burden, delays, barriers or restrictions.
   The deadline for written comments related to the Federal Register notice is Oct. 18. However, BIS also plans to make visits and initiate a dialogue with the export industry, including software firms and trade associations, to better gauge how business secures transshipments against diversion risk.
   These discussions would include whether industry agrees with the 'new' best practices listed in the notice of inquiry and if other practices and processes have emerged or have been developed that the government has not considered. When all of the information is collected and analyzed, BIS plans to publish another Federal Register notice with the results in early 2011, Horner explained.
   As the Obama administration presses forward with reforming the nation's Cold War era export controls, more attention and enforcement resources will surely be placed on rooting out transshipment violators.
   BIS uses a variety of methods to prevent diversion of items subject to the EAR to unauthorized destinations and uses. These methods include interagency review of export license applications, identification of high-risk foreign parties, extensive outreach to industry, end-use checks ad reviews of export data through the Automated Export System, Kevin Wolf, Commerce assistant secretary for export administration, told the House Foreign Affairs subcommittee.
   The State Department has also worked with countries with transshipment hubs to encourage and assist them with developing export control programs of their own.
   'We have worked long and hard to reduce this vulnerability through various policy and programmatic efforts so as to build international support for controlling trade in proliferation-sensitive items, to encourage suppliers to play a greater role in preventing illicit transshipment, and to improve the regulation and enforcement of transshipment controls of key partners,' State's Van Dieppen said.
   'The record speaks for itself,' he added. 'Hong Kong is a good example of a vibrant economy with an extensive export and transshipment control system in place for over a decade.'
   Recent steps taken by the United Nations Security Council to restrict the flow of materials and technologies for weapons of mass destruction (WMD) programs in Iran and North Korea have raised the level of international attention placed on companies and individuals who attempt to export to these countries via transshipment hubs.
   Interdiction efforts have been enhanced through programs like the Proliferation Security Initiative (PSI), a global effort that aims to stop trafficking in WMD, their delivery systems, and related materials. Many key transshipment countries are PSI partners. Last October, Singapore hosted Exercise Deep Sabre II, a PSI maritime interdiction, and in January the U.A.E. co-hosted with the United States the maritime exercise Leading Edge. ' Chris Gillis