That routed feeling
'Is anyone listening?'
That's what some U.S. export compliance experts are asking the U.S. Census Bureau's Foreign Trade Division with regards to 'routed' export transactions under the mandatory Automated Export System regulation.
While Census worked exceptionally close with industry to craft the regulation, which was published in the June 2, 2008 Federal Register, routed transactions remain a concern for both the agency and exporters.
Routed transactions, also known commercially as 'ex-works' shipments, occur when the overseas buyer (foreign principal party in interest, or FPPI) authorizes a U.S. agent to facilitate the export of items from the United States on its behalf and prepare and file the electronic export information (EEI) in AES. The practice is quite common, and experienced routinely between exporters (U.S. principal party in interest, or USPPI) and their overseas customers.
A big question for many USPPIs is how do you ensure the data submitted in AES is properly presented for view by enforcement agencies?
This concern should be heightened by the increase in penalty amounts for either failure to file or providing false export information in AES. Civil penalties under the new Census regulation were increased from $1,000 per violation for failure to file to a maximum of $10,000 per violation, and up to $10,000 per violation for making false statements. Criminal penalties are raised to a maximum of $10,000 per violation and/or up to five years in prison. In addition, failure to keep an export control document, as required under the Export Administration Regulations, could result in penalties of as much as $250,000 per violation.
Export compliance experts warn that Census' mandatory AES regulation gives away too much authority to the FPPI with regards to routed transactions, even though the USPPI must provide certain fields of information. Critical AES information fields that are not required for the USPPI to provide for routed shipments include:
' Ultimate consignee.
' Intermediate consignee.
' Country of ultimate destination.
The FPPI and its forwarder submit this information to AES.
'If one assumes that the USPPI is conducting the proper export compliance checks, such as restricted parties, end use and diversions, on the known parties to the transaction and then the FPPI provides the forwarder with a different set of parties to the transaction, who do you think the U.S. government is going after?' said Paul DiVecchio, president of Northboro, Mass.-based DiVecchio & Associates. 'The answer is the USPPI who had little or no control on what information was submitted through the EEI into AES.
'Even if the Office of Export Enforcement determined that the USPPI did not violate the Export Administration Regulations, the exporter would be tying up its time, money and resources defending itself for the potential violation caused by the FPPI and/or the forwarder,' he said.
Forwarders representing USPPIs often watch with frustration and concern when FPPIs and their agents mismanage the regulatory aspects of routed transactions.
'Many troubles exist with routed orders because they are U.S. regulations and many firms outside the U.S. have neither read them nor care to,' said Michael Ford, vice president of regulatory compliance and quality at Philadelphia-based BDP International. 'As a company that follows the regulations and communicates them to our network outside the U.S. and to our clients, we at times are faced with other forwarders who are not enforcing the same rules and therefore we lose business by doing the right thing.'
Catherine Thornberry, an export consultant with the Export Procedures Co., based in Zelienople, Pa., highlighted the difficulty for USPPIs to obtain complete AES export records for routed transactions from FPPIs or their forwarders.
Under the Export Administration Regulations administered by the Bureau of Industry and Security, USPPIs are required to maintain complete records of their export transactions. 'Companies aren't paying much attention to (routed transactions) until after a violation occurs,' Thornberry told Census and Bureau of Industry and Security officials at the March 10 Regulations and Procedures Technical Advisory Committee meeting in Washington.
Export compliance experts concur that the best way to comply with the regulations is for USPPIs to have complete control over the entry of all data entered into AES.
'Census' implementation of the Foreign Trade Relations requires that if the FPPI pays for the freight the transaction must be marked as routed and the USPPI then loses authority over the EEI,' Thornberry said. 'A simple solution would be to allow the USPPI to determine the authority over the EEI regardless of who pays for the freight.'
In a much-praised Census regulation published in 2000, the agency clearly identified 'parties to the transaction' by changing the ambiguous nomenclature of 'exporter of record' to the USPPI. This established accountability for compliance decisions and the documenting of those decisions on the shipper's export declaration and now the AES entry.
'If the USPPI wants to have their freight forwarder file on their behalf then the USPPI needs to communicate to the FPPI that they will file the EEI and take on the responsibility for the data,' Ford said. 'We help our clients when asked to perform these services. We talk with the client upfront and try to assist in coordinating all the data required.
'I think Census and BIS can help everyone by updating the regulation for routed orders when the USPPI wants to take control of the EEI filing and make this step easy for a U.S. firm to take on this action by a simple letter to the FPPI,' he said.
Census says it's aware of the industry's problems with routed transactions. However, Dale Kelly, assistant division chief for data collection at Census, told American Shipper the agency has no plans to make any changes to its regulations at this time. 'Right now, we're trying to figure out a better way to explain it and provide clarification,' she said.
Kelly encourages exporters and forwarders with routed transaction questions and concerns to contact the Foreign Trade Division by telephone, (800) 549-0595 and select 'option 3' to reach the Regulations Branch, or e-mail, FTDregs@census.gov. ' Chris Gillis