Continuing developments in U.S. export law and practice highlight a need for exporters to ensure their export compliance programs are up-to-date and meet U.S. legal requirements. Of particular interest are developments regarding updates to the Foreign-Trade Regulations Export Reform efforts, Customs’ role in export penalty guidelines, and the transfer of the Automated Export System (AES) to the Customs Automated Commercial Environment (ACE).
Census has proceeded with enhanced compliance efforts now that the Foreign Trade Regulations (FTR) have been implemented. The FTR dropped the term “Statistics” from the title to emphasize a stronger enforcement perspective, including significant new penalty provisions. Census has implemented an “AES Compliance Review Program” with auditor visits to exporters and reviews of export-reporting activities. The AES and the Compliance Review Program also create an opportunity for Census to identify compliance failures and to begin enforcement activities against exporters who have breached regulatory requirements. U.S. Customs and Border Protection and Census use the AES system in ACE as an audit and enforcement tool. Customs has significantly expanded its EXODUS Command Center in Washington, D.C. to review all export shipments for compliance. Cases of non-compliant companies, including licensing issues, are referred to other agencies for enforcement. Exporters must be sensitive to the potential risks involved.
Customs has issued guidelines stating its intent, as the port-centered enforcer of the FTR, to apply the available penalties based on certain mitigating and aggravating circumstances. Customs has taken an aggressive position on its role in enforcing the FTR, and has begun issuing “Warning Letters” for alleged errors and violations. Thousands of AES/EEI penalties have been issued evidencing a new aggressiveness. This Customs position must be considered when errors are identified and voluntary self-disclosures are contemplated.
The FTR require that all export reports are to be filed electronically through AES. See 15 C.F.R. Part 30. AES now in ACE provides various U.S. export compliance agencies –including U.S. Bureau of Industry and Security (BIS), Directorate of Defense Trade Controls (DDTC), the Office of Foreign Assets Controls (OFAC), Customs, and Census – the ability to monitor data provided by exporters, identify security risks and compliance issues, and hold export shipments.
Increased enforcement activities by U.S. agencies, enhanced civil and criminal penalties for export violations, and the potential for multiple penalties from various agencies for reporting and controls violations underscore the need for exporters to upgrade their export compliance practices and procedures to meet the resulting heightened demands and avoid enhanced penalties.
We believe that all exporters should develop a comprehensive export compliance program mirroring import management programs. The program should consist of a thorough review of existing export activity and should include:
- Securing and analyzing Census export data to identify possible export compliance issues;
- Completing and reviewing an Internal Export Audit Questionnaire;
- Identifying the process for export document preparation, submission, and retention from the Questionnaire responses, and implementing necessary enhancements;
- Preparing or revising an Export Procedures Manual to cover all aspects of the export process;
- Reviewing export jurisdiction, classifications, valuation, origin marking and declarations, special trade program usage, document preparation, and audit reviews;
- Enhancing existing Item Masters to include key export management data;
- Implementing increased management over freight forwarders to control selection, reporting accuracy, and record provision;
- Creating an Export Log to monitor export transactions;
- Identifying possible export control or export licensing issues;
- Implementing or upgrading Restricted Party Screening tools and procedures; and
- Obtaining legal advice on any potential issues identified.
We have developed comprehensive export compliance programs for many different types of exporters. We have template documents to begin the process, but believe that these programs must be specifically tailored to individual exporters for them to be successfully implemented. Please contact us about export compliance programs and our assistance in developing and implementing a robust export management program for your company.