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New Commerce Department rules focus on who is the "exporter"
Census, BXA would expand accountability
BY JACK LUCENTINI
Journal of Commerce Staff
Proposed regulations governing the responsibility for export paperwork would require greater accountability and communication from the parties involved, U.S. officials said last week.
Government officials described how exporters, forwarders and foreign buyers would be able to comply with the proposed rules, defining which parties in an export transaction would be held accountable for compliance with the regulations.
Two sets of proposed regulations will be published soon in the Federal Register by Commerce Department agencies. Rules proposed by the Bureau of Export Administration, known as BXA, will define who is responsible for exports winding up in the wrong hands.
By contrast, the Census Bureau proposal will identify the responsible party for filling out the Shipper's Export Declaration (SED), which is used to compile export statistics. The two sets of rules are designed to work in harmony.
"When we say we're simplifying the rules, we mean it," said Amanda DeBusk, assistant Commerce secretary for export enforcement.
The BXA proposal will not automatically hold the exporter of record responsible for a shipment landing in a restricted country. An earlier version of the rules had aroused concern among exporters who feared prosecution in such cases even though in many sales they surrender control of the shipment at their own loading dock. Such transactions are called "ex-works."
The proposed Export Administration rules aim to clarify who is responsible for violations, so that parties involved in a transaction don't point fingers at each other after the fact.
"What we often find when we have a violation is . . . a failure to communicate," said Mark Menefee, director of export enforcement for the Commerce Department.
Under the proposed BXA rules, a company or individual on U.S. territory must accept primary responsibility for making sure the goods end up in the right place. Unless another party agrees to take responsibility, the responsible party would be the U.S. entity that gains the most from the transaction, which usually means the manufacturer or seller of the goods. In the rules, this party is known as the "U.S. Principle Party in Interest."
That individual or company must communicate the license conditions to all parties involved in the transaction, such as the forwarder and the foreign buyer.
In cases where U.S. seller hands over the goods at its own loading dock, a U.S. agent of a foreign buyer can accept the burden instead of the manufacturer. To do that, the agent of the foreign buyer would have to obtain a power of attorney or other written authorization from the buyer.
In cases where a shipment winds up in a restricted country, the exporter would not automatically be cited for a violation if he or she can prove someone else gave erroneous information that led to the diversion.
In that case, the party that supplied the information will be held at fault, DeBusk said.
The Census proposal places new burdens on the exporter, forwarder and foreign buyer to communicate in writing to ensure that all information on the principal export document, the SED, is accurate.
The Census rules focus on ensuring the accuracy of export documents for statistical purposes. They contain two major changes dealing with the SED. First, they clarify who is an "exporter." Census officials complain that too often, the forwarder is listed on the document as exporter, when they want the entity actually selling the goods listed as the exporter.
The reason is that the forwarder often doesn't know the value or proper description of the shipment, which leads to inaccuracies in reporting export statistics, which are compiled from SEDs.
Census defines "exporter" differently from the Export Administration. For Census' purposes, the exporter is always the U.S. party that gains the most from the deal. In the BXA rules, the default party is the U.S. party that gains the most, but that responsibility can be shifted.
For Census' purposes, the party that gains the most can be the manufacturer or other kind of seller, if the party sells the goods directly to a foreign buyer, or a foreign entity, if he or she is in the United States when signing the export declaration. This definition serves only to determine who is listed as exporter on the declaration, not who is responsible for export control compliance.
Secondly, the proposed Census rules say the manufacturer and forwarder must communicate to properly complete the export declaration. Exporters have complained about this, saying the two parties don't ordinarily collaborate when the forwarder represents the foreign buyer. In "ex-works" transactions, the new rules would require the exporter to provide the forwarder with certain information. This includes the point of origin and the classification number, which is used to determine whether a product needs an export license.
The person primarily responsible for the information on the declaration is the principal U.S. party to the transaction. However, other parties are also responsible.
In an "ex works" transaction, where the foreign buyer authorizes a U.S. forwarder to file the document, the principal party must provide the forwarder with certain information. This includes the point of origin and the classification number, used to determine whether a product needs an export license. The forwarder is responsible for other items such as the date of export and the destination.
Jack Lucentini can be reached at (212) 837-7113 or jlucentini@mail.joc.com
