On February 17^th, the U.S. Census Bureau (Census Bureau) released proposed rules to amend the Foreign Trade Statistics Regulations (FTSR) and require mandatory filing of export information through the Automated Export System (AES) for all shipments where a Shipper's Export Declaration (SED) is currently required.

Written comments on the proposed regulations will be accepted by Census up to and including April 18, 2005.

Background

When a party exports commodities from the United States, there is a requirement that the exporter (or its freight forwarder) submit a declaration with the U.S. Government. This declaration is referred to as a "Shipper's Export Declaration" (or "SED"). The requirement for filing these declarations is found in the U.S. Foreign Trade Statistics Regulations (FTSR) (15 C.F.R. 30 et seq.), which are administered by the Census Bureau.

In July, 2003, Census published a rule that if the export is for goods listed on the Commerce Control List of the EAR (Supplement 1 to Part 774) or the Department of State, Munitions Control List (ITAR), the filing must be made electronically through a program referred to as "Advanced Export System" or "AES". AES is an electronic method for filing the SED information directly with CBP and Census.

The AES declaration is the principal enforcement tool for the United States Government. The electronic AES declaration serves to inform the U.S. government of:

The parties to the transaction (name of U.S. exporter and name of foreign importer or consignee), and their addresses;
A description of the articles exported;
The Schedule B export commodity number for each article;
The value of the articles exported;
The ECCN of the articles exported, if appropriate; and
The export license number or export license exemption that authorizes the export of the goods or technology to the named destination.

Errors in the preparation of the AES declaration, or applicable license approval or exemption, can result in the assessment of monetary fines.

Electronic filing strengthens the U.S. Government's ability to control the export of critical goods and technologies to prohibited and unauthorized end-users, and affords the Government the ability to significantly improve the quality, timeliness, and coverage of export statistics. Reporting through AES has demonstrated that, compared to paper filing, the error rate is reduced substantially and coverage is improved.

Reason For Proposed Changes

The purpose for these proposed changes is to provide full implementation of the Foreign Relations Authorization Act (Public Law 107-228), which mandates that all shipments that require reporting be filed through AES. This law also:

Increases the penalties, both civil and criminal, for the delayed filing, failure to file, and false filing of export information and/or using the AES to further any illegal activity.
Provides for administrative proceedings for imposition of a civil penalty for violation(s), and
Authorizes and delegates enforcement functions to the Office of Export Enforcement and U.S. Customs and Border Protection officials from the U.S. Department of Homeland Security.

Summary of Changes

To comply with the requirements of Public Law 107-228, Census proposes amending the FTSR in its entirety to specify the requirements for mandatory reporting of all export information through the AES when a SED is required.

For purposes of the regulations, SED information shall be referred to as Electronic Export Information (EEI).

New Penalty Provisions

A new subpart H is added to cover penalty provisions formerly addressed in Section 30.95 of the FTSR. New penalty provisions provide that civil penalty shall not exceed $10,000 per violation and a criminal penalty shall not exceed $10,000 or imprisonment for not more than five (5) years, or both, per violation, for situations when the filer knowingly fails to file, files false and/or misleading information, and for other violations of the FTR, other than late filings.

In addition, the penalty provisions also increase penalties imposed for late filings from $100 to $1,000 per each day of delinquency, to a maximum of $10,000 per violation.

Finally, subpart H provides for the enforcement of these penalty provisions by the Bureau of Industry and Security's Office of Export Enforcement (OEE), and the Department of Homeland Security's CBP, Immigration and Customs Enforcement (ICE).

Additional Changes

The Census Bureau proposes amending the FTR to include the following changes:

Rename the FTSR to "Foreign Trade Regulations" (FTR) to more accurately reflect the scope of the revised regulations implementing full mandatory AES filing, such as the inclusion of Department of State requirements and the advanced filing requirement implemented by CBP.

Routed Export Transactions

A "routed" export transaction occurs when a Foreign-Principal-Party-in-Interest (FPPI) authorizes a U.S. agent to facilitate the export of items from the United States on its behalf. In 2000, BIS and Census issued joint regulations regarding the responsibility of parties in Ex-works transactions.

Section 30.3, adds language specifying that, in "routed" export transactions, the U.S. principal party in interest (USPPI) may compile and transmit export information on behalf of the foreign principal party in interest (FPPI) when authorized by the FPPI. This language is consistent with the language of Sec. 758.3 of the Export Administration Regulations, and permits the USPPI to act as an agent of the FPPI upon the written authorization by the FPPI.

Section 30.6 adds requirements for transmitting a Routed Transaction Indicator to the list of data elements required to be reported through AES. The Routed Transaction Indicator indicates the conditions of other data elements reported to AES. The Routed Transaction Indicator gives an indication of whether or not the EEI reported represents a routed export transaction.

Post-departure Filing Privileges

Section 30.5 revises the post-departure (formerly Option 4) approval procedures. Certification and approval requirements for post-departure filing of EEI have been strengthened to address U.S. national security concerns and interests. The Census Bureau and other federal government agencies participating in the AES post-departure filing review and approval process will subject applications submitted by USPPIs for post-departure filing to closer scrutiny. Under the proposed revised post-departure filing requirements:

Authorized agents may no longer apply for post-departure filing status on behalf of individual USPPIs. Only USPPIs may apply.
USPPIs must demonstrate the ability to meet AES pre-departure filing requirements by filing EEI to the AES before applying for approval for post-departure filing;
USPPIs must meet a minimum number of shipments requirement before being authorized to file post-departure; and
Partnership agencies of the U.S. Government shall determine whether or not a USPPI poses a significant threat to U.S. national security before granting the applicant post-departure filing status.

Time and Place-of-Filing Requirements

Section 30.4 specifies the time and place-of-filing requirements for presenting proof of filing citations, post-departure filing citations, and/or exemption legends. Specific time and place-of-filing requirements are included in the FTR in accordance with provisions of Section 341(a) of Public Law 107-210, the Trade Act of 2002. With the exception of State Department USML shipments under the control of the International Traffic in Arms Regulations and shipments approved for post-departure filing, the EEI with the appropriate proof of filing citations and/or exemption legends is required to be transmitted to the exporting carrier within specified time frames depending on the mode of transportation used. For non-USML shipments, the EEI must be filed and the Internal Transaction Number (ITN) (a system-generated number assigned to a shipment confirming that the AES transmission was accepted and is on file in AES), transmitted to the carrier as follows:

For vessel cargo, the EEI must be filed and the AES ITN provided to the exporting carrier no later than 24 hours prior to the departure of the vessel from the U.S. port where the cargo is laden.

For air cargo, including Air Express Couriers, the EEI must be filed and the AES ITN provided to the exporting carrier no later than two (2) hours prior to the scheduled departure time of the aircraft.

For truck cargo, including cargo departing by Express Consignment Couriers, the EEI must be filed and the AES ITN provided to the exporting carrier no later than one (1) hour prior to the arrival of the truck at the United States border.

For rail cargo, the EEI must be filed and the AES ITN provided to the exporting carrier no later than two (2) hours prior to the time the train arrives at the U.S. border.

Currently, export information with appropriate proof of filing citations and/or exemption legends are required to be presented to the exporting carrier just prior to exportation.

Section 30.4(b)(1) and Section 30.4(b)(3) specify how to file EEI and acquire an ITN when AES, AESDirect or the participant's AES is unavailable.

Unknown Inland Freight and Insurance Charges

Section 30.6 adds language specifying the procedure for reporting the value of goods to the AES when inland freight and insurance charges are not known at the time of exportation. When goods are sold at a point other than the port of export, freight, insurance, and other charges required to move the goods from their U.S. point of origin to the carrier at the port of export must be added to the selling price (or cost, if not sold) of the goods. Where the actual amount of freight, insurance, and other domestic charges are not available, an estimate of the domestic cost must be made and added to the cost or selling price of the goods to obtain the value to be reported to the AES.

Export control and Export Licensing

Subpart B proposes to add references to export control and licensing requirements of the Department of State and other Federal agencies, in addition to expanding those of the Department of Commerce's BIS. General guidelines for obtaining export control and licensing information are also presented for use by preparers and filers of EEI. The purpose of this subpart is to consolidate references to export control issues. No new requirements are introduced.

Reporting Cost of Repairs and/or Alterations to Goods

Section 30.29 revises the language that describes the proper manner for reporting cost of repairs and/or alterations to goods, and reporting the value of replacement parts exported. The previous version of the FTSR did not specifically describe the manner in which these export transactions would be reported. The regulation now clarifies that goods previously imported for repair and alteration only, and reexported, shall only include the value for parts and labor. Goods exported as replacement parts shall only include the value of the replacement part. No new requirements are specified in Section 30.29.

Carrier and Manifest Issues

Carrier and manifest issues have been consolidated in subpart E. Requirements for SEDs being attached to the manifest are replaced with requirements for proof of filing citations and/or exemption legends to be shown on the bill of lading, air waybill, or other commercial loading documents attached to the manifest. Specific requirements for annotating the bill of lading, air waybill, or other commercial loading documents are included in Section 30.7.

Additional information on Census export information reporting requirements can be found at:

General SED and AES Filing Requirements:

http://www.tuttlelaw.com/subjects/us_control_exp_re-exp_orig_of_tech/us_control_exp_
re-exp_orig_of_tech_exp_clearance.html

Mandatory Filing Using AES:

http://www.tuttlelaw.com/newsletters/final_rule_on_
mandatory_use_of_aes.html

http://www.tuttlelaw.com/newsletters/aes_licensing_program.html

Routed Export Transactions:

http://www.tuttlelaw.com/newsletters/
responsibilities_of_parties_in_ex_works_trans.html

If you have any questions on any of the issues raised in this newsletter, please contact George R. Tuttle, III at (415) 288-0428 or via email at geo@tuttlelaw.com.

George R. Tuttle, III is an attorney with the Law Offices of George R. Tuttle in San Francisco. The information in this article is general in nature and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered as such.

All rights reserved. Information has been obtained from sources believed to be reliable. However, because of the possibility of human or mechanical error by our offices or by others, we do not guarantee the accuracy, adequacy, or completeness of any information and are not responsible for any errors, omissions, or for the results obtained from the use of such information.

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