follow us on: RVCF Facebook RVCF1 Twitter RVCF LinkedIn RVCF Google+ RVCF LIVE Link Podcast
RVCF LINK
  FEBRUARY 2014
 

Upcoming Events

Supplier Open Forum
2/14/2014
Conference Call

Retailer Open Forum
3/6/2014
Conference Call

Supplier Open Forum
3/14/2014
Conference Call

Retailer Open Forum
4/10/2014
Conference Call

2014 Spring Conference
5/5-7/2014
Sanibel Harbour Marriott Resort & Spa
Conference


SAVE THE DATE!

2014 Fall Conference
11/2-5/2014
Camelback Inn Resort & Spa
Conference

 

   

Sandler, Travis & Rosenberg, P.A.

A Routed Export by Any Other Name...
Melissa Miller Proctor, Esq., Sandler, Travis & Rosenberg, P.A.


On February 6, 2014, the Commerce Department's Bureau of Industry and Security ("BIS") published its proposed rule to clarify and rename the so-called "routed export transaction" in its regulations. The Export Administration Regulations apply to the vast majority of merchandise that is sold in the United States, covering purely commercial items as well as items that have both military and commercial applications. This proposed rule would impact U.S. manufacturers, retailers and e-commerce merchants that market their products internationally typically in Ex-Works transactions. U.S. companies are urged to take note of the BIS' proposed rule and assess how it may impact their current sales and operations. This is also an opportune time for companies to evaluate their current "routed export" sales and confirm that they squarely comply with the U.S. export requirements.

By way of background, a routed export transaction occurs when a U.S. company's foreign customer (i.e., "Foreign Principal Party in Interest" or "FPPI" in the BIS and Census Bureau vernacular) authorizes a U.S. forwarding agent to arrange for the export of purchased goods, assist in the customs clearance of the shipment, apply for an export license (if warranted) as well as transmit the Electronic Export Information ("EEI") filing, when required, into the Automated Export System ("AES"). Generally, the U.S. seller will make the purchased goods available to the foreign customer's forwarding agent under Ex-Works terms. If a routed export is set up properly, liability for the export shipment itself will transfer from the U.S. seller to the foreign customer and its forwarding agent. The U.S. seller, in effect, will only be liable for the accuracy and completeness of the information that it provided to the foreign customer or its agent about the goods. The U.S. Seller will still be shown as the U.S. Principal Party in Interest ("USPPI") on the foreign customer's EEI filing for Census Bureau purposes; however, it is the foreign customer and its U.S. forwarding agent that will be on the hook for any EEI or export licensing violations that occur.

 

Under the proposed rule, the BIS intends to begin referring to these types of transactions as "Foreign Principal Party Controlled Export Transactions" instead of routed export transactions in Section 758.3(b) of the Export Administration Regulations. The purpose behind this change lies in the fact that the BIS' Export Administration Regulations and the Census Bureau's Foreign Trade Regulations both refer to "routed exports" but define them differently. In order to prevent any confusion, the BIS has decided to remove the reference to "routed exports" from its regulations.

In addition, the BIS's proposed rule provides additional clarification on the roles and responsibilities of the U.S. seller, foreign customer, and U.S. forwarding agent in these types of transactions. The proposed rule is not intended to modify or change these responsibilities in any way. Nevertheless, the BIS's proposed rule does outline additional steps that the parties must take in order to achieve a valid "Foreign Principal Party Controlled Export Transaction." For example:

  • The U.S. seller would be required to provide written authorization to the foreign customer (e.g., in a contract, letter, fax or e-mail) that formally transfers the responsibility for export clearance and licensing compliance to the foreign customer.
  • The foreign customer, in response, would be required to provide in writing to the U.S. seller acknowledging its acceptance of the export clearance and licensing obligations and identifying the U.S. forwarding agent that will act on its behalf.
  • As is currently the case, the foreign customer must execute a Power of Attorney to the U.S. forwarding agent authorizing the agent to facilitate the export shipment and file any necessary EEI's.
  • The foreign customer would also be required to authorize the U.S. forwarding agent in writing to apply for and obtain an export license for the shipment if one is warranted - the forwarder will become the export licensee and both the forwarder and foreign customer will be responsible for compliance with the license issued by the BIS.
  • The U.S. seller would still be required to provide the foreign customer and its forwarding agent with the correct export classification of the goods or sufficient technical information that will allow them to determine classification and licensing requirements.

For purposes of its own export compliance, U.S. sellers, however, should still make a practice of requesting a copy of the EEI filings submitted by the foreign customer's forwarder in order to verify and confirm that the AES transmission was timely and accurately made. In fact, the proposed rule notes that the forwarder will be required by the BIS (as is currently the case vis-à-vis the Census Bureau's Foreign Trade Regulations) to provide export shipment information to the U.S. seller - this will allow the U.S. seller to confirm that the information it provided about the shipment was properly utilized.

Again, as long as these types of transactions are set up properly from the outset, the U.S. seller should only be responsible for the veracity of the data that it provided to the foreign customer's agent. In view of the proposed rules, U.S. sellers are advised to review their current policies and procedures for handling these kinds of transactions, ensure that they are in compliance with the current requirements, and make plans for adjusting their processes to take into account the new written authorization requirements that the BIS proposes to implement.


Melissa Miller Proctor is a Partner with Sandler, Travis and Rosenberg, P.A., resident in the firm's Arizona office. With significant experience in export controls, customs laws and regulations, and international trade, Melissa works closely with clients to expand their markets while ensuring their regulatory compliance. She may be reached at (480) 263-2283 or via e-mail at mproctor@strtrade.com.

 
 
RETURN TO THE RVCF LINK: CLICK HERE