International Trade Blog

You’ve probably known since grade school that Puerto Rico is not a state. But do you know what it is?

It’s an unincorporated United States territory in the Caribbean Sea made up of a main island plus several smaller islands with a population of about 3.5 million people.

But what does it mean to be an unincorporated U.S. territory?

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The Destination Control Statement is a legal statement required by the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR) stating that the goods you are exporting are destined to the country indicated in all the shipping documents. It is a necessary legal boundary clarifying what happens to shipments, and it essentially states that the buyer isn’t going to take the goods and forward them to another country.

Until recently, the statement required by the Bureau of Industry and Security (BIS) under the EAR was different than the statement required by the State Department under the ITAR. That changed in November 2016 after both agencies published notices in the Federal Register of a single, harmonized statement that can be used by exporters regardless if their goods fall under the jurisdiction of BIS or State.

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Wishing something were true doesn’t make it true.

This simple fact that some exporters ignore the truth came into focus for me at one of the two-day Bureau of Industry and Security (BIS) export control seminars held across the country. I heard a licensing officer tell an interesting story about “wishing it were so,” and I want to share a paraphrased version of what he said:

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Are you afraid to export goods that require a license? If so, you’re not alone. I’ve talked with exporters who are hesitant to export goods because they know the process would require an export license, and they don’t know how to begin to apply for one.

The good news for them (and for all exporters) is that the process of applying for an export license is not so bad at all. In this article, we’ll focus on the Commerce Department’s Bureau of Industry and Security (BIS) Simplified Network Application Process Redesign (SNAP-R) process for applying for an export license.

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You all know about the three academic R’s, of Reading wRiting and aRithmetic. But are you familiar with the three R's of export compliance: the FTR, the EAR and the ITAR?

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One of the more frustrating parts of this job is seeing the costly mistakes small and midsize exporters make when it comes to export compliance.

Because they aren’t “one of the big guys,” some U.S. companies think export compliance regulations don't apply to them (or that they won’t get caught if they don’t follow the regs). Instead, they ignore the regulations, or they breeze through their company’s compliance process and neglect to cross all the T’s and dot all the I’s.

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The phone calls started coming in last week: "I've got a shipment going out tomorrow, but I can't run a restricted party screening because the Consolidated List is offline due to the government shutdown. What should I do?"

Kudos to these exporters for knowing and understanding their export compliance responsibilities. Among those responsibilities is a restriction on doing business with entities the government deems a danger to U.S. interests.

Failure to comply is a violation of U.S. law and can result in civil or criminal prosecution, as well as denial of exporting privileges. I doubt very strongly that a government shutdown will be an acceptable excuse for violating the law.

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One of my favorite aspects of working with our customers is getting their feedback about the export processes and systems they use and love. However, there are some instances when I hear things that make me cringe.

This is especially true when I’m talking to people about export compliance. I ask them what they’re currently doing to stay compliant with export regulations.

Too often I hear: “We don’t have to worry about compliance because our items are EAR99.”

Facepalm.

What I then emphasize (often to deaf ears) is that EAR99 is not a pass to get out of the compliance due diligence process. In fact, determining the proper classification for your goods is only part of the compliance process—end use and end user make a difference!

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It's illegal to export to someone who appears on any of the government's denied party lists, also known as restricted party lists. And it's not just your customers. It's illegal to include any denied parties in any part of your transactions.

The best way to avoid doing this—and the only way to know for sure—is to run screenings for every single export that check all the parties against each denied party list.

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Product classification codes, which are used by the Census Bureau through the Automated Export System (AES) for trade statistic purposes and are also used at the country of import for assessing duties and taxes, are required for most exports.

For some exporters, getting started with product classification can be difficult. “I need a Schedule B number. How do I find the right number?” “Should I just start Googling?” “Is there recommended place to start?” are all questions we’ve been asked, and today, we’ll address them.

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