1 NAEP 2009 Annual Meeting Sarah Reynolds American River Intl. Import / Export Compliance Workshop

2 Post 9/11 Initiatives 1. CSI 2. CTPAT 3. Importer Security Filing 4. Transportation Security Admin. 9/11/20152

3 Container Security Initiative CSI is a program intended to help increase security for containerized cargo shipped to the United States from around the world. CSI addresses the threat to border security and global trade posed by the potential for terrorist use of a maritime container to deliver a weapon

4 Container Security Initiative  January 17, 2002 U.S. Customs Service’s Commissioner Bonner announces CSI.  January 17, 2003 – 18 ports are committed to participate in CSI.  Currently 58 ports and 35 countries participate  March 1, 2003 – US Customs Service becomes US Customs & Border Protection

Container Security Initiative Three Core Elements of CSI are:  Identify high risk containers based on advance information and strategic intelligence  Pre-screen containers at the earliest possible point  Use technology to quickly pre-screen containers that may pose a risk for terrorism

Container Security Initiative Key Benefits of CSI:  Increases the security of the global trading system  Significantly increases the ability to intercept containers that may pose a risk for terrorism  Enhances safety and security for all

7 Importer Security Filing  Formally known as  Effects Ocean Shipments Only  10 Data Elements to be Provided by the Importer  2 Data Elements to be Provided by the Carrier  Electronically transmitted data  Advance shipment data will produce more effective and more vigorous cargo risk assessment  Interim Final Rule was announced by DHS on Nov.24 th 2008

8 Importer Security Filing  Became effective January 26 th 2009  The Interim Final Rule includes a delayed compliance date of 12 months after the interim final rule takes effect.  During this time Customs will show restraint in enforcing the rule.

9 C-TPAT Customs Trade Partnership against Terrorism  Joint government business initiative to build cooperative relationships that strengthen overall supply chain and border security  Raises level of global security  Decreased delays in the import process

10 C-TPAT  Every importer, exporter, manufacturer, customs broker, NVOCC and warehouse proprietor should join this partnership in a proactive effort to raise the bar on security standards in the U.S  Provides a competitive edge in the Industry  Decreased delays in the import process  Expedited customs clearance  Mitigating factor in determining penalty amount

11 C-TPAT  Tier I – Certification  Tier II - Validation  Tier III - Exceeding Minimum Security Practices

12 C-TPAT ISA – Self Importer Assessment Is one of the privileges offered to C-TPAT members. The program give the importer an opportunity to perform a self analysis of their compliance standards and provide their findings to CBP for review

13 TSA-Transportation Security Administration Sensitive Security Information Increased inspections in the field 50% screening of all cargo on passenger planes by Feb % screening by August 2010 STA (Security Threat Assessment)

14 Import  The Customs Modernization Act of 1993  Reasonable Care  Due Diligence

15 The Customs Modernization Act of 1993 The Mod Act was a congressional act that outlined and redefined Customs regulations and introduced new legislation in reference to the importers responsibilities. The Mod Act also introduced a warning prior to audit enforcement as to the future Customs towards increasing compliance levels.

16 Import Reasonable Care Defined as that degree of care that a person of ordinary prudence would exercise in the same manner or similar circumstances Legal responsibility of importer and his agent (Customs Broker) Mandated by the Customs Modernization Act and passed into law December 8 th 1993

17 Fines and Penalties Reasonable Care Penalty for importers failure to meet Reasonable Care Standards Domestic value or twice the duty, whichever is less If duty free the penalty is calculated at 20% of the value

18 Import – Recordkeeping  All records which pertain to the merchandise and are maintained in the normal course of business..  Must be maintained in the United States  Must be kept for five years from the date of entry  All records must be maintained as outlined in CFR163 (a)1(a) listing.  Customs forms 7501, 3461, 4333

19 Import Recordkeeping Penalties for failure to keep records: $100,000 or 75% of dutiable value for each release for willful failure $10,000 or 40% of the dutiable value for each release for negligence

20 Export  U.S. Principal Party in Interest: the person in the United States that receives the primary benefit, monetary or otherwise, of the export transaction.  U.S. manufacturer, U.S. seller, U.S. order party  Foreign company CANNOT be the USPPI unless they are in the U.S. at the time the goods are obtained/purchased for export.  A freight forwarder may not be the USPPI!!

21 Export Automated Export System/ Electronic Export Information Canada (30.36) – NO EEI $2500 and under (30.37a) – NO EEI 30.37a

22 Two Types of Exports Export Transaction: USPPI files the Electronic Export Information (EEI) record or authorizes a U.S. Forwarder, or other agent to file the EEI via AES (Automated Export System) Routed Export Transaction: Foreign principal party in interest (FPPI) authorizes a U.S. Forwarder, other agent or USPPI to file the Electronic Export Information (EEI)

23 Export USPPI Responsibilities:  Files or authorizes U.S. forwarder, or other agent to file the EEI  Provides Power of Attorney / written authorization  Responsible for schedule B and license determination  Obtain copy of the EEI filed by forwarder  USPPI may obtain POA from FFPI to complete & file the EEI record

24 Export Forwarder Responsibilities:  File export information via the AES  Upon request provide USPPI with copy of the filed EEI  Provide ITN to the carrier  Obtain a POA or written authorization from the FFPI to file the EEI

25 Export AES pre-departure filing time frames  Vessel: 24 hours prior to loading  Air: no later than 2 hours prior to departure  Truck: no later than 1 hour prior to arrival at the border  Rail: no later than 2 hours prior to arrival at the border  Mail: no later than 2 hours prior to export

26 Export USPPI or authorized agent who knowingly:  Fails to file  Files false and misleading information  Continues to participate in illegal activities Fines:  Up to $10,000 per violation  Imprisonment for not more than five years  Both

27 Export USPPI or authorized agent or carrier: Late filings  Up to $1,100 per each day delinquency or up to a maximum of $10,000 per violation Other violations:  Up to $10,000 per violation

28 Export Regulations  Export Administration Regulations / Dept of Commerce  BIS / Bureau of Industry & Security / Export Administration Regulations  FTSR / Foreign Trade Regulations / Bureau of Census / Dept of Commerce  OFAC / Office of Foreign Assets Control  ITAR /Intl Traffic in Arms Regulations / Dept of State

29 Export Compliance Management Scope of Export Administration Regulations (EAR) Denied Parties Know Your Customer Red Flags Restrictive Trade Practices (Anti-boycott Compliance) Export Commodity Control Numbers (ECCN) Commerce Control List (CCL) Recordkeeping Requirements Penalties for Violations

30 Scope of the Export Administration Regulations Bureau of Industry & Security  Reexports  Transfer of Technology (Deemed Exports)  Foreign Subsidiaries  All U.S. origins items wherever located  U.S. origin parts, components, materials or other commodities integrated abroad into foreign-made products.  Certain foreign-made direct products of U.S. origin technology or software  U.S. persons abroad

31 Deemed Exports / Transfer of Technology Deemed Export Rule An export of technology is “deemed” to take place when it is released to a foreign national within the United States. Release of Technology Technology is “released” for export when it is available to foreign nationals for visual inspection ( such as reading technical specifications, plans, blueprints, etc.) when technology is exchanged orally; or when technology is made available by practice pr application under the guidance of persons with knowledge of the technology.

32 Deemed Exports / Transfer of Technology Technology Technology is specific information necessary for the development, production or use of a product If the technology does not qualify for treatment under EAR 99 and no license exception is available, U.S. entities must apply for an export license under the “deemed export” rule when both of the following conditions are met: They intend to transfer controlled technologies to foreign nationals in the U.S. Transfer of the same technology to the foreign national’s country

33 Deemed Exports / Transfer of Technology Any foreign national is subject to the “deemed export” rule except a foreign national who is: Granted permanent residence as demonstrated by the issuance of a permanent residence visa ( Green Card) Granted U.S. citizenship Granted status as a “protected person” ( political refugees and political asylum holders)

34 Export EAR 99 Items subject to the EAR, but not specified on the Commerce Control List. NLR – No license required. Must check General Prohibitions 4 –10. NLR When an item is not listed on the Commerce Control List (CCL), but is under the scope of the EAR. When an item is listed on the CCL but does not require a license to the destination AND no General Prohibitions apply to the export.

35 Export Commerce Control List (dual use items // Dept. of Commerce// BIS) Export Commodity Control Number Reason for Control Country Chart License Exceptions Example : 4A994 / Computers

36 Commerce Control List Categories 0 – Nuclear Materials, Facilities & Equipment 1 – Materials, Chemicals, Microorganisms & Toxins 2 – Material Processing 3 – Electronics 4 – Computers 5 – Telecommunications & Info Security 6 – Lasers & Sensors 7 – Navigation & Avionics 8 – Marine 9 – Propulsion Systems, Space Vehicles & Related equip. Groups A – Equipment, Assemblies & Components B – Test, Inspection & Production Equipment C – Materials D – Software E - Technology

37 Sanctioned and Embargoed Countries Cuba, No Korea, Iran, Rwanda, Syria, Sudan Need to check the BIS and OFAC websites

38 Destination Control Statement Destination Control Statement (DCS) must be entered on the invoice and on the bill of lading, air waybill, or other export control document that accompanies the shipment from its point of origin in the U.S. to the ultimate consignee or end use abroad. The DCS is required for all exports from the U.S. of items on the Commerce Control List that are not classified as EAR99. At a minimum, the DCS must state: “These commodities, technology or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law is prohibited”

39 Know Your Customer / Red Flags Red Flag Indicators – a check list to discover possible violations of the Export Administration Regulations: Customer is reluctant to offer information about the end use Product’s capabilities do not fit the buyer’s line of business Technical incompatibility in the country of import Paying cash where terms of sale would normally require financing Freight Forwarder is listed as delivery site Abnormal shipping route Routine installation, training or maintenance services are declined Packaging is inconsistent with the stated method of shipment or destination

40 Know Your Customer/Five Basic Questions In Order to be Compliant BIS asks Five Basic Questions 1. What is Being Shipped 2. What is the Value / Quantity 3. Where is it Going? 4. Who is it Going to? 5. What Will it be Used for?

41 Denied Parties Listings Department of Commerce *Denied Parties List *Unverified List *Entities List Department of Treasury – Office of Foreign Asset Controls (OFAC) *Designated Nationals List Department of State *Debarred Nationals List

42 Export Recordkeeping All records must be maintained for a period of 5 years from the expiration date of the export license or other approval or from the date of export. All export docs, A-Z from request for quotation order to commercial invoices to license applications to receivable records to airbills to AES/ EEI copies.

43 Fines and Penalties Violations of the EAR may be subject to both criminal and administrative penalties. Criminal penalties can reach up to 20 years imprisonment & $1 million per violation Administrative penalties can reach the greater $250,000 per violation or twice the amount of the transaction that is the basis of the violation

44 Best Practices Senior Management Designate a point person Standard Operating Procedures Technology Training and Education 44

45 Review Summary, Questions and Open Discussion