The Census Bureau has recently updated the AES system to add a new License Exception code for STA shipments. The Census Bureau has also indicated that new reporting requirements should be followed when using C59 to prevent the return of fatal errors from AES:

- In addition to reporting C59 in the AES License Type field, also report STA in the license number field.

- The Export Control Classification Number (ECCN) field is required. Refer to §740.20 of the Export Administration Regulations for those items that are ineligible for BIS license exception STA.

- Report Export Information Codes OS, OI, CH or CI.

A complete list of all of the AES License Type codes and reporting instructions found at<http://www.cbp.gov/linkhandler/cgov/trade/automated/aes/tech_docs/aestir/june04_intro/appendices/apndx_f.ctt/apndx_f.doc>, which has been updated to include the code for License Exception STA.

reprint of the AES Broadcast of the Notice:

AES Broadcast 06/30/2009 Broadcast # 2009024
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BIS to Add New Edits on ECCNs, Special Comprehensive Licenses, and
Certain License Exceptions
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United States Principal Parties in Interest (USPPIs) and their authorized filing agents (AES filers) are reminded that the AES record containing the Electronic Export Information (EEI) is an export control record under § 758.1(f) of the Export Administration Regulations (EAR). Furthermore, the AES record represents whether the export authorized under the terms and conditions of a license, license exception or no license required is true, accurate and complete.

Effective October 1, 2009, BIS is tightening up the edits on the EEI to improve statistics and to ensure that AES filers are correctly certifying the use of a license or license exception authorization or no license required designation. AES filers must prepare for these edits, as described below to prevent the return of fatal errors from AES.

• The export Control Classification Number (ECCN), when reported in AES must be [a] valid 5 – position ECCN as listed on the Commerce Control List. See Supplement 1 to § 774 of the EAR for a complete list of valid ECCNs and their descriptions.
• The Special Comprehensive License (SCL) number reported in AES under license type C31 must be a BIS approved SCL.
• License exceptions LVS(C35), GBS(C36), CIV(C37), and TSR(C38) must designate an eligible ECCN and country. See Part 740 (License Exceptions) and Supplement 1 to § 774 (Commerce Control List)
• In accordance with the EAR § 740.17, license exception ENC(C50) must only be used with ECCNs 5A002, 5B002, 5D002 and 5E002.

Please note that by using a License Exception, you are certifying that the terms, provisions and conditions for the use of the License Exception described in the EAR have been met. See Part 740 of the EAR.

If you are unable to resolve fatal errors related to the above and require regulatory guidance from BIS, please contact its Office of Exporter Services at one of the following locations.

• Western Regional Office (949) 660-0144
• San Jose, CA Branch (408) 291-4212
• Headquarters, Washington, DC (202) 482-4811

• Red = mandatory field
• Blue = conditional field; depending on your shipment you may be required to fill in these fields
• Black = optional

Some examples of the blue conditional fields are:

• Transportation Reference Number: This is only required if you are using a vessel as the mode of transportation.
• Port of Unlading: required if mode of transportation is a vessel or if the shipment is an air shipment between the US and Puerto Rico.
• Carrier SCAC/IATA: Census explains that if the mode of transportation is vessel, rail, truck or air, then this is required…so if your shipping anything just plan on filling out this field with either the Carrier’s Standard Carrier Alpha Code (SCAC) or International Air Transport Association (IATA) code.
• Conveyance Name: same as above, unless you’re walking this shipment to its destination you will need to provide the vessel name or carrier name.

Refer to Section 30.6 of the Foreign Trade Regulations for the entire list of fields and the requirements to file.

Still a little confused? Attend one of our seminars to get more information and get your questions answered!

More information:

• AES Newsletter April 2009 (PDF)

The easiest code to understand is C33, which should be used for exports, designated EAR99 or those that have an ECCN with a reason for control of Anti-Terrorism (AT) ONLY. C33 should also be used for items destined for Puerto Rico or the US Virgin Islands

License Code C32 should be used for exports that have an ECCN which has a reason for control IN ADDITON to Anti-Terrorism (AT) or other than AT.

More information:

• AES Newsletter April 2009 (PDF)

Authority to issue civil penalties to enforce the FTR has been delegated to CBP, which has published guidelines on how it will assess penalties for certain violations based on four mitigation schemes outlined as follows:

• Penalties for the Failure to File Electronic Export Information (EEI) in AES
• Penalties for the Late Filing of Electronic Export Information (EEI) in AES
• Penalties for Various Other FTR Violations
• Penalties for Carrier Filing Failures

Each penalty scheme follows a sequence of recorded offenses, typified by the following one for failure to file EEI:

• First Recorded Offense – $750 to $2,500
• Second Recorded Offense – $1000 to $3500
• Third Recorded Offense – $1500 to $5000
• Fourth and Subsequent Recorded Offense – $2000 to $10,000

In addition to a voluntary disclosure, a number of other mitigating factors can reduce the penalty. Additional mitigating factors may include: a first-time offense; documented remedial measures to prevent future violations; exceptional cooperation; isolated occurrence; providing substantial assistance during investiga tion; and demonstration of systematic export compliance efforts.

If one or more mitigating factors are present, it may result in a reduced penalty amount from the prescribed amount with a minimum penalty of $250 or $500, depending on the mitigation scheme. The reduced amounts are based on the type of violation and which of the four mitigation schemes covers that violation. In situations of a first-time offense, CBP may take an alternative action to the assessment of penalties, such as a warning letter. Note that multiple violations can occur in a single export transaction and penalties can be assessed on a per-shipment basis where violations are repeated. Therefore, the total amount of fines can be significant for companies that export regularly.

Alternatively, if one or more aggravating factors exist, then the mitigated penalty amount may increase beyond the prescribed amount but no higher than $10,000 per violation. The guidelines provide a list
of examples of aggravating factors. The examples include: several violations in the same export transac tion; circumstances suggesting an intentional violation; a high number of violations in the preceding three-year period; evidence of criminal conviction for related violation; pattern of disregard for U.S. export laws and regulations; and evidence of lack of systematic export compliance effort.

Penalties may be assessed against any culpable party with respect to the export transaction. This includes the U.S. Principal Party in Interest (USPPI), the Foreign Principal Party in Interest (FPPI), freight forward ers, authorized agents (which may include brokers and other parties to the export transaction), and carriers.

The notice states that CBP will commence the issuance of civil penalties for FTR violations on February 1. Although enforcement actions for violations of these regulations have previously been relatively rare, the publication of these guidelines suggests that CBP is planning a more robust civil penalty program. All companies involved in international business should ensure that they maintain full compliance with the FTR to avoid the increased penalties and the new cop on the beat.

For further information, Thomas M. deButts, Esq. or Ada L. Loo, Esq. at www.pillsburylaw.com

— Thomas M. deButts, Esq. Ada L. Loo, Esq.

© 2009 Pillsbury Winthrop Shaw Pittman LLP. All Rights Reserved.

The Census Bureau has now released a clarification to the exemption, when shipping any items between the US and Puerto Rico proof of the EEI filing citation, post departure filing citation or exemption must be presented to the carrier prior to the departure of goods. The filing does not have to be in advance, but it must be filed.

Remember however, most carriers want this information earlier than the time frames that have been set. Most carriers have a “no docs, no load” policy, meaning they must have the ITN number or an exemption listed on the transport document or your shipment will not be loaded. All ITN formats and exemption formats must meet the new criteria set forth in the Jun 9, 2008 Federal Register.

More information:

• Filing Time Frames Exemption for Puerto Rico (PDF) (Census Bureau Memorandum)

Under the Act the AES would be required to:

• Reject data submitted for exports that would violate US export control or sanction regulations by virtue of the destination country or entity;
• Alert the exporter of potential export license requirements under the EAR and/or the ITAR based on codes;
• Issue a fatal error notice when the data submitted includes: names, addresses or restricted entities or destination countries subject to US sanctions and embargoes;
• Issue compliance alerts or other warnings to the filer if: the data submitted includes an inconsistent classification number, a license exception which is not available for the country or ultimate consignee or if there is no license number

Exporters say that these types of errors happen often because of the many different export control laws and regulations they have to handle.

Provisions to the bill include:

• Licenses for AES Filers, the DOC could establish a program to license those who file information in the AES on their behalf;
• Shipper’s export declarations and AES filings would be exempted from disclosure to the public, but could be shared with other federal agencies if deemed necessary;
• The DOC would required to work with other relevant agencies to ensure that appropriate personnel are made available to participate in seminars, training and meetings whose purpose will be to educate exporters about US export laws and regulations and the AES in particular.

This bill is far from becoming something that actually requires that exporters take action. As a practical matter, exporters should not even think about doing anything to comply with this potential change. Yet.

The ECCN will be required for the following exception codes:

1. C35-LVS
2. C36-GBS
3. C37-CIV
4. C38-TSR
5. C40-TMPC
6. C41-RPL
7. C42-GOV
8. C43-GFT
9. C44-TSU
10. C45-BAG
11. C46-AVS
12. C47-APR
13. C48-KMI
14. C49-TAPS
15. C50-ENCC51-AGR
16. C53-APP

While some have argued that this new requirement should not pose any problems for exporters, those arguments usually come from people who are not responsible for doing AES submissions and coordinating export paperwork and documentation.

More information:

www.access.gpo.gov/bis/ear/ear_data.html

The legislation also adds new activities that represent violations; in the past civil violations consisted of violating or attempting to violate the law. Now it is a violation to “conspire” or “cause a violation” of the law. The criminal side merely adds that it is a violations to “willfully conspire to commit” or “aid or abet” a violation.

According to the Commerce Department, over a period of almost 8 months, Aviacsa Airlines of Houston, Texas exported No License Required aircraft parts without filing the required SEDs/AES on 75 different occasions. The shipments ranged in value from $2550 to approximately $22,000. Consequently, Aviacsa agreed to pay a fine of $450,000—half of the fine is suspended for one year and will be waived if Aviacsa doesn’t get caught with any violations during the one year period.

No doubt, Aviacsa’s lawyers claimed that they got a good deal for their client, who could have faced fines of $875,000, or even more if Commerce had decided to double count violations as it often does.

Bottom Line Compliance Lesson: Failure to file SEDs/AES can lead to problems. I am not saying one mistake will get you in big trouble, but we now know what can happen if you fail to file 75 times. Use this story to scare your company into doing a better job with its SED/AES filing.