Archive for the ‘Shipping’ Category

ACE, AES and AESDirect…Confused Yet?

Thursday, November 5th, 2015 by Danielle McClellan

By: Danielle McClellan

The ACE, AES and AESDirect system is a bit of a convoluted puzzle of applications that are intertwined. If you understood them before, be prepared to change what you thought you knew. In early 2016 changes will be taking place to the systems. Before we look at the changes, let’s look at each one individually.

ACE (Automated Commercial Environment): this is the primary system that the trade community reports import and export shipments. ACE is a single window that will continue to change and adapt so that it can automate more processes and eliminate paper.

AES (Automated Export System): this is the central point where export shipment data is filed and sent to the US Customs and Border Protection. AES collects, processes and stores all Electronic Export Information (EEI). AES creates Internal Transaction Numbers (ITNs) and provides exporter’s with messages such as “Fatal Errors” and “Compliance Alerts.” AES is housed in ACE.

AESDirect is the online system for Electronic Export Information (EEI) maintained by the US Census Bureau. AES filers can register their accounts in AESDirect and file their export shipments to the AES for processing. Basically AESDirect is just another way to file your export shipment data…50% of exports are processed directly thru AES and the other half are processed thru AESDirect.

So, in early 2016, the current AESDirect (also known as Legacy AESDirect) will transition into ACE. This means that AESDirect filers need to sign up for an ACE account if they do not already have one. If you have an ACE Importer account you should contact your Trade Account Owner (TAO) to request the export functionality be added to your account.

Specific Details:

  • The current AESDirect application available at aesdirect.census.gov, referred to as Legacy AESDirect, will transition completely into ACE in:
    • early 2016 for web, EDI and AESPcLink filers
    • mid-2016 for Weblink filers (specifications are forthcoming in October)
  • The ACE AESDirect application is referred to as Refactored AESDirect.
  • The online portal filing capability for the Refactored AESDirect will be available in late October 2015.

You must transition to the Refactored AESDirect based on the time frames noted above!!!

AESDirect filers are strongly encouraged to sign up for ACE Exporter accounts if they are completely new to the ACE system (brief how-to video).

Filers who have ACE Importer accounts should contact their Trade Account Owner (TAO) designated by their company and request that export functionality is added to their account (brief how-to video).

ALL legacy AESDirect account holders (regardless of filing method) will need an ACE account to access the Refactored AESDirect application because the legacy application will be retired in 2016!!! Sign up in advance and be prepared!

The videos referenced are accessible on CBP’s website.

For further information or questions, contact the U.S. Census Bureau’s Data Collection Branch.

2 Regulations…1 Destination Control Statement

Tuesday, July 14th, 2015 by Danielle McClellan

By: Danielle McClellan

On May 22, 2015 the Directorate of Defense Trade Controls and the Bureau of Industry and Security proposed rules that would change the EAR destination control statement to read the same as the ITAR destination control statement. Many exporters have shipments that contain both EAR and ITAR goods which creates issues when deciding which statement should be included…or if both statements should be included. The goal of this proposed  rule is to make exporter’s lives a bit easier…something we don’t see very often—but then again this is only a proposed rule.

To a certain extent, BIS already fixed the dual DCS problem for shipments containing both EAR and ITAR items.  BIS previously revised 758.6(a) of the EAR to state that using the ITAR DCS constitutes compliance with the EAR DCS requirement for shipments containing both EAR and ITAR items.  The proposed rules, if implemented, would go beyond this BIS quick fix for mixed shipments to a single DCS for all exports.

The Department of State Federal Register notice can be accessed online here.

The BIS Federal Register notice can be accessed online here.

Adding Injury to Insult: Forfeiture of Merchandise for Export Violations

Monday, December 22nd, 2014 by Brooke Driver

By: Stephen Wagner

You are a manufacturer of precision-engineered machinery.  Several weeks ago, a shipment of very expensive merchandise was detained by Customs as your freight forwarder was exporting it from the country.  It seems that you were late filing your commodity data in your EEI and one of the machines actually required a license for export, which you didn’t have at that time.  You are working to obtain the proper license and you understand you may be fined by CBP for the AES violation.

In today’s mail, however, you received a notice of seizure from Customs stating that they have seized the machine for “attempting to export” the merchandise “contrary to law.”  The machine is valued at over $100,000.  This seems like an extreme sanction for what really amounts to a paperwork violation.

Can the Government do this?  And what can you do about it?

The power of the federal Government – by and through U.S. Customs and Border Protection (CBP) – to detain and inspect merchandise arriving at the border of the United States for export (or import) is almost without limitation.  CBP also has the authority under numerous federal statutes to seize and forfeit merchandise that violates certain laws.  For example, Title 22 of the United States Code (U.S.C.), Section 401, “Illegal exportation of war materials,” states:

Whenever an attempt is made to export … articles in violation of law, or whenever it is known or there shall be probable cause to believe that any … articles are intended to be or are being or have been exported or removed from the United States in violation of law, [CBP] may seize and detain such … articles.  (22 U.S.C. § 401 (a).)

This forfeiture provision is used primarily in the ITAR context.  For merchandise falling under the Export Administration Regulations (EAR), CBP has a similar authority under 19 U.S.C. § 1595a(d):

Merchandise exported or sent from the United States or attempted to be exported or sent from the United States contrary to law … shall be seized and forfeited to the United States.

CBP exercises this power pursuant to Title 19 (U.S.C.) as the agency at the border charged with enforcing the laws of numerous agencies including DDTC, BIS and OFAC.  Recently, all of these enforcement agencies have been using their power to seize and forfeit merchandise with fervor.  In the Government’s fiscal year ending September 30, 2013, the Bureau of Industry and Security reported that forfeitures had increased to more than $18 million, up from approximately $5 million in Fiscal Year 2012.

In the case described above, the late filing of the Electronic Export Information (EEI) in the Automated Export System (AES) subjects the entire shipment to seizure.  Also, failing to have the proper license for the machine at the time of its export subjects that machine to seizure.

What can a company facing seizure and forfeiture do?

In the event of a seizure, CBP will issue a letter to the exporter and other parties known by CBP to have an interest in the seized merchandise setting forth the grounds for seizure and forfeiture and describing the alternatives that such parties have in the matter.  These alternatives include voluntarily abandoning the merchandise, filing a petition to have CBP adjudicate the matter administratively or requesting that CBP refer the matter to the United States Attorney for judicial forfeiture proceedings.

This letter, called a “Notice of Seizure,” must be read and understood very clearly by the exporter.  In particular, the notice will give a 30-day deadline for responding.  If the exporter misses this deadline, then the merchandise will be administratively forfeited to the Government, and the exporter will have relinquished its rights to contest the seizure and forfeiture.

In determining the best approach to respond to the Notice of Seizure, it is critical to consult with qualified legal counsel.  If your company’s in-house attorney is not skilled at dealing with seizures and forfeitures, the company should consult with an outside counsel who has such experience, as the laws, regulations and procedures applicable in forfeiture cases and arguments to be made in petitions and in litigation with the Government are not the standard civil litigation practice with which your general counsel or usual outside counsel may be familiar.

Options available to exporters

Depending on the facts of the case, we typically recommend that exporters facing seizure and forfeiture actions file a petition with CBP and pursue the case administratively.  In the petition, there are many arguments an exporter can make as to why the sanction of seizure and forfeiture should be mitigated and the merchandise returned by CBP.  CBP addresses many of these arguments in its Informed Compliance Publication, “Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages.”  Additional helpful information on seizures and forfeitures in general is available from CBP in its publication “Customs Administrative Enforcement Process: Fines, Penalties, Forfeitures and Liquidated Damages.”

Depending on the specific grounds for the seizure (i.e., the laws alleged to have been violated), the facts of the matter and the compliance record of the exporter, in many cases, CBP will mitigate the seizure and return the merchandise upon the payment of a penalty along with the administrative costs of the case (i.e., storage and processing charges).  Exporters typically are also asked to sign a release and hold harmless agreement.  The penalty itself can vary significantly depending on the value of the seized merchandise, the exporter’s prior compliance record and the presence of “aggravating factors,” such as criminal conviction(s) relating to the export transaction, repetitive violations of the same law or evidence of intent to violate or evade export control laws.

The benefit of seeking administrative relief from the seizure in the form of a petition to CBP is that the exporter usually will still have its judicial remedies available, in the event that CBP does not mitigate the seizure and/or return the merchandise.  In other words, if an exporter is unsatisfied with the relief offered by CBP, it can still take the case to federal court for adjudication.  It should be noted, however, that federal litigation can be very expensive and can be a very time-consuming process.  It would not be unusual for an exporter to spend $100,000 in legal fees and take 18-24 months or more for an entire judicial forfeiture case to play out in federal court.  In contrast, CBP will adjudicate most administrative petitions in no more than 3-6 months (depending on the complexity of the matter), and such processes typically cost companies only a fraction of the cost of litigation.

In the event the exporter chooses to pursue judicial review of the seizure, there are many additional arguments that could be made to contest the seizure.  In addition to all of the other arguments raised in the petition in favor of mitigation, as alluded in the letter above, a company could argue the severity of the seizure/forfeiture penalty is excessive in light of the infraction.  Under the 8th Amendment to the U.S. Constitution, “excessive fines [shall not] be imposed…”  Moreover, depending on the particular facts of the case and the value of the merchandise involved, the U.S. Attorney may not want to prosecute the forfeiture action, meaning that a favorable settlement could be reached.

Whatever course an exporter decides to take in a seizure and forfeiture action, it must act with forethought and it must act decisively.  Not only do you have only 30 days to respond to the notice of seizure, but the actions you take (including the petition you file) become part of your compliance record with CBP and the agency whose laws, regulations or requirements have been violated (e.g., BIS, DDTC and/or OFAC).

Computerlinks FZCO fined $2,800,000 for Violating Syria Trade Embargo

Tuesday, June 18th, 2013 by Brooke Driver

By: Brooke Driver

Recently, United Arab Emirates’ Computerlinks FZCO, a Middle East distributer working with Blue Coat Systems, Inc. of Sunnyvale, California, was charged with shipping without permission—or the manufacturer’s knowledge—to the embargoed country Syria. Although Computerlinks FZCO had agreed in its distribution agreement with Blue Coat to abide by US Department of Commerce regulations, the company falsified end user and final destination information it gave to Blue Coat on three occasions.

On or about October 29, 2010, December 31, 2010 and May 15, 2011, Computerlinks FCZO ordered devices from Blue Coat used to monitor and control web traffic along with related equipment and software, informing the manufacturer that the items were bound for the Iraq Ministry of Telecom or Liwalnet (an Internet service provider in Afghanistan), when in fact Computerlinks sent them to the Syrian Telecommunications Establishment. The total value of the three shipments is approximately $1,400,000

Because the value of the shipments was so high and because Computerlink intentionally evaded trade regulations, the BIS chose to:

  • Fine the company a whopping $2,800,000
  • Require three consecutive external audits—the first to analyze the company’s activity during the year prior to the charges, the second to observe the company’s activity the year directly after the charges and the last to analyze its activity two years after the charges

Freight Forwarder Pays $139,650 for Affiliates’ Shipments to Cuba and Iran

Tuesday, June 18th, 2013 by Brooke Driver

By: Brooke Driver

EGL, Inc. of Houston, Texas has agreed to pay $139,650 for alleged violations of the Cuban Assets Control Regulations, 31 C.F.R. part 515 (CACR) and the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). During 280 transactions between the dates of April 19, 2005 and December 15, 2008, EGL’s foreign affiliates provided freight forwarding services to and from Cuba, in violation of the CACR. The alleged violations of the ITR occurred between August 15, 2008 and October 27, 2008, when affiliates of EGL provided freight forwarding services for ten shipments that contained oil rig supplies to Aban VIII, an oil drilling rig off the Iranian coast owned by Petropars—an affiliate of the National Iranian Oil Company.
While the company voluntarily disclosed the CACR violations, it did not disclose the ITR violations, resulting in a base fine of $206,889. The lowered settlement amount and the case’s non-egregious classification reflect OFAC’s consideration of the following:

  • EGL had no history of prior sanctions violations
  • EGL substantially cooperated with OFAC’s investigation, including by entering into statute of limitations tolling agreements, and by producing responsive materials in a clear and organized fashion
  • EGL took remedial measures to prevent future OFAC violations

OFAC’s required fine of $139,650 was based on the facts that:

  • The alleged violations of the CACR and the ITR by EGL resulted in significant harm to OFAC’s sanctions programs
  • EGL had reason to know that the Aban VIII was an oil rig operated by an Iranian company in Iranian waters

So what have we learned?
1.    Be aware of the actions of your affiliates, because you are accountable for their mistakes.
2.    Speak up to pay less: The government will take your cooperation into consideration when determining consequences.
3.    Suspicion counts as knowledge: reason to believe that a violation may occur is reason enough for the government to dole out severe consequences.

Verify the EEI

Tuesday, May 3rd, 2011 by Anna Barone

Posted by Eric on the Census Blog

If you receive a Fatal Error and Compliance Alert response message titled VERIFY, this means certain fields reported in the Electronic Export Information (EEI) must be double-checked or verified for accuracy. If you have checked the fields indicated by the response messages and everything looks good, then no further action is required. However, if the field is not correct, make the necessary changes and resubmit. (more…)

Power of Prefix: OFAC Warns Iranian Shipper’s Games

Tuesday, May 3rd, 2011 by Anna Barone

The Office of Foreign Assets Control (OFAC) is issuing a special advisory to alert shippers, importers/exporters and freight forwarders to practices used by the Islamic Republic of Iran Shipping Lines (IRISL) and companies acting on its behalf to evade U.S. and international economic sanctions. These practices, which hide the involvement of IRISL in shipping transactions, include:

  • Using container prefixes registered to another carrier
  • Omitting or listing invalid, incomplete or false container prefixes in shipping container numbers
  • Naming non-existent ocean vessels in shipping documents.

Examples of container prefixes that have been used by IRISL and either belong to another carrier or are fabricated include:

  • IRSU: (belongs to another carrier)
  • XBIU: (belongs to another carrier)
  • ALXU: (fabricated)

What Can You Do?

  • Exercise enhanced due diligence to ensure you do not unwittingly process fraudulent shipping documents or facilitate prohibited activities.
  • Look for examples of container prefixes that are registered to designated entities affiliated with IRISL, such as SBAU and HDXU
  • Note that transactions involving U.S.-sanctioned entities cannot be processed through the United States or by U.S. persons unless there is an authorization from OFAC.
  • Be alert to the presentation of fabricated vessel names in trade documents.
  • Check the bona fides of unfamiliar entities issuing shipping documents.
  • Verify the accuracy of container numbers, particularly when unfamiliar with the issuer of the shipping documents by using an internet search term such as “shipping container validation.”

Additional information available:

http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/pages/20110331_33.aspx

http://www.strtrade.com/wti/wti.asp?pub=0&story=36735&date=4/4/2011

Tennessee Trafficking- Tisk, Tisk

Tuesday, May 3rd, 2011 by Anna Barone

Following an extensive investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HIS) and the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), four former officers of Sabre Defense Industries, LLC (SDI-US) plead guilty to the following charges:

  • Conspiracy to defraud the United States
  • Conspiracy to commit mail fraud and wire fraud
  • Making false statements on export and import documents
  • Conspiracy to violate the AECA

Specifically, they admitted to:

  • Illegally importing and exporting regulated firearms and firearm components and technology to and from the United States from Sabre Defense Industries, LLC and from their personal residences.
  • Exporting firearm components from the U.S. to an international location without first obtaining a license or written authorization from the DDTC of the U.S. Department of State.
  • Importing silencers into U.S. from international sources without having first obtained the required license and authorization from ATF.
  • Falsifying shipping records, conceal unlicensed firearms components in false bottoms of shipping cartons, and mislabel and undervalue shipments of firearm components, since 2003, to avoid scrutiny by U.S. Customs and Border Protection control officers.
  • Concealing illegal import and export activities by maintaining two sets of business books to record the company’s accounts and balances, and its export and import activities.

U.S. Attorney Jerry Martin says, “The illegal import, export and transfer of firearms and related components poses a great risk to America and our allies.   Those who engage in such irresponsible and illegal activity will come to realize the commitment of our law enforcement partners to safeguarding America and the high priority given to this issue by the Department of Justice.”

Sentencing is set for August 1, 2011 at 10 a.m.

Additional information available:

http://www.ice.gov/news/releases/1103/110329nashville.htm

DDTC List of Companies with Name Changes or Mergers

Friday, April 16th, 2010 by John Black

Here is a list of the companies for which the DDTC has announced name changes or mergers.  Check this list to see if any of these parties are on licenses, agreements, or approval that you have now, have applied for, or are about to apply for.  Click on the link to see the details.

  • GE Fanuc Intelligent Platforms Technology Corporation to GE Intelligent Platforms Technology Corporation. (3.08.10)  Click here to read.
  • GE Fanuc Intelligent Platforms Embedded Systems, Inc. to GE Intelligent Platforms Embedded Systems, Inc. (3.08.10)  Click here to read.
  • GE Fanuc Intelligent Platforms (Colorado), Inc. to GE Intelligent Platforms (Colorado), Inc. (3.08.10)  Click here to read.
  • ITT Systems Division and ITT Federal Services International Corporation Changing to ITT Systems Corporation. (3.08.10) Click here to read.
  • i-Logistics USA Corporation Changing to Itochu Logistics USA Corporation. (2.22.10)
    Click here to read.
  • G4S Security Services (Canada) Ltd. to G4S Secure Solutions (Canada) Ltd. (2.22.10)  Click here to read.
  • GE Fanuc Intelligent Platforms of the U.S. Changing to GE Intelligent Platforms. (2.22.10)  Click here to read.
  • GE Fanuc Intelligent Platforms (Bracknell) Limited of the United Kingdom Changing to GE Intelligent Platforms (Bracknell) Limited (2.22.10)  Click here to read.
  • GE Fanuc Intelligent Platforms Limited of the United Kingdom Changing to GE Intelligent Platforms Limited. (2.22.10)  Click here to read.
  • Sartomer Company, Inc. Changing to Cray Valley USA, LLC. (2.22.10) Click here to read.
  • Saab AB (publ) Entities Name Changes. (2.16.10)  Click here to read.
  • Saab Technologies, Inc. to Saab North America, Inc. (2.12.10)  Click here to read.

State/DDTC Requires Eight Copies for CJs

Friday, April 16th, 2010 by John Black

If you are going to submit a Commodity Jurisdiction (CJ) determination request, DDTC says you must mail it in (FedEx, DHL, UPS, USPS) and you must include 8 complete copies of a fully executed DS-4076 CJ and all supporting documentation.