Clarifying ‘routed’ exports for US data collection, enforcement

The U.S. Commerce Department’s Census Bureau, which is charged with collecting the nation’s trade statistics, said it is working with its counterparts among the various export enforcement agencies to redefine responsibility within the industry for “routed” exports.

The Census Bureau is drafting a notice of proposed rulemaking (NPRM) to “clarify the responsibilities of parties participating in routed and standard export transactions,” the agency said in a Federal Register notice to the White House’s Office of Management and Budget (OMB).

Census is developing its rule in coordination with the Commerce Department’s Bureau of Industry and Security’s (BIS) effort to redefine how it regulates routed export transactions.

“Both rules have required extensive review and coordination with each agency to ensure that there are no discrepancies or contradictory language in either NPRM,” Census told OMB.

Today, it is mandatory that all export information, whether supplied by the U.S. exporter or its freight forwarder, be provided to the U.S. government through the Automated Export System (AES).

An export transaction typically involves a U.S. seller, known in the Export Administration Regulations (EAR) as the U.S. principal party in interest (USPPI), and an overseas buyer, or foreign principal party in interest (FPPI). In these cases, the USPPI ships an item from the United States and is responsible for obtaining the necessary export clearances, including applying for any federal export licenses.

In a routed export transaction, the FPPI agrees to sales terms with the USPPI in which it takes delivery of the items inside the United States for delivery overseas. Since the FPPI is not technically the U.S. exporter, which is required by the EAR, it hires a U.S.-based agent, such as a freight forwarder, to manage these exports on its behalf.

However, the USPPI is still obligated to ensure routed transactions are compliant with the country’s export control regulations by receiving written authorization from the FPPI and its U.S. agent that they are taking charge of the export and any compliance obligations. Without this documentation, the USPPI remains the responsible party in terms of export compliance.

In addition, the USPPI must provide the FPPI in a routed transaction any information that can affect a U.S. licensing determination or export product classification.

The Census Bureau’s draft rule proposes to revise and “add several key terms used in the regulatory provision of these transactions, including authorized agent, forwarding agent, standard export transaction and written release.”

The agency said, “it is critical for the Census Bureau to ensure that any revisions made to the FTR [Foreign Trade Regulations] will allow the continued collection and compilation of complete, accurate and timely trade statistics. Additionally, it is important that the responsibilities of the U.S. Principal Party in Interest (USPPI) and the U.S. authorized agent are clearly defined to ensure that the EEI [Electronic Export Information] is filed by the appropriate party to prevent receiving duplicate filings or in some cases, no filings.”

For exporters, forwarders and their compliance consultants, this redefining of routed export transaction requirements between Census and enforcement agencies is long overdue. For more than a decade, the agencies have been grappling with how to forge this clarification between export data requirements and enforcement.

“The concern with the current Census FTR is lack of clarity as to which party is going to be accountable for compliance with the export regulations,” said Paul DiVecchio, a 40-year export compliance consultant based in Boston.

“The current FTR allows the opportunity for the FPPI to control the export compliance requirements and the data filed in AES even though the USPPI has been provided with a copy of a ‘power of attorney’ designating the forwarder or the U.S. agent of the FPPI. Relinquishing this responsibility is extremely concerning to the export compliant USPPI who will be held accountable by the enforcing agencies,” he said.

DiVecchio said he believes that the Census Bureau’s Trade Regulations Branch is “working diligently” to publish the proposed regulation for routed transactions in order to obtain industry input which would still allow the FPPI to direct the logistics part of the transaction yet maintain the integrity of export compliance.