US freight forwarders take note: new guidance clarifies export compliance responsibilities

The Bureau of Industry and Security (BIS) recently released a document outlining best practices and responsibilities for freight forwarders engaged in international trade.

This information is critical for freight forwarders to ensure they operate within legal boundaries and mitigate risks associated with export compliance.

The guidance brings clarity to the roles and responsibilities of freight forwarders, eliminating ambiguity regarding their involvement in the export process.

This newfound clarity can translate into several benefits for forwarders. Clear expectations allow them to develop efficient procedures for handling export transactions, potentially minimising errors and delays.

Establishing best practices for communication and documentation can further streamline processes and reduce the likelihood of mistakes in Electronic Export Information (EEI) filings.

However, the guidance also introduces potential challenges for freight forwarders. The document emphasises their role in export security, which may lead to increased scrutiny of their operations by BIS to ensure compliance. This heightened focus on their role comes with a degree of strict liability.

Freight forwarders share responsibility for the accuracy of EEI filings, by assuring information provided by exporters is accurate. Inaccurate or incomplete data from exporters can place a significant burden on forwarders.

Additionally, implementing the recommended best practices, such as screening parties against restricted lists and maintaining detailed records, may require additional resources and effort.

The Importance of BIS and Export Regulations

The BIS plays a critical role in safeguarding national security and foreign policy interests. Through its Export Administration Regulations (EAR), the BIS establishes a framework for controlling the export of sensitive goods and technologies.

These regulations help prevent the proliferation of weapons of mass destruction, curb destabilising military activities and impede human rights abuses. Additionally, they protect against the flow of goods that could be used for terrorism or other illegal activities.

Without a comprehensive system like the EAR, the global supply chain could become vulnerable to exploitation. Malicious actors could gain access to restricted items, potentially disrupting international security and stability.

The BIS, through its regulations and guidance documents like this recent release, works to ensure a secure and responsible flow of goods across international borders.

Responsibilities of Freight Forwarders Outlined in the Guidance

While a freight forwarder’s expertise lies in efficient cargo movement, the BIS guidance emphasises their responsibility to comply with the Export Administration Regulations (EAR) even when relying on information from exporters. This highlights the importance of clear communication and documented agreements.

Here’s a breakdown of the key points for freight forwarders:

• Obtaining Clear Instructions: Freight forwarders must secure a Shipper’s Letter of Instruction (SLI), Power of Attorney (POA), or written authorisation from the exporter (US Principal Party of Interest or USPPI). This document outlines the services expected and clarifies who is responsible for filing the Electronic Export Information (EEI) in the Automated Export System (AES). Additionally, they must retain this document and the exporter’s contact information as per EAR recordkeeping requirements.
• Understanding Regulations: Freight forwarders need to be familiar with the EAR and other relevant regulations from various federal agencies. This includes knowing the 10 general prohibitions outlined in 15 CFR 736.2, proper handling of license exceptions and specific licenses, and the EAR’s requirements for filing EEI (15 CFR 758). They should also be knowledgeable of Foreign Trade Regulation (FTR) requirements (15 CFR 30) and export requirements from agencies like U.S. Customs and Border Protection.
• EEI Filing and Information Accuracy: The guidance lays out specific responsibilities depending on whether the exporter files the EEI or the freight forwarder does. When the exporter files, the forwarder must provide accurate transportation data and keep them informed of any changes. They should also obtain the Internal Transaction Number (ITN) or exemption code from the exporter. If the forwarder files the EEI, they must have written authorisation, ensure accuracy and timeliness, and obtain missing information from the exporter, such as the Export Control Classification Number (ECCN) and license details. They are also responsible for identifying and resolving discrepancies and maintaining detailed records.
• Security and Compliance: Freight forwarders are expected to be vigilant for red flags, such as boycott language in documents. When a license is involved, they must ensure the entire transaction aligns with the license requirements. They should also be prepared to provide the exporter with a copy of the export information upon request.

By understanding and adhering to these crucial points, freight forwarders can ensure they meet their legal obligations and contribute to a secure and compliant export process.

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