BIS Requests Comments on Best Practices to Prevent Transshipment Diversion

The previous list was posted in November 2003. BIS seeks information to refine and revise the list to help ensure that industry and the government continue to prevent diversion of controlled items subject to the Export Administration Regulations through transshipment points¹.

Comments are due by October 18, 2010.

Particular Interest Regarding EMCP Guidance Principles

BIS is particularly interested in engaging in a dialogue with industry regarding new transshipment principles and best practices that complement those already identified by BIS in its web guidance on export management and compliance programs (EMCPs), which includes nine key elements for effective EMCPs for exporters of dual-use items, and industry outreach regarding export management and compliance.

(See ITT’s Online Archives or 02/24/10 news, 10022425, for BP summary of BIS’ EMCP guidance.)

Possible Additions to Existing List of Best Practices

BIS seeks comment on the following existing transit, transshipment, and reexport best practices and additional practices from the public based on experience.

1. Pay heightened attention to the Red Flag Indicators on the BIS Website (see http://www.bis.doc.gov/Enforcement/redflags.htm) with respect to transactions to, from, or through transshipment hubs. When a company encounters a suspicious transaction, such as those outlined in the “Know Your Customer” Guidance and Red Flags (Supplement No. 3 to Part 732 of the EAR), it should inquire further and attempt to resolve any questions raised by the transaction.
2. An Exporter/Reexporter should seek to utilize only those Trade Facilitators/Freight Forwarders that also observe these best practices and possess their own export management and compliance program.
3. Exporters/Reexporters should have information regarding their foreign customers. In particular, a company should know if the customer is a trading company or distributor, and inquire whether the customer resells to or has guidelines to resell to third parties.
4. With respect to transactions to, from, or through transshipment hubs, Exporters/Reexporters should take appropriate steps to inquire about the end-user and to determine whether the item will be reexported or incorporated in an item to be reexported.
5. Freight Forwarders should inquire about the details of a routed transaction when asked by a foreign principal party in interest to ship to a country or countries of destination or ultimate consignees that are different from those provided by the U.S. principal party in interest.
6. An Exporter/Reexporter should communicate the appropriate Export Control Classification Number (ECCN) or other classification information (EAR99) for each export/reexport to the end-user and, where relevant, to the ultimate consignee.
7. An Exporter/Reexporter should report such ECCN or the EAR99 classifications for all export transactions, including “No License Required” designations to the Trade Facilitator/Freight Forwarder or enter them in the Automated Export System (AES).

Best Practice Compliance May be Mitigating Factor in Prosecutions

BIS notes that demonstrated compliance with these best practices by a company could be considered a mitigating factor in administrative prosecutions arising out of violations of provisions of the EAR that apply to transit, transshipment or reexport transactions.

¹Transshipment points are countries or areas that function as major hubs for the trading and shipment of cargo, and pose special risks due to their large volumes of transit, transshipment, and import and reexport traffic.

BIS contact -- Gerard Horner (202) 482-2078

(D/N 100812348-0366-01, FR Pub 09/01/10)

BIS’ EMCP guidance is available here.