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April 22, 2008 

Bill Introduced in Congress Would Authorize AES Licensing and Permit System

Representatives Don Manzullo (R-IL) and Adam Smith (D-WA) recently introduced H.R. 5828, the Securing Exports Through Coordination and Technology Act of 2008. According to the press release issued in connection with the introduction of this bill, H.R. 5828 is intended to "clarify a confusing U.S. export system that often punishes inadvertent mistakes with costly fines" and would "strengthen the government’s ability to crack down on deliberate violators." The bill "would require the federal government to modernize its computerized Automated Export System (AES) to prevent freight forwarders (who facilitated 78 percent of the $1.62 trillion in U.S. exports for 2007) and others from inadvertently making illegal exports to restricted parties or embargoed countries."

The centerpiece of the bill, as contained in section 304, is the authorization o
f a program that would require companies and users of AES to obtain a license to file AES records. Among other things, the bill authorizes the Census Bureau to conduct examinations and background checks and collect users fees to defray the costs of an AES licensing program. The Census Bureau previously considered establishing an AES Filer Licensing and Permit Program. However, in a 2003 Federal Register notice issued in connection with the advance notice of proposed rulemaking associated with the mandatory AES program Census indicated that it "decided not to move forward with the development and implementation of an AES filer licensing program concurrently with requiring full mandatory electronic filing of export information through the AES. However, the Census Bureau will continue to explore the need for an AES filer licensing program."

The bill would also require AES to provide certain export compliance information, fatal error messages and alerts to AES filers. For example, section 305 of he bill requires AES to provide the following notifications to filers:

(1) Codes entered into the Automated Export System to identify an export, whether by classification under the Harmonized Tariff Schedule or otherwise, will alert the exporter of potential export license requirements under the Export Administration Regulations or the International Traffic in Arms Regulations (ITAR).

(2) Automated Export System will issue a Fatal Error notice when data entered for an export contain any of the following:

(A) The name or address of an individual or legal entity that has been described on any restricted party list and the data are not accompanied by the necessary export authorization.

(B) The intermediate or ultimate country of destination is subject to trade sanctions imposed by the United States and the data are not accompanied by the necessary export authorization.

(C) In the case of defense articles and defense services, the country of the intermediate or ultimate consignee is subject to an arms embargo or prohibition imposed by the United State and the data are not accompanied by the necessary export license.

(3) Automated Export System will issue compliance alerts or other warnings to the filer when data for an export are entered containing any of the following errors or omissions:

(A) The Harmonized Tariff System code is inconsistent with the Export Control Classification Number or the U.S. Munitions List Category.

(B) In the case of a dual use item, the license exception is not available to the country of the ultimate consignee or to the intermediate or ultimate consignee.

(C) In the case of defense articles and defense services, the U.S. Munitions List Category is identified but no license number, exemption, or exception is correctly identified.

(4) Fatal Error notices, compliance alerts, or other warnings are accompanied by references to the applicable regulations and licensing authorities.

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