More than three years after the Census Bureau first proposed
them, the most recent amendments to the Foreign Trade Regulations (“FTR”) (15
CFR Part 30) finally will take effect on April 5, 2014.
Given the long delay in implementing the final rule — which was originally published on March 14, 2013, and the effective date changed from January 8, 2014 to April 5, 2014 — many U.S. exporters and freight forwarders appear unaware that these changes are finally taking effect, much less have analyzed the implications on their EEI filings.
The final rule is particularly significant given its broad
application. The changes to the FTR will
affect all Electronic Export
Information (“EEI”) filings made through the Automated Export System (“AES”),
whether filed directly by the U.S. exporter or via an agent, such as a freight
Some of the changes are particularly important to exporters that
ship goods under export licenses issued by the Bureau of Industry and Security
(“BIS”) or the Directorate of Defense Trade Controls (“DDTC”).
Since this final rule impacts all exports departing the U.S. on or after April 5, 2014, U.S. exporters will need to submit the new information in AES later this week, except for the small number of authorized postdeparture filers.
As with any regulatory overhaul, questions
abound, and we have already seen confusion within industry regarding how
certain changes to the FTR will affect ITAR and other licensed shipments.
The following is a summary of several of the more
significant changes to the Foreign Trade Regulations that enter into effect on April 5, 2014. This is by no means a complete list. We recommend that all
exporters and freight forwarders, as well as their advisors, review the final
rule published by Census in the Federal
Register on March
14, 2013 to review the full set of FTR amendments to determine the impact of the changes on their EEI filings.
Addition of Two Data Elements in All EEI Filings
One of the most significant changes made by the final FTR amendment rule is
the addition of two new data elements to numerous existing
data elements required in EEI filings:
- License value – Amended FTR section 30.6(b)(15) requires that all
shipments requiring an export license report the total value included on
the BIS or DDTC export license that corresponds to the commodity being
exported. Thus, in addition to the export license number and total value
of the shipment, the total value of the license must also be included in the EEI filing. This
information will be used to allow electronic license decrementation
capability that is being included in the reengineered AES/ACE
- Ultimate consignee type–
Amended FTR section 30.6(a)(28) to include a mandatory filing requirement
for the “ultimate consignee type.” This applies even if the goods are EAR99 and are exported No License Required ("NLR"). There are four ultimate consignee types
to choose from:
- Direct Consumer
- Government Entity
- Other/Unknown. Other/Unknown is an entity that
does not fall under one of the other three ultimate consignee types
or whose type is not known at the time of export.
Census has stated that if more than one type applies to the ultimate consignee the type that applies most often should be reported.
Census has also advised that shipments exported on and after April 5, 2014 will require the additional data element(s) outlined in the FTR, otherwise the shipment will be rejected."
(Formerly Option 4) Time Decreased From 10 Calendar Days to 5 Calendar Days
While all EEI filings must be filed prior to the export
taking place, certain exporters are authorized to transmit the EEI filing after the goods
have been exported because they are grandfathered into the Census
postdeparture filing program (formerly known as Option 4). A moratorium on
accepting new applications for postdeparture filing has been in place since
9/11, but Census and CBP reportedly are working on future pilot program that might
allow certain data elements to be filed after the goods have left the United
For currently approved postdeparture filers, however, section
30.4(c) of the FTR has been amended to decrease the postdeparture filing
timeframe from 10 calendar days to 5 calendar days. This change has required many exporters to make signficant changes to their EEI filing procedures and processess.
Changes to FTR Filing
Exemptions and Impact on Exports Made Pursuant to an Export License, License
Exemption, or License Exception
Numerous changes were made to the various EEI filing
exemptions in section 30.37 of the FTR. As a result of these changes, EEI does
not have to be filed for the following shipments:
- Exports of ITAR controlled technical data and
defense service exemptions as defined in 22 CFR § 123.22(b)(3)(iii) (see
section 30.37(u) of the FTR).
- Shipments exported under EAR License Exception BAG
(see section 30.37(x) of the FTR).
- While shipments to EAR Country Group E:1 countries (Cuba,
Iran, North Korea, North Sudan and Syria) require an EEI fling in most
cases, specific types of shipments destined for these E:1 terrorist
supporting countries, are excluded from EEI filings, such as tools of the
trade, certain publications, and vessels and aircraft under License
Exception AVS (see section 30.37(y) of the FTR).
Conversely, an important EEI filing exclusion
was eliminated. Section 30.27(q) of the FTR was removed so as to require an EEI
filing for goods that are temporarily exported from the United States valued
over $2,500 per Schedule B number.
Filing Exclusions for Licensed Goods
Section 30.2(d) of the FTR was amended
to add the following two narrow EEI filing exclusions:
1. When the ultimate destination of BIS or DDTC export licensed goods is
the United States. (See below for clarifications related to ITAR-controlled
2. When the ultimate destination
of BIS or DDTC export licensed goods is to international waters (such as an
offshore oil rig) where the person or entity assuming control of the item is a
U.S. citizen or U.S. permanent resident alien (Green Card holder). (See below
for changes made to the FTR regarding other types of shipments to international
to EEI Filings for ITAR-Controlled Goods Ultimately Destined for the U.S.
Section 30.18(a) of the FTR was amended
to read as follows:
"Items identified on the USML, including those exported
under an export license or license exemption, ultimately destined to a location in the United States are
not required to be reported in the AES."
This change has led to confusion among various exporters,
as they were reading the regulation to indicate that a temporary export of an
ITAR-controlled item from the United States pursuant to a DSP-73 or other
authorization, which ultimately is being returned to the US, would not require
an EEI filing. This interpretation is not correct. Census has confirmed that this
language was only included to clarify that shipments of ITAR controlled goods
moving by vessel from the East Coast of the U.S. to the West Coast of the U.S.,
or vice versa, would not require the an EEI filing. In a temporary export where
the goods are delivered to an end-user outside the United States, an EEI filing
is required notwithstanding that the goods ultimately will be returned to the
United States. It is not hard to
understand why the regulation as drafted generated confusion among industry.
While not specifically mentioned in the FTR, the same
policy should apply to EAR controlled goods.
In addition to the filing
exclusion noted above regarding shipments to international waters, the new
amendments to the FTR make a number of other changes to shipments to
international waters, including:
- Adding the following definition of “international waters” in the FTR: “waters
located outside the U.S. territorial sea, which extends 12 nautical
miles measured from the baselines of the United States, and outside
the territory of any foreign country, including the territorial water
thereof. Note that vessels, platforms, buoys, undersea systems, and
other similar structures that are located in international waters,
but are attached permanently or temporarily to a
country’s continental shelf, are considered to be within the
territory of that country” (see section 30.1 of the FTR).
- For licensed shipments to “international waters”,
the person designated on the export license must be reported as the
ultimate consignee (see section 30.6 of the FTR).
- For BIS license exceptions and non-licensed shipments
to international waters, the EEI filer will be required to report the nationality
of the person or entity assuming control of the item subject to the
EAR (see section 30.6(a)(5)(i)).
Of course, the EAR contains separate requirements for certain shipments to international waters and those should also be reviewed.
These are but a few of the significant
changes to the FTR that will take effect on April 5, 2014. A number of the other changes to the FTR might affect a particular exporter or freight forwarder depending on the
nature of their export activities. Exporters and freight forwarders are
encouraged to examine the FTR amendments to determine whether and the extent to
which they will require changes to their EEI filings processes and procedures going forward, including providing their EEI filing agents with new data elements in their Shipper's Letters of Instructions.
Compliance with the FTR is
particularly important given the increased scrutiny EEI filings now receive
from CBP and other agencies, the potential civil penalties that can be imposed
for inaccurate EEI filings (up to $10,000 maximum per violation), and the more
aggressive enforcement posture of such agencies, particularly U.S. Customs and Border Protection.