Reprinted from Northrop Grumman's Ex/Im Compliance Daily Update ("The Daily Bugle") dated November 1, 2005. Editor's Note: The following letter is being distributed to numerous U.S. freight forwarders by Michael D. Turner, Director, Office of Export Enforcement, Bureau of Information & Security, Department of Commerce, and is reprinted with Mr. Turner's permission.

To Members of the International Forwarding Community

Dear International Forwarder:

The President has identified opposing the proliferation of Weapons of Mass Destruction (WMD) as one of the highest priorities in the war against terror.  As members of the international forwarding community, you play a key role in ensuring the security of the global supply chain, stemming the flow of illegal exports, and helping prevent WMD goods and technologies from falling into the hands of terrorists and proliferators.

I am writing to discuss how the Bureau of Industry and Security (BIS), Office of Export Enforcement (OEE) can work together with you in these efforts. In this letter, I will discuss OEE's export enforcement mission, how you can meet the forwarding community's export compliance responsibilities, tips for mitigating illegal export risks, and working together with OEE to prevent, detect, and deter export violations.

The OEE Mission

OEE's mission is to keep the most sensitive goods out of the most dangerous hands. Our focus is on the most significant international threats facing U.S. national and homeland security, foreign policy, and economic interests: the proliferation of WMD, international terrorism and State sponsors of terror, and diversions of U.S. dual-use goods and technologies to unauthorized military end-uses.  OEE accomplishes its mission through preventative and investigative enforcement activities designed to (1) educate U.S. manufacturers, exporters, and shippers on export control requirements; (2) facilitate voluntary compliance; and (3) disrupt illicit proliferation networks through the interdiction of illegal export shipments and the prosecution and penalization of willful export violators.  Outreach and partnership with the private sector are crucial to our efforts to prevent, detect, and deter illegal exports.

Responsibilities of the Forwarding Community

The Export Administration Regulations (EAR) place legal responsibility on all persons who have information, authority or functions relevant to carrying out export transactions subject to the EAR. Primary responsibility for compliance with the EAR falls on the "principal parties in interest" (PPI) in a transaction. Generally, the PPIs in an export transaction are the U.S. seller and the foreign buyer.

Forwarding agents may have compliance responsibilities under the EAR even when their actions are dependent upon information or instructions given by those who use their services.  However, hiring a forwarding or other agent to perform various tasks does not necessarily relieve a party of its compliance responsibilities.

Agents are responsible for the representations they make in filing export data.  Moreover, no person, including agents, may proceed with any transaction knowing that a violation has occurred, is about to occur or is intended to occur in connection with it. It is the agent's responsibility to understand its obligations.

Agents, especially those acting as the "exporter," should understand the "Know Your Customer" Guidance and Red Flags found in Supplement No. 1 to part 732 of the EAR.  Agents and exporters should decide whether there are red flags, inquire about them, and ensure that suspicious circumstances are not ignored. Failure to do so could constitute a violation of the EAR.

Both the agent and the PPI who has hired it are responsible for the correctness of each entry made when filing export data. Good faith reliance on information obtained from the PPI can help protect an agent, but the careless use of pre-printed "No License Required" forms or unsupported entries can subject an agent to penalties.  Agents should also avoid making commodity classifications for which they lack technical expertise, and should obtain support documentation for Export Control Classification Numbers (ECCNs) and other material.

Agents should also be thoroughly familiar with the ten General Prohibitions set forth in Part 736 of the EAR; and with the violations outlined in Part 764 of the EAR.  Engaging in prohibited conduct or committing the violations set out in the EAR may subject violators to significant penalties - up to 10 years imprisonment and fines of $250,000 for individuals and $500,000 for companies, upon criminal conviction; and penalties of up to $11,000 per violation for administrative offenses.

Mitigating the Risk

As noted above, forwarders may be subject to criminal prosecution and/or administrative penalties for violations of the EAR. BIS has not hesitated to hold forwarders liable for participating in illegal transactions. For example, in 2003, DSV Samson Transport was sentenced to 5 years corporate probation, a $250,000 criminal fine, and a $399,000 administrative penalty for forwarding over 30 illegal shipments to listed entities in India. These violations were committed after DSV had received repeated warnings from OEE that such exports constituted violations of the EAR.

This case, and many others involving forwarders, demonstrate the need for forwarders to know their customers and be aware of suspicious circumstances and Red Flags that may be present in an export transaction. When presented with Red Flags, forwarders have an obligation to inquire about the facts of the transaction, evaluate all of the information after inquiry and refrain from engaging in the transaction. These steps help protect not only the forwarder but also the forwarder's client, who may be unknowingly engaging in a prohibited transaction.

Forwarders can take steps to mitigate their own and their clients' risk of liability by establishing a compliance program that scrutinizes export transactions, checks the parties to transactions against BIS's Denied Persons List (firms and individuals whose export privileges have been denied based on prior export violations), the Entity List (organizations identified by BIS as engaging in activities related to the proliferation of weapons of mass destruction), and the Unverified List (firms for which BIS was unable to complete an end-use check), as well as other lists maintained by the State Department and Treasury Department's Office of Foreign Assets Control. Forwarders should also familiarize themselves with the types of activities to avoid in suspicious transactions as described in the BIS publication, "Don't Let This Happen To You," which can be found at the BIS website.

Parties who believe they may have committed a violation of the EAR are encouraged to submit a Voluntary Self Disclosure (VSD) to OEE.  VSDs are an important indicator of a party's desire to bring their export activities into full compliance, and also may provide important information to OEE helping to identify foreign proliferation networks. Parties submitting VSDs may be eligible for significant reductions in administrative penalties. Procedures for filing VSDs may be found in Section 764.5 of the EAR.

Working with OEE

Forwarders are uniquely placed to identify suspicious transactions and Red Flags.  While it is important to protect yourselves and your clients from engaging in transactions that might constitute violations, it is equally important that OEE be able to fulfill its mission of preventing our most sensitive goods and technologies from falling into the hands of WMD proliferators and terrorists.  Prompt notification by forwarders to OEE of suspicious transactions, and assistance to OEE Special Agents in gathering the evidence necessary to disrupt illicit proliferation networks and bring export violators to justice are important steps in helping us achieve these goals.

OEE welcomes the opportunity to work with you, the members of the international forwarding community, to help ensure compliance with U.S. export requirements and to keep the most sensitive goods out of the most dangerous hands. I encourage you to contact your local OEE office to explore opportunities to work together to ensure the safety and security of our great Nation. 

Thank you for your assistance in helping keep America safe.

Sincerely,

Michael D. Turner
Director
Office of Export Enforcement

(202) 482-1208, ext. 3
mturner@bis.doc.gov

BIS Export Enforcement: Keeping the most sensitive goods out of the most dangerous hands.
To Report Export Violations: 1-800-424-2980 or www.bis.doc.gov