The “Soon” Is Now: Throw Away Your SEDs Because It’s AES EEI Time!

The “soon” is now, to paraphrase the late, great football coach George Allen. For quite a while, the Census Bureau has been saying soon it will publish the rewritten rules for the submission of Shipper’s Export Declarations (SEDs) and the Automated Export System (AES). The new rules enter into force on July 2, 2008, and on that day the SED will no longer be valid. The SED will be replaced by Electronic Export Information (EEI) that must be submitted via the AES (or AESDirect) electronic reporting system.

Nearly six years ago on September 30, 2002 the President signed the Foreign Relations Act that authorized the Commerce Department to eliminate the paper SED for all exports and require that exporters submit export information electronically. (Commerce is the mother agency of the Census Bureau’s Foreign Trade Division, which is the organization that administers the AES EEI regulations, technically known as 15 CFRP Part 30—Foreign Trade Regulations.) In the June 2, 2008 The Federal Register, the Census Bureau published the new FTR, to entirely replace the former Foreign Trade Statistics Regulations (FTSR).

So, background information aside, let’s look at the key highlights of the new FTR. Generally speaking, the FTR is quite similar to its FTSR predecessor. Based on my first read of the new FTR, here are some key changes that enter into force on July 2, 2008:

Electronic Filing Required for EAR99 Items: Formerly you could use paper SEDs for items classified as EAR99 in the Export Administration Regulations (EAR). Now everything has to be submitted via the AES EEI mechanism now.

FTR Fire and Brimstone: You can go to jail for violations of the FTR! Well, it is unlikely that anybody reading this article will go to jail, but the fines and penalties have been increased. Criminal penalties include up to $10,000 and 5 years in jail per violation. Worth noting is that there are civil penalties of up to $1,100 per day for failure to file or late filing, and $10,000 per violation. The Office of Export Enforcement in the Bureau of Export Administration and US Customs (Immigration and Customs Enforcement and Customs and Border Protection) are responsible for enforcing these rules.

Routed Export Transaction Adjustments: Routed generally means the foreign customer (also known as the FPPI or Foreign Principal Party in Interest) chooses the freight forward to get stuff out of the United States. In such cases, the US exporter (also known as the US PPI or US Principal Party in Interest) is not responsible for filing the AES EEI.

• In routed exports, the FPPI is responsible for filing and normally authorizes its agent (e.g., forwarder) to file on its behalf. The agent of the FPPI must show the USPPI a copy of the power attorney in which the FPPI authorizes the agent to file the AES EEI. The agent must also give the USPPI a copy of the data elements it filed through AES.
• In a routed export, the FPPI may authorize the USPPI to file AES on its behalf—this must be authorized in writing.

When is AES filing required? For the most part, there are no changes to when AES EEI filing is required. Some adjustments/clarifications/updates were made, such as adjustments to country lists. For example, filing is not required for temporary exports unless the export is destined to Country Group E:2 in the EAR, a license is required, or an International Traffic in Arms Regulations exemption applies. Another example is that the $2,500 exemption was adjusted—formerly there was a longer list of countries (including Libya, for example) not eligible for the $2,500. Now the countries excluded from the $2,500 exemption are those in Country Group E:2 in the EAR.

Appendices Galore: This stuff is export control nerd heaven. I mean, take these home and read them in your spare time.

• Appendix A To Part 30 — Sample for Power of Attorney and Written Authorization
• Appendix B To Part 30 — ES Filing Codes
• Appendix C To Part 30 — Summary of Exemptions and Exclusions from EEI filing
• Appendix D To Part 30 — AES Filing Citation, Exemption and Exclusion Legends
• Appendix E To Part 30 — FTSR to FTR Concordance
• Appendix F To Part 30 — FTR to FTSR Concordance

The FTR Learning Experience: OK, so for me the highlight of the new FTR is I learned a new word. My vocabulary is expanded to include the word “drayage.” Never heard of it before. I am not saying this is a new term in the regs, but it is new to me and I thought I would share it. I bet you don’t know what it means!

AES EEI Filing Lead Times: You have to read the ITAR to find out how far in advance of ITAR exports you have to submit AES EEI information. (Sarcastic comment omitted.) For all other exports, you must submit with these lead times

• Air: 2 hours prior to scheduled departure time
• Vessel: 24 hours prior to loading
• Truck: 1 hour prior to arrival at the border
• Rail: 2 hours prior to arrival at the border
• Mail and other methods: 2 hours prior to export

Please May I Be Penalized? There is a new section 30.74 dedicated solely to voluntary disclosures. You will be surprised to learn that the Census Bureau “strongly encourages” voluntary disclosures of “any violation or suspected violation.” (Hmm, ‘suspected violation’s…Dear Census: We suspect we might have violated the FTR but we don’t know….” I don’t recommend that approach. Before you turn yourself, first figure out if you violated the rules, and, if you didn’t, well, don’t report yourself. They do not want you to voluntarily disclose that you are complying with the rules.

The FTR says voluntary disclosure is a mitigating factor, but it does not tell you how much it will help. In fact the FTR warns that “it is a factor that is considered together with all other factors in a case,” and then goes on to explain that the government will try to penalize you however it sees fit. I thought I should point that out for those of you who thought maybe the government would write regulations that would limit its ability to attempt to impose whatever penalty it feels like imposing for whatever reason.

But, the upside here is that if you do decide to do a voluntary disclosure, the FTR now includes specific description of the steps you should take, the internal investigation you should conduct over the past five years (ouch, ouch and ouch!!!!), and the information you should provide.

Conclusion: Well, that’s my first read of the new rules. I gotta stop now so I can go off on a long vacation—export controls can do that to a person. And no, I am not skipping town because I am afraid of 30 years in the slammer for failing to submit a few AES EEI records!

If you notice some interesting new things in the FTR, I would love to hear from you with your thoughts and comments.

Ok, one last important thing: “Drayage. The charge made for hauling freight, carts, drays, or trucks.”

SED: R.I.P.

Correction: Country Group incorrectly stated

1) There is an important typo in the June 26, 2008 newsletter. I incorrectly said, “Now the countries excluded from the $2,500 exemption are those in Country Group E:2 in the EAR.”It is actually Country Group E:1 that is excluded from the value-based exemption.I apologize for the mistake. It’s funny how the regs look different from Beijing.

2) NORTH KOREA: While I am making the correction, and since I am sitting in Beijing, I will let you know that the recent changes announced by the White House have resulted in no changes in export controls on North Korea. Changes may come soon, but nothing yet.

Best Regards,
John Black