By: Maarten Sengers
If someone ever sought to create a license exemption that was perfectly designed to trip up munitions exporters, they probably could draw tremendous inspiration from the ITAR temporary import exemption. The name itself seems a misnomer. When returning items to overseas that were originally brought into the US for repair or for a trade show, most people would think they’re exporting. But no, under ITAR double talk this is really called temporarily importing because the first ITAR-controlled event was the temporary import. Both when you export and import the item, you are essentially using the same import exemption. Confusing is sowed from the get go.
Once you begin to digest the concept that you’re supposed to use an import exemption when you export, the temporary import exemption confronts you with an innocuous looking technical requirement that is a monster in practice. In the case of most repairs, to use the exemption you must place a temporary import regulatory citation, “This shipment is being imported in accordance with and under the authority of 123.4(a)(1),” on the Customs import documents when you bring in the item. After the item is repaired and ready to go back, you must again place a similar exemption citation on the SED, and either attach a copy of the import documents or reference the Customs import document number.
If we drafted a top 10 list of things that go wrong with using the temporary exemption, which we could easily do, most would probably agree that the #1 position should be held by the “failure to put temporary import exemption citation on the import document.” Failure to put the statement on the import document essentially disqualifies you from using the exemption, both for the import and the subsequent export, though that doesn’t stop people from trying anyway. One in three temporary import exemption attempts probably fail for this reason alone. In some cases, Customs has been known to seize items either on the inbound or the outbound due to this error.
Why is it so difficult to get the temporary import citation on the inbound paperwork? Primarily because it’s up to the overseas licensee to notify the US company that they are returning the equipment for repair. All too often, the US company never knew that the unit was coming back for repair until it hit the loading dock, and by then all the Customs paperwork is complete-except for the temporary import citation. There are a variety of steps you can take to help prevent this from happening, which could be the topic of another article. But even if you have an army of compliance personnel and a billion dollar compliance budget, trust me, at some point this mistake will happen to you. So we must brainstorm a strategy to correct it in advance.
The instinctive remedial strategy is to ignore the fact that the import paperwork failed to note the exemption as required and to subsequently ship the item under the exemption anyway. If common sense were the law, I personally wouldn’t really have a problem with this (nor, perhaps, would I have a full-time job as an export compliance consultant). If the shipment otherwise qualified for the exemption (e.g., the unit was properly licensed/authorized by ODTC to the end user and repaired but not upgraded in the US), I, like your program manager and the rest of the human race, can’t understand what’s the big deal about sending it out even though a regulatory citation didn’t appear on the import paperwork. Unfortunately common sense and the ITAR don’t always walk the same path. The reality is that perhaps 5 – 10% of these attempts wind up in a seizure, and then things start to get annoyingly messy. Some ports pay more attention to this mistake than others.
You could try to get a license instead. Probably the best way to do this is to get a DSP-61 temporary import license approved. Besides the license processing delays, there is one major problem with this strategy: The DSP-61 must be approved before the import happens. You blew the import part of the equation by failing to put the temporary import citation on the import paperwork, so from the perspective of the US Government the import part never really happened. From their perspective, your export is fresh and permanent and therefore DSP-5 material. But trust me, honestly filling out a DSP-5 without admitting to your botched temporary import is nearly impossible. In short, covering the error with a license can be messy as well.
Another strategy is to submit a voluntary disclosure to Customs. The disclosure goes something like this: “Dear Customs, on shipment so and so we failed to note on the entry document that this import was under the authority of 22 CFR 123.4(a)(1). We request that the record reflect that this statement is on the paperwork. We have instituted the below listed procedure to prevent this from happening again.” It may be ill advised to be too truthful, ala “we may screw this up again in spite of our best efforts.” The result of this disclosure may be a $350 fine, but then you go ahead and ship attaching the import paperwork and the disclosure letter. This strategy will allow you to export the item much faster and will probably avoid a seizure, but some folks at ODTC probably won’t like it. If anybody is disclosing anything relating to defense articles, ODTC would like to be in on the fun.
That leads to the last remedial option. Submit a voluntary disclosure to ODTC, more elaborate than your Customs disclosure but with the same flavor, and advise them that you will be submitting a license for the subsequent export of the repaired widget. Follow it up with a DSP-61 or 5 license. Although this is probably the best method from a strict ITAR compliance perspective, it is undoubtedly the most painful. ODTC could see your disclosure, albeit a nearly unavoidable technical compliance failure, as the last bucket drawn from their already parched well of patience. They may sit on the license for months (years?) while contemplating the greater implications of this disclosure, or conduct an unwelcome inquiry into your lack of compliance program.
Given the fact that all remedial options for the botched temporary import are less than perfect, probably the best thing you can do when you discover the unit on your loading dock without the correct import paperwork is to call your Customs broker immediately and have them amend the entry. In many cases, if you catch this error early enough Customs will allow the correction. The longer you wait, the less likely they will accept the amendment. That way you avoid the #1 reason for temporary import exemption error altogether and are free to run the gauntlet of the next nine potential errors.
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