Southern Border Conference Export Compliance August 23, 2018 Joe A. Cortez International Trade Advisors Export Regulations Simplified

Today’s Topics AES Reporting Concerns Routed Exports Routed Advance Notice of Proposed Rule Making (ANPRM) Status Best Practices Joe A. Cortez 202.821.2730 Zetreoctrade@gmail.com

Gather & Review filing resources: Preparing to File Your EEI Gather & Review filing resources: Before we begin filing our electronic export information, it’s important that we are familiar with the following resources. Foreign Trade Regulations, FTR Export Compliance Flipper, AESDirect User Guide, ACE AESDirect Filing Demonstration, Export Training Videos, the Global Reach Blog, and GovDelivery Broadcast are all important resources just to name a few. Most of these resources can be found on our website http://www.census.gov/foreign-trade We can show you how to find and use all of these resources and information.

U.S. Authorized Agent’s Responsibilities Obtain POA or written authorization Prepare and file EEI Provide filing citation or exemption legend Upon request, provide the USPPI with: A copy of the POA or written authorization (routed) Data elements supplied by the USSPI Internal Transaction Number Filer Name Date of Export Retain documentation READ SLIDE finally what are the USPPIs responsibilities

USPPI Identification FTR 30.6 (a)(1)(iii) - USPPI identification number. Report the EIN or DUNS number of the USPPI. If the USPPI has only one EIN, report that EIN. AESTIR Part II, Section 1 (a) – July 2017 - US Principal Party in Interest. ….”Census requires that the EIN number be reported for a non-foreign USPPI. When establishing or correcting a USPPI using a DUNS number, include the EIN in the N03 record” Joe A. Cortez 202.821.2730 Zetreoctrade@gmail.com

DSP-5 - License Applicant vs Seller Who is the USPPI Block 5 – applicant Block 16 Seller Joe A. Cortez 202.821.2730 Zetreoctrade@gmail.com

Value The selling price (or the cost if the goods are not sold) in U.S. dollars, Plus inland or domestic freight, insurance, and other charges to the U.S. seaport, airport, or land border port of export. Cost of goods is the sum of expenses incurred in the USPPI’s acquisition or production of the goods. Notice, it does not say the cost shown on the Pedimiento, or the FPPIs invoice. Value. In general, the value to be reported in the EEI shall be the value of the goods at the U.S. port of export in U.S. dollars. The value shall be the selling price (or the cost, if the goods are not sold), plus inland or domestic freight, insurance, and other charges to the U.S. seaport, airport, or land border port of export. Cost of goods is the sum of expenses incurred in the USPPI’s acquisition or production of the goods. Report the value to the nearest dollar, omit cents. Fractions of a dollar less than 50 cents should be ignored, and fractions of 50 cents or more should be rounded up to the next dollar. (i) Selling price. The selling price for goods exported pursuant to sale, and the value to be reported in the EEI, is the USPPI’s price to the FPPI (the foreign buyer). Deduct from the selling price any unconditional discounts, but do not deduct discounts that are conditional upon a particular act or performance on the part of the foreign buyer. For goods shipped on consignment without a sale actually having been made at the time of export, the selling price to be reported in the EEI is the market value at the time of export at the U.S. port. (ii) Adjustments. When necessary, make the following adjustments to obtain the value. (A) Where goods are sold at a point other than the port of export, freight, insurance, and other charges required in moving the goods from their U.S. point of origin to the exporting carrier at the port of export or border crossing point shall be added to the selling price (as defined in paragraph (a)(17)(i) of this section) for purposes of reporting the value in the EEI. (B) Where the actual amount of freight, insurance, and other domestic costs is not available, an estimate of the domestic costs shall be made and added to the cost of the goods or selling price to derive the value to be reported in the EEI. Add the estimated domestic costs to the cost or selling price of the goods to obtain the value to be reported in the EEI. Joe A Cortez ZetrocTrade@gmail.com 202.821.2730.

Schedule B Number - Repairs FTR section 30.29 (a) (1) states  "The return of non- USML goods temporarily imported for repair and alteration and declared as such on importation shall have Schedule B number 9801.10.0000. The value reported shall only include parts and labor…" FTR section 30.29 (a)(2) says …" In the value field, report the value of the parts and labor, …." Note, the word only is omitted in 30.29(a)(2).    Market value of part ( if working) $15,000 7501 value declaration of broken part $6,000 Parts and Labor to Repair Engine Part $3,000  Schedule B reported in the AES is the  commodity Schedule B Number  Value to report in the AES $9,000 Joe A. Cortez 202.821.2730 Zetreoctrade@gmail.com

Commodity Description FTR 30.6(a)(13) - Report the description of the goods shipped in English in sufficient detail to permit verification of the Schedule B or HTSUSA number. Commodity description. Report the description of the goods shipped in English in sufficient detail to permit verification of the Schedule B or HTSUSA number. Clearly and fully state the name of the commodity in terms that can be identified or associated with the language used in Schedule B or HTSUSA (usually the commercial name of the commodity), and any and all characteristics of the commodity that distinguish it from commodities of the same name covered by other Schedule B or HTSUSA classifications. If the shipment requires a license, the description reported in the EEI shall conform with that shown on the license. If the shipment qualifies for a license exemption, the description shall be sufficient to ensure compliance with that license exemption. However, where the description on the license does not state all of the characteristics of the commodity that are needed to completely verify the commodity classification number, as described in this paragraph, report the missing characteristics, as well as the description shown on the license, in the commodity description field of the EEI. Joe A Cortez Zetroctrade@gmail.com 202.821.2730

Potential Reporting Errors $ 40,000 IE = Ireland Ink cartridges Export Information Code = OS (General Exports) $ 4,000,000 Ammunition cartridges IR = Iran EIC = MS (Military Shipments)

Routed Export Transactions Export Administration Regulations EAR-§ 758.3 (b) Foreign Trade Regulations-FTR §30.3(e) The USPPI is the exporter and must determine licensing authority, obtain the appropriate license or other authorization, Unless the USPPI obtains from the FPPI a writing from the FPPI assuming the responsibility for determining licensing requirements The FPPI’s U.S. agent becomes the exporter for EAR purposes The FPPI’s forwarding or other agent must obtain a power of attorney or other written authorization from the FPPI to act on its behalf. A transaction in which the FPPI authorizes a U.S. agent to facilitate the export of items from the United States and to prepare and file EEI. If an authorized agent is preparing and filing the EEI on behalf of the FPPI, the authorized agent must obtain a power of attorney or written authorization from the FPPI and prepare and file the EEI based on information obtained from the USPPI or other parties involved in the transaction § 758.3 Responsibilities of parties to the transaction. All parties that participate in transactions subject to the EAR must comply with the EAR. Parties are free to structure transactions as they wish, and to delegate functions and tasks as they deem necessary, as long as the transaction complies with the EAR. However, acting through a forwarding or other agent, or delegating or redelegating authority, does not in and of itself relieve anyone of responsibility for compliance with the EAR. (a)Export transactions. The U.S. principal party in interest is the exporter, except in certain routed transactions. The exporter must determine licensing authority (License, License Exception, or NLR), and obtain the appropriate license or other authorization. The exporter may hire forwarding or other agents to perform various tasks, but doing so does not necessarily relieve the exporter of compliance responsibilities. (b)Routed export transactions. All provisions of the EAR, including the end-use and end-user controls found in part 744 of the EAR, and the General Prohibitions found in part 736 of the EAR, apply to routed export transactions. The U.S. principal party in interest is the exporter and must determine licensing authority (License, License Exception, or NLR), and obtain the appropriate license or other authorization, unless the U.S. principal party in interest obtains from the foreign principal party in interest a writing wherein the foreign principal party in interest expressly assumes responsibility for determining licensing requirements and obtaining license authority, making the U.S. agent of the foreign principal party in interest the exporter for EAR purposes. One writing may cover multiple transactions between the same principals. See § 748.4(a)(3) of the EAR. (c)Information sharing requirements. In routed export transactions where the foreign principal party in interest assumes responsibility for determining and obtaining licensing authority, the U.S. principal party in interest must, upon request, provide the foreign principal party in interest and its forwarding or other agent with the correct Export Control Classification Number (ECCN), or with sufficient technical information to determine classification. In addition, the U.S. principal party in interest must provide the foreign principal party in interest or the foreign principal's agent any information that it knows will affect the determination of license authority, see § 758.1(g) of the EAR. (d)Power of attorney or other written authorization. In routed export transactions, a forwarding or other agent that represents the foreign principal party in interest, or who applies for a license on behalf of the foreign principal party in interest, must obtain a power of attorney or other written authorization from the foreign principal party in interest to act on its behalf. See § 748.4(b)(2) and § 758.1(h) of the EAR.

Letter from a USPPI To Whom It Concerns:                 This letter notifies ChemUSA, Inc. that Company ABC in MX assumes responsibility to determine any U.S. export authorizations, to report export statistics as required by U.S. laws and regulations, and/or to comply with applicable U.S. Customs regulations related to the export from the United States of the items purchased from ChemUSA. Company ABC in MX will perform these actions in cooperation with the U.S. agent, Zetroc Forwarding, who is located in the United States and is acting as the U.S. exporter.  Joe A. Cortez 202.821.2730 Zetreoctrade@gmail.com

Advance Notice of Proposed Rulemaking (ANPRM) Status Published in the Federal Register on October 6, 2017 Public comment period ended on December 5, 2017 Drafting Notice of Proposed Rulemaking with feedback from comments NPRM Expected Late 2018 or Early 2019 Ninety Days for Comments

ANPRM Comments Total of 53 Comments Received Common Themes: 210 individual comments Common Themes: Party responsibilities Definition of Routed Data Elements BIS related Power of Attorney Incoterms

Comments-Party Responsibilities Confusion is heightened by the fact that several aspects of the Export Administration regulations ("EAR") are not identical or do not necessarily comport with definitions and responsibilities that arise under the Census AES regulations. Large majority of FPPls are not as knowledgeable … even whether they must provide authorization to their forwarding or other agents in order for them to be able to file the relevant Electronic Export Information ("EEl"). Joe A. Cortez 202.821.2730 Zetreoctrade@gmail.com

Comments-Party Responsibilities For example, the term "Routed Export Transaction" could be changed to "Foreign Party Export Filing Transaction." Additional data element should be added to 15 CFR § 30.3(e)(1) to include a transaction reference number, such as the invoice number issued by the U.S. customer to the FPPI, which can be used to link the original sale to the ITN in the EEI report. The FTR and EAR each refer to different responsibilities in an export transaction. The EAR refers to licensing and the FTR refers to EEI filings. Joe A. Cortez 202.821.2730 Zetreoctrade@gmail.com

Next Steps Collaborate with the Bureau of Industry and Security and Trade Associations to discuss revisions Draft the NPRM Obtain concurrence from CBP and the State Department Respond to formal comments Publish the NPRM

Implement Best Practices Document!!! Document!!! Document!!! Correct information as soon as possible Maintain compliance Education & cross training Automation & Procedures Perform regular audits Attend Seminars & Workshops

AES Tips for Avoiding Fines and Penalties Report the Correct Port of Export Describe the Commodity – don’t just use the schedule B description Value Shown on AES is Similar to Invoice value Know and Report the Ultimate Consignee type Enter Correct Country of Ultimate Destination Joe A Cortez Zetroctrade@gmail.com 202.821.2730.

Correct Port of Export Joe A Cortez ZetrocTrade@gmail.com 202.821.2730.

Correct Port of Export Joe A Cortez ZetrocTrade@gmail.com 202.821.2730.

Ultimate Consignee Type Provide the business function of the ultimate consignee that most often applies: Direct Consumer Government Entity Reseller Other/Unknown Joe A Cortez ZetrocTrade@gmail.com 202.821.2730

Issued monthly to the Account Owner AES Compliance Reports Issued monthly to the Account Owner Ensure contact information is current on ACE Unresolved fatal errors & compliance alerts impact your compliance rate Here is an example of how a compliance report looks. In this example we see ABC Company has two unresolved fatal errors 120 which indicates that the carrier is unknown and 121 which indicated that the carrier code must be 2 characters or 3 letter. The Compliance Alert 700 is also shown on the report as well as the number of shipments for the prior three month. Companies should resolve fatal errors and report EEI filings in accordance to filing timeframes to achieve 100% compliance.

Fatal Error Reports Issued if there are Unresolved Fatal Errors remaining from AES Compliance Report Issued Two Weeks after AES Compliance Report Resolve Fatal Errors - Appendix A For shipments that cannot be corrected: Send an email to DCB’s Fatal Error Team at ftd.aes.fatal.reports@census.gov Include: ITN for the shipment that replaced the Fatal Error and the SRN of the shipment that generated the error. Now lets move on to the Fatal Error Report. It is issued two weeks following the AES Compliance Report and provide unresolved Fatal errors that are remaining from the AES Compliance Report. The reports are sent to e-mail registered as the email for the account administrator. There are three different ways to resolve fatal errors… 1- Correction: For the rejected EEI that was issued a fatal error before receiving an ITN or for a shipment with the status “Update Rejected” that requires correction: Filers must: Retrieve the rejected EEI Correct the error Resubmit to receive the ITN The same shipment reference number should be used when resubmitting the rejected EEI Warning: using a new Shipment Reference Number will create a new shipment 2- Cancellation : For the rejected EEI that generated a fatal error after receiving an ITN that needs to be cancelled Cancel the submission only once or a second attempt will cause another fatal error * A shipment cannot be cancelled if an ITN has not been received. 3- Suppression: For the rejected EEI that: Cannot be corrected Was successfully filed with another Shipment Reference Number (SRN) Never left the country for export Send an e-mail to the Data Collection Branch at: FTD.AES.FATAL.REPORTS@census.gov Include the following: Original SRN, Replacement SRN, new ITN

Document!!! Document!!! Document!!! Correct information as soon as possible Maintain compliance Education & cross training Automation & Procedures Perform regular audits Attend Seminars & Workshops Joe A Cortez ZetrocTrade@gmail.com 202.821.2730

International Trade Advisors Questions? Joe A. Cortez, President International Trade Advisors ZetrocTrade@gmail.com 202.821.2730