Trade law firm advises on impacts of export control bill

Ongoing federal efforts to increase enforcement of export laws and regulations would get a boost from legislation introduced Aug. 1 by Rep. Brad Sherman, D-Calif., the trade law firm Sandler, Travis and Rosenberg said in an e-mail Friday.

The Export Control Improvements Act (H.R. 6828) proposes to make significant changes to the U.S. export environment by strengthening the export enforcement authority of the departments of Homeland Security and Commerce, implementing stricter controls on countries that pose unacceptable risks of diversion of dual-use commodities and suspending the Validated End-User program, ST&R said. The bill also includes a number of provisions aimed at modernizing the Automated Export System. Specifically, the law firm said that H.R. 6828 would augment federal authority by granting permanent export enforcement authority to the DOC and DHS. The DOC's Office of Export Enforcement, U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement would be authorized to conduct investigations and searches and to detain, seize and forfeit merchandise within the United States and abroad. The commerce department would be required to designate "countries of diversion concern, which would be subject to additional export restrictions, such as more stringent license application review policies, stricter licensing restrictions and more frequent end-use/end-user checks. Countries falling within this new category could be designated in new Country Group C of the Export Administration Regulations.

The bill has special provisions calling on the Commerce Department to work more closely with the United Arab Emirates and Malaysia, two countries that have long been recognized as potential transshipment hubs, on strengthening their export and re-export controls.

The DOC would be required to certify on an annual basis whether these countries have implemented national laws and regulations controlling transshipment and taken steps to prevent the unlawful diversion of dual-use items to countries that pose proliferation and terrorism concerns, ST&R said. Failure of the U.A.E. and Malaysia to comply with the bill's conditions could result in their designation as countries of diversion concern. Also of significance is a proposed moratorium that would be imposed on the Validated End-User program pending an audit by the Government Accountability Office. The VEU program allows the export, re-export and transfer of certain dual-use items without a license to specified end-users in countries such as China and India.

H.R. 6828 also incorporates several provisions relating to the electronic filing of export data via the AES that first appeared in H.R. 5828, the Securing Exports Through Coordination and Technology Act, which was widely criticized as technically unfeasible by both industry and the DOC. These provisions, which would result in significant changes to the AES filing environment, include: mandatory filing of shipper's export declarations through the AES, a requirement already implemented by the Foreign Trade Regulations issued by the Census Bureau on a formal registration system in which individuals (U.S. citizens, U.S. permanent residents and nationals of U.S. territories and possessions), and corporations would have to be certified in order to file export data through the AES. The provisions would also seek to modernize the AES o as to enable the classification of exported products, make the various restricted parties lists available in a standardized format, alert filers to export license requirements based on data elements they enter, retain an audit trail of AES filers' entries, issue automatic alerts, notices and warnings if entered data does not satisfy U.S. export requirements, and reject noncompliant AES filings.

H.R. 6828 does not, however, include H.R. 5828's controversial requirement that the AES automatically alert filers when entered (U.S. Harmonized Tariff Schedule) numbers/Schedule B codes conflict with export classification control numbers or U.S. Munitions List categories.

That provision was criticized as unworkable because there is no correlation between the (harmonized tariff schedule), the Commerce Control List and the (munitions list). In addition, the bill does not include H.R. 5828's requirement that the AES perform restricted party list screening and reject filings for which there are potential its. Industry members feared this provision could mean substantial shipment delays because neither Census nor the DOC currently has the resources necessary to timely review and resolve potential or false its against these lists.

Source: American Shipper