Update on BIS Efforts to Prevent Dual-Use Export Diversion, Measure Compliance

At the recent National Customs Brokers and Forwarders Association of America (NCBFAA) Annual Conference, a Bureau of Industry and Security (BIS) official discussed BIS’ compliance measurement of “no license required” (NLR) shipments, its updated list of “best practices” to prevent diversion of dual use exports, and the potential for Automated Export System (AES) changes based on that updated list.

Updated “Best Practices” to Stop Diversion of Dual-Use Exports Expected Soon

In spring 2011, BIS is expected to issue its final updated list of “best practices” for industry regarding the transit, transshipment, and reexport of dual-use items.

In September 2010, BIS had proposed that its update would include:

• Pay heightened attention to red flags;
• Seek to use only trade facilitators/freight forwarders who observe these best practices and possess an export management & compliance program;
• Know the foreign customer and whether they are a trading company or distributor;
• Inquire about end-users and re-exports;
• Inquire about suspicious routed export transactions (for freight forwarders);
• Communicate the ECCN or EAR99 to the ultimate consignee or end-user; and
• Communicate the ECCN or EAR99 classification to the freight forwarder and in AES for all items.

Future Diversion Prevention Steps May Include Outreach, AES Changes

BIS states that the next steps in its efforts to prevent export diversion are:

• Publication of the final revised list of “best practices;”
• Education of industry and government stakeholders about the new “best practices;” and
• Consideration of possible changes in AES reporting requirements, processes, and regulations (based on the new “best practices”).

Compliance Measured at 99% for Licensed Exports in 2010

BIS discussed its Compliance Measurement Program, which measures exporters’ compliance with the Export Administration Regulations (EAR) using data from AES.

The purpose of the compliance measurement program is to:

• Ensure EAR-related items are properly exported;
• Ensure data integrity when evaluating the dual-use export control system; and
• Evaluate whether exporters’ export management and compliance programs are effective.

According to BIS, its original compliance measurement addressed only shipments subject to a BIS export license requirement and indicated that the compliance rate for 2010 was 99% (up from 96% in 2009).

BIS Has Begun Compliance Measurement for NLR Shipments

BIS is now conducting a compliance measurement for NLR shipments. BIS is sampling certain NLR designations for accuracy, using the BIS correlation between the HS/Schedule B and the ECCN, and using the Commerce Country Control chart.

BIS will also work on educating the trade on the correct use of the NLR designation.

(See ITT’s Online Archives or 09/14/10 news, 10091414, for BP summary on BIS’ discussion of its compliance measurement program at the BIS Annual Export Controls Update Conference.

See ITT’s Online Archives or 09/01/10 news, 10090120, for BP summary of BIS’ request for comments on best practices to prevent transshipment diversion.)

BIS presentation available by emailing documents@brokerpower.com.