Introduction to Braumiller Schulz LLP Why Trade Compliance? Establishing an Internal Compliance Program (ICP) Contracting Services to Outside Experts

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1 Olga Torres, Associate Ol T A i t Braumiller Schulz LLP International Trade Law

2 Overview Introduction to Braumiller Schulz LLP Why Trade Compliance? Establishing an Internal Compliance Program (ICP) Contracting Services to Outside Experts Common Pitfalls and Best Practices

3 Introduction to Braumiller Shl Schulz International Trade Law Firm And Braumiller Schulz hl Consulting LLP Trade Professionals Include: International Trade Attorneys Trade Advisors Licensed Customs Brokers International Freight Forwarders Former Customs Auditors

LLP Trade Professionals Include: International Trade Attorneys Trade

4 A Few of Our Services... Export and Import Compliance Programs and Compliance Manuals Export Licensing and Agreements Technology Control Plans Export and Import Compliance Audits Free Trade Agreements Duty Savings and Foreign Trade Zones Trade Compliance Training Fines, Penalties, and Forfeitures

Licensing and Agreements Technology Control Plans Export and Import

5 Customs Brokerage and Freight Forwarding Services Filing export documents AES records Bills of Lading, Air Waybills Commercial Invoices Packing Lists Many others! Customs entries and supporting documentation Customs Form 7501 or 3461 a(1)(a) List: all documents associated with the import Supply Chain Logistics Services

6 Why Trade Compliance? Export Security Trade Secrets/ Economic Espionage Military Controls Fighter in the Field Trade Policy Economic Sanctions and Embargoes

7 Why Trade Compliance? (cont d) Import Security C TPAT and AEO voluntary accreditation regimes Duties/Fees Consumer Product Safety Trademark, Copyright Violations Many other agency regulations enforced (EPA, FWS...)

8 Why Trade Compliance (cont d) Companies Require It! Requests for ITAR Registration Numbers Requirements that business partner is AEO or C TPAT certified Terms and Conditions Specify It: EXPORT COMPLIANCE: Purchaser agrees that its business shall be conducted d in accordance with ih all laws of the United States and its foreign jurisdictions, and in a manner that will always reflect the highest standards of ethics. Diversion of the Product contrary to US U.S. law is prohibited. In particular, Purchaser agrees to comply with U.S. government export control laws and regulations...

COMPLIANCE: Purchaser agrees that its business shall be conducted d in accordance with ih all laws of the United States and its foreign

9 U.S. Overview: Who Regulates What? Customs & Border Protection Policemen to enforce regulations 19CFR Dual Use Items Bureau of Industry & Security Export Administration Regulations (EAR) 15CFR Defense Items Directorate of Defense Trade Controls International Traffic in Arms Regulations (ITAR) 22CFR Other Agencies DEA, NRC, OFAC, Census Bureau

Bureau of Industry & Security Export Administration Regulations (EAR) 15CFR Defense

10 Authorities Who Control lus U.S. Imports Animal and Plant Health Inspection Service (U.S. Department of Agriculture) U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (U.S. Department of Justice) U.S. Fish and Wildlife (U.S. Department t of the Interior) U.S. Patent and Trademark Office (U.S. Department t of Commerce) Food and Drug Administration (U.S. Department of Health and Human Services) U.S. Customs and Border Protection enforces all imports at US U.S. borders. (U.S. Department of Homeland Security)

S. Department of Health and Human Services) U.S. Customs and Border Protection enforces all imports at US U.S. borders. (U.S. Department of Homeland Security)

11 Authorities i Who Control lus U.S. Exports State Dept s Directorate of Defense Trade Controls (DDTC) controls defense articles, defense services, and related technical data, including most space related articles ITAR. Commerce Dept s Bureau of Industry and Security (BIS) controls dual use items EAR; and the Bureau of Census controls trade statistics and SEDs Treasury Dept s Office of Foreign Assets Control (OFAC) oversees embargo and sanction lists OFAC regulations. Homeland Security Dept s U.S. Customs and Border Protection enforces all exports at U.S. borders.

including most space related articles ITAR.

12 Supply Chain Participants Examples: Factory / Supplier Truck/Rail Transport International Air/Ocean Carrier Freight Forwarders 19 CFR Licensed Customs House Brokers (Brokers, or LCHBs) 19 CFR 111.1

Air/Ocean Carrier Freight Forwarders 19 CFR 111.

13 Starting a Compliance Program Your company wants to start importing or exporting and has no compliance program. Where to start?

14 U.S. Export Resources Dept. of Commerce International Trade Administration (ITA) trade Market Access, Matching, Eliminating Trade Barriers U.S. Commercial Service USA TRADE Dept. of Commerce Bureau of Industry and Security Dept. of Treasury Census Bureau trade/regulations/index.html trade/regulations/index html Dept. of State Directorate of Defense Trade Controls

of Commerce Bureau of Industry and Security http://www.bis.doc.gov/ Dept. of Treasury Census Bureau http://www.census.

15 U.S. Import Resources Informed Compliance Publications available at: ce_pubs/icp021.ctt/icp021.pdf CROSS System for tariff classification rulings

cbp.gov/linkhandler/cgov/trade/legal/informed_complian

16 Export Controls Generally Dual Use Items: Export Licensing and the Wassenaar Arrangement Items Classified under ECNs, or ECCNs Deemed Exports Defense Articles: Export Licensing for Military Items Df Defense Articles Defense Technology Transfers Defense Services

Deemed Exports Defense Articles: Export Licensing for Military

17 Denied Party Screening Lists to check BIS lists EAR Part 764 OFAC Sanctioned Countries List ex.shtml Federal Register Other lists...

gov/offices/enforcement/ofac/sdn/ EAR Part 764 OFAC Sanctioned

18 Denied dparty Screening Non U.S. Examples Australia Australia Consolidated List Listing of Terrorist Organizations Implementation of UN Security Council Sanctions Canada Anti-terrorism Act Currently Listed Entities Canada Cumulative Warning List OSFI Consolidated List of Entities OSFI Consolidated List of Individuals Royal Canadian Most Wanted List Chile Most Wanted Fugitives European Union EU Financial Sanctions EU List of Persons, Groups and Entities Involved in Terrorist Acts List of Airlines Banned Within the EU UN Persons Publicly Indicted by the ICTY for war crimes Sanctions or Restrictive Measures in Force Hong Kong Wanted Persons India Most Wanted Terrorist, Insurgent and Extremist Groups Interpol Most Wanted Israel Palestinian Suspects Wanted for Terrorism and Other Crimes Palestinian Terrorist Wanted People Involved bombing the Jewish Community Center in Argentina (AMIA) The Leading Palestinian Terrorist Organizations

Examples Australia Australia Consolidated List Listing of Terrorist Organizations Implementation of UN Security Council Sanctions Canada Anti-terrorism Act Currently Listed Entities Canada Cumulative

19 Trade Management Software Denied Party Screening Free Trade Agreements Export License Management Deemed Export Management Inventory Management Classification Examples: net/ com/vc/vc cfm

Classification Examples: http://www.integrationpoint.

20 Outsourcing Services to a Broker or Freight Forwarder Services May Include Customs and Export Clearance, Paperwork Commodity Classification (HTS, Licensing) Supply Chain Logistics i

21 Outsourcing Services to a Broker or Freight Forwarder (cont d) Limiting the Number of Brokers, Forwarders Used Btt Better service More control (consider also WTO Incoterms) Best Practices Written Compliance Procedures Standard Operating Procedures (SOPs) with client RECORDKEEPING 5 years

22 BIS charged: Pitfalls: The DHL Case on 8 occasions between June 2004 and September 2004, DHL caused, aided and abetted acts prohibited by EAR when it transported items subject to the EAR from the US to Syria 90 exports between May 2004 and November 2004 DHL failed to retain air waybills and other export control documents required to be retained under Part 762 of the EAR. OFAC charged that t DHL violated various OFAC regulations lti between 2002 and 2006 relating to thousands of shipments to Iran and Sudan. Like DHL's EAR violations, its OFAC violations primarily involve DHL's failure to comply with applicable record keeping requirements.

23 The Outcome BIS and OFAC entered into the joint settlement agreement with DPWN Holdings (USA) and DHL Express (USA). The settlement amount: $9.44 million "Large scale compliance breakdowns lead to significant sanctions aimed at ensuring that freight forwarders put into place and maintain necessary measures to meet their compliance responsibilities. "

24 The DHL Case Four times greater than any civil penalty on BIS s Major Cases List and far exceeds freight forwarder settlements to date.

25 Key Points from the DHL Case U.S. export controls typically do not consider freight forwarders to be the exporter, but OFAC pursued DHL because it appeared to have exported or attempted to export multiple shipments. BIS, on the other hand, characterized DHL s involvement with those exports only as aiding or abetting someone else s export. BIS threatened DHL with $250,000 per violation. Even though it could have done the same, OFAC started settlement negotiations at $50,000 or significantly lower amounts per violation.

26 BIS Red Flags htm Customer or purchasing agent reluctant to offer information about end use Product's capabilities do not fit buyer's line of business Customer willing to paycash for a very yexpensive eitem when terms sof sale would normally call for financing Customer has little or no business background Customer is unfamiliar with product's performance characteristics but still wants it Freight forwarding firm is listed as the product's final destination Shipping route is abnormal for the product and destination

27 Export Penalty Examples Criminal Sanctions: A fine of up to $1,000,000 or up to ten years in prison, or both, per violation. Civil Sanctions: A fine of up to $500,000 per violation. Additionally, i for any violation i of the ITAR either ih or both of the following may be imposed: The denial of export privileges; iil and/or Seizure/Forfeiture of goods.

28 Best Practices Senior Management Commitment to Compliance Written Compliance Procedures Recordkeeping Procedures Ongoing Compliance Training i Monitoring: Audits, Reviews, Corrective Measures Updates on U.S. restrictions, sanctions, licensing, denied parties, country lists Review the lists Watch for Federal Register notices Refer to online resources

29 Best tpractices (Cont d) Denied Party Screening Employees Vendors Manufacturers Buyers Awareness of Red Flags Ongoing Communication with Broker, Freight Forwarder, Trade Attorney, and Other Experts In the event of an error, consider voluntary disclosure

30 Stay Current! Watch for Updates: Automated t export/import t filings HTS tariff codes and rates VEU program updates Denied party lists Country sanctions Licensing requirements

31 Contact Information Olga Torres, Associate Braumiller Schulz LLP International Trade Law

COMPUTER & INTERNET. Westlaw Journal. Expert Analysis Software Development and U.S. Export Controls

COMPUTER & INTERNET. Westlaw Journal. Expert Analysis Software Development and U.S. Export Controls Westlaw Journal COMPUTER & INTERNET Litigation News and Analysis Legislation Regulation Expert Commentary VOLUME 31, ISSUE 1 / JUNE 13, 2013 Expert Analysis Software Development and U.S. Export Controls