Export Double Invoicing Leads To
Criminal Conviction
03/02
At one point or another, most American
exporters have been asked by their foreign buyers to double invoice. In
other words, they have been asked to issue one invoice at a reduced
value to minimize the buyer's taxes and then issue the real invoice
which the buyer pays. Advanced Computer complied with that request over
a year's period of time and that acquiescence led to their downfall.
Advanced Computer was selling computer components to ZTR in Ireland. It
issued one invoice for $892.50 which was declared to Irish authorities.
The real price was $89,250. British authorities became suspicious,
sought the aid of U.S. Customs which, in turn, worked with the U.S.
Attorney's Office. As a result of its misadventures, the company is
out of business. It also pled guilt to one count of wire fraud, agreed
to pay a $140,000 fine and forfeit $1.1 million in assets! The company
laid off its employees when the scheme came to light and will now cease
operations altogether.
Notice of Foreign Regulatory Changes
01/02
The U.S. Department of Commerce's
National Institute of Standards and Technology and International Trade
Administration has announced the launch of a free Internetbased
service called Export Alert! which automatically notifies interested
businesses when foreign governments propose regulations that might
influence the treatment of U.S. exports. Announcements from the 142 WTO
members are included. When registering, a company can receive notices
focused on 41 different industry sections The notices describe the
proposed regulation, the issuing country and the time limit to respond.
Interested parties can register for Export Alert! at http//ts.nist.gov/htdocs/210/217/export
alert.htm.
WTO AGAIN RULES AGAINST FOREIGN SALES
CORPS
11/01
Despite having changed the law once, the
U.S. replacement law, called the FSC Repeal and Extraterritorial Income
Exclusion Act of 2000, was again found to be WTO violative, as an
illegal subsidy. FSCs involve establishing companies in selected
jurisdictions, exporting goods through those off-shore companies with
the resulting profits eligible for partial tax refunds from the I.R.S.
The U.S. and EU are in negotiations to settle their differences but
those negotiations seem to be lengthy.
FORWARDER INTERACTIVE DATABASE
08/01
The U.S. Department of Agriculture has
created an online system to provide agricultural exporters with
efficient access to information about freight forwarders that specialize
in the field. The Directory of Freight Forwarders Serving Agricultural
Shippers is available at http//www.ams.usda.gov/tmd/freight.
MANDATORY AES FILING
08/01
The required AES Certification Report was
submitted to Congress in June 2001, so the 270 day time limit contained
in the Proliferation Prevention Enhancement Act of 1999 has been
triggered. Therefore, the mandatory transmission of information through
AES for shipments subject to the jurisdiction of BXA and State will
commence in March 2002.
STATE REVISES ITAR
3/01
Canada and the U.S. have completed negotiations changing the rules
regarding munitions export licenses.
EXPORTERS MUST CHECK FOR DENIED END USERS
3/01
Looking for information about denied persons? The Bureau of Export
Administration, Dept. of Commerce has added information to its web site
to assist exporters: www.bxa.gov/DPL.
BXA IMPOSES LARGE FINES
12/00
A $174,000 civil penalty was imposed on Hua Ko
Electronics Co.. Ltd of Hong Kong. The company had previously been
denied export privileges. This fine was for ordering and receiving U.S.
origin goods in violation of the denial order. Similarly Macosia
International was hit with a seven year denial of export privileges. It
exported handcuffs and leg irons to Mexico without a validated export
license.
EXPORT CONTROLS
10/00
On August 3, 2000, The White House issued
a fact sheet updating U.S. export controls on computers. While the
prohibitions on trading with unlawful end users or for unlawful end uses
remains, the new rules generally lessen the computers subject to a
validated license by placing the speed controlled at a level up to
28,000 MTOPS, subject to further review in six (6) months.
AES AND EXPORTS
08/00
Carriers are now required to file
original export declarations unless they have signed a cooperation
agreement with Census. If they have signed, carriers will have until
November 1, 2000 to comply with the new AES rules and their cooperation
is conditioned upon them providing to Census the names of their
customers who prepare paper SEDs. Census is anxious to convert everyone
to the use of AES.
Similarly, the new exporter of record
rules have now been published in final form. The big area of contention
remains for ex-works or ex-factory transactions. Under the relevant
INCOterm of sale, in an ex-works or ex-factory transaction, as soon as
the exporter makes the shipment available to his buyer at his factory
door, his responsibility for the shipment ends. However, under the new
exporter of record rules, the seller's responsibility continues. These
rules require the principal party in interest to provide information
about the goods to the buyer's forwarder. The stated purpose of the new
rules is to protect the seller from unknown export violations. In fact,
what has happened is the seller is put in the position of providing
details to the forwarder, the buyer's agent, without any assurance the
forwarder will use it correctly. For example, suppose the seller reports
the shipment was sold for $100,000. However, because the buyer wants to
avoid graft in his home country, he instructs the forwarder to declare
the value at $50,000 plus misdescribe the goods. Supposed the U.S.
forwarder is unscrupulous enough to agree. Where is the protection for
the seller? There is a question as to whether the forwarder has a legal
obligation to provide copies of any of the export documents to the
seller. In fact, he could breach his obligations to his customer - the
buyer - by doing so!
Under these new rules, in a routed
transaction, the seller is required to provide the buyer's forwarder
with such information as name, address, point of origin, FMS code, the
ECCN number and related commodity description, I.R.S. number, and any
other information which could affect the export license designation.
Interestingly, if the buyer has assumed licensing responsibility, the
exporter does not have to report the ultimate consignee or port of
destination, but, of course, the seller cannot turn a blind eye to the
end user and end uses prohibitions in U.S. export laws.
Look for forwarders to make sure they
have a proper power of attorney from their customers. Look also for more
and more forwarders and shippers to implement transmission of export
related data through AES. The program itself is available on the
Internet free of charge at http://www.aesdirect.gov/ <http://www.aesdirect.gov/>
Further pushing towards the mandatory use
of AES is a long-anticipated report recently issued by Census to
Congress with input from many other federal agencies. The report was
required under the 2000 Consolidated Appropriations Act (P.L. 106-113)
to address the feasibility of requiring the use of AES for all shipments
which require an export license. Not surprisingly, Census recommended
the use of AES for all export transactions and that its information be
made available to all interested agencies, e.g. State, Commerce,
Defense, Energy, Treasury and the CIA.
WHO IS THE EXPORTER?
05/00
The disagreement between the trade and
Census continues as revisions of the exporter of record rule remain
under discussion. Census states it does not intend to change commercial
relationships yet it also insists that the U.S. seller must participate
in the export process by providing information for the Shippers' Export
Declaration. The problem is particularly complex for those exporters
selling on an ex-factory term of sale as their buyers are responsible
for arranging export. In the most recent regulatory revisions, Census
established a box labeled "Exporter (U.S. Principal Party in
Interest)." In so doing, it arguably required U.S. sellers to
assume certain liabilities if their goods are exported in reliance on
incorrect information coming from their buyers.
The trade community and Census continue
their dialog but in the meantime, the Office of Management and Budget
has now directed Census to relabel the box to refer only to the U.S.
Principal Party in Interest. The final rules regarding who in the
commercial transaction is responsible for providing what information
remains under review. The final rules are still expected in mid-June
2000 and would become effective 90 days thereafter.
CREDIT CHECKS ON OVERSEAS BUYERS
05/00
A major concern for exporters is how to get paid by their overseas
buyers. Often a letter of credit is used to finance the transaction.
However, this approach is not always popular or well-received. In the
May 3, 2000 Journal of Commerce, a column written by Frank Reynolds
entitled Savvy exporters do credit checks listed a number of entities
which can assist exporters in providing credit and collection services
overseas. See the Journal of Commerce web site for more details -
www.joc.com
EXPORT CONTROL VIOLATIONS LEAD TO GUILTY PLEA
05/00
A&C International Trade Inc. recently pled guilty in New York to
one felony count for exporting a police riot control vehicle to China
without the required export license. Alan Wang, its President, pled
guilty to a misdemeanor for filing false documents in conjunction with
the same export.
Recently International High Tech Marketing also entered a guilty plea
in Miami to an export control violation. IHTM pled to three felony
counts for under-valuing its shipments thereby evading the reporting
requirements. It exported computers and related products to Libya and
Sudan. A $250,000 fine was also imposed.
AES MANDATORY WITH GOODS SUBJECT TO AN EXPORT LICENSE
05/00
When enacted, HR 3194 required the use of the Automated Export System
if the goods being exported are subject to a validated export license,
see sections 1252 and 3154 and 13 U.S.C. 301. Before this section of the
law takes effect, however, a feasibility report must be filed by Census
with Congress. That report is expected shortly. It awaited feasibility
studies from the licensing agencies: Commerce, State, Defense, Treasury,
Energy and CIA which have now been completed. There have also been
certain operational problems with AES which Census and Customs continue
to address.
On a related topic, Customs has announced that based upon
instructions received from Census, effective August 4, 2000, facsimile
copies of the Shippers' Export Declaration will no longer be accepted.
AERP EXPIRES ON DECEMBER 31st
11/99
Exporters are reminded that at year end, AERP will
expire. At that time, the only means for filing shippers export
declarations will become AES. Check our web site for more details plus
the location where the necessary software can be downloaded.
CENSUS BEGINS INTERNET OPERATION
OF AES
10/99
Census has announced that starting
September 27th, filers can register at http/www.AESDirect.gov to
participate when AES becomes operational on the Internet on October 4,
1999.
SED EXCEPTIONS
10/99
In the paper world, exemptions from
Shippers Export
Declaration (SED) filing are stated on the first page of the loading
document. Such a requirement, of course, cannot apply in the electronic
context. Therefore, with the advent of electronic SED filing (called AES),
the Bureau of the Census, Dept. of Commerce, has issued a notice
detailing the available exemptions. Census still prefers to receive the
full exemption explanation on the loading document but when space
prevents it, the listed exemptions are the recommended way of providing
that information.
UNDERVALUATION ON SED YIELDS
CRIMINAL CONVICTION
10/99
Immunostics, Inc. of New Jersey is
reported to have been convicted of submitting false shippers export
declarations. The company is reported to have pled guilty to under
declaring the value of some of its export shipments on the Shippers
Export Declarations it filed with Commerce and Customs. The company is
expected to be fined $48,000.
BXA RULES CHANGE
9/99
As Commerce has begun to tighten the reins on exports, it has
announced the License and Enforcement Action Program - LEAP. A rider will now be
required for each export license requiring the exporter to notify all parties to
a transaction of their responsibilities under the license conditions to make
sure products reach their intended destinations and are used only for their
intended purposes. Acknowledgments must be in writing and the exporter will be
obligated to notify BXA of any missing acknowledgments.
The purpose of LEAP is to organize license conditions by
category of party bound, e.g. forwarder, consignee, end-user, exporter; place a
rider on each license requiring affirmative action by those affected; expand
pre-license checks and post-shipment visits; and to allow annual reviews and
spot-checks of license exceptions and holders of bulk export licenses.
CENSUS CHANGES SED FILING PROCEDURE
7/99
As the push continues towards the Automated Export
System, Census has awarded a contract to Flagship Customs Services, Inc. to
build a web-based system giving free access for users to AES. As a result,
individual companies will not have to develop their own AES programs or links.
