When Will They Ever Learn?

Posted by Clif Burns at 5:44 pm on August 4, 2011
Category: BIS • Entity List

ABOVE: Bharat Dynamics HQ
in Kanchanbagh, India

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Late last week, the Bureau of Industry and Security (“BIS”) released documents relating to an agreement by Toll Global Forwarding (USA), Inc. to pay $200,000 to settle charges that it had aided and abetted nine unlicensed exports of EAR99 items to companies on BIS’s Entity List. The company also agreed to conduct an external audit of its export controls compliance program.

The violations at issue were committed by Baltrans Logistics prior to its acquisition by Toll Global Forwarding in 2008. The exports in question were to Bharat Dynamics Ltd. and Solid State Physics Laboratory, both government-owned entities in India which have since been removed from the Entity List.

It is hard to work up much sympathy for companies engaged in this kind of violation by failing to consult an easily accessible list on the BIS website. And in this instance, it wasn’t an isolated failure but instead nine separate failures. Worse yet, this wasn’t Baltrans’s first time at the rodeo. In 2007 Baltrans agreed to pay a $6,000 fine to settle charges of an unlicensed export to another Indian company on the Entity List. Moreover, one of the unlicensed exports in the current case occurred after Baltrans agreed to pay the earlier fine. That might explain the high fine in this case as well as the external audit requirement

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Copyright © 2011 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

One Comment:

Clif,

Do we know yet who the USPPI was here, and whether they too were fined? I’ve tried to find out to no avail. I wonder it this isn’t a case of a consignee routed export transaction.

In a traditional shipper routed export, wouldn’t penalties like this would normally hit the USPPI’s inbox? But consignee routed exports represent a pitfall to which most freight forwards are oblivious.

15 CFR 758.3(b) (EAR) tells us that, in a consignee routed export, the U.S. agent for the foreign principal party in interest (which would be the U.S. freight forwarder) is the exporter for EAR purposes. I interpret this to mean that, in a consignee routed export, the U.S. freight forwarder is responsible for determining the licensing requirements and, if necessary, obtaining the license, presumably in the freight forwarders name.

Note over in 15 CFR 30.3(e) (Census regulations), the USPPI is only responsible for providing the “Export Control Classification Number (ECCN) or sufficient technical information to determine the ECCN”. 30.3(e)(1)(x) The authorized agent (the freight forwarder) is responsible for providing the “License or license exemption information”. 30.3(e)(2)(xiv).

I surmise that the fast majority of freight fowarders don’t know how exposed they are in consignee routed exports.

Jim Dickeson
Import Export Geeks
Import Export Compliance Training