[Federal Register: May 16, 2003 (Volume 68, Number 95)]
[Notices]
[Page 26567-26569]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16my03-41]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
[Docket No. 030505114-3114-01]
Best Practices for Exporters/Re-Exporters and Trade Facilitation/
Freight Forwarding Companies Regarding the Transit, Transshipment, and
Reexport of Dual-Use Items
AGENCY: Bureau of Industry and Security, Commerce.
ACTION: Notice of Inquiry.
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SUMMARY: The Bureau of Industry and Security (BIS) is seeking public
comments on the following proposed ``Best Practices for Exporters/Re-
exporters and Trade Facilitation/Freight Forwarding Companies Regarding
the Transit, Transshipment, and Reexport of Dual-Use Items.'' BIS will
consider all comments timely submitted before finalizing these Best
Practices.
DATES: Comments must be received before June 16, 2003.
ADDRESSES: Comments may be submitted by e-mail to rcupitt@bis.doc.gov,
by fax at (202) 482-2387, or on paper to Rick Cupitt, Office of the
Under Secretary for Industry and Security, Bureau of Industry and
Security, Room H3898, U.S. Department of Commerce, 14th Street and
Pennsylvania Avenue, NW., Washington, DC 20230.
FOR FURTHER INFORMATION CONTACT: Rick Cupitt, Office of the Under
Secretary for Industry and Security at rcupitt@bis.doc.gov or (202)
482-1459.
SUPPLEMENTARY INFORMATION:
Background
This document sets forth ``best practices'' for exporters/re-
exporters and trade facilitation/freight forwarding companies regarding
the transit, transshipment, and re-export of dual-use items. The best
practices identified herein represent the types of practices that many
companies already observe, which is consistent with the broader view of
the Department of Commerce (DOC) that implementing effective export
compliance programs is an important component of responsible corporate
citizenship and good business practices generally.
Overview
Dual-use export control laws are predicated on the security and
reliability of supply chains. Both the licensing of export transactions
in dual-use items and the allowance of license-excepted transactions in
such items are premised on the assurance that such
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items: (i) Will not be used for a prohibited end-use, (ii) will be in
the possession of the person or organization contemplated as the end-
user at the time of export, and (iii) will be utilized in the country
contemplated as the country of end-use when the item is exported. The
diversion of controlled goods or technologies--even inadvertently--from
such contemplated end-use, end-user, or destination constitutes a
serious threat to the efficacy of export control regimes. Such
diversion undermines efforts to counter the proliferation of weapons of
mass destruction, terrorism, and other threats to national and
international security.
Global ``transshipment hubs''--i.e., countries or areas that
function as major hubs for the trading and shipment of cargo--pose
special risks of diversion. The concentrated presence of commercial
infrastructure (e.g., trading companies, brokerages, and free trade
zones) that facilitates large volumes of transit, transshipment, import
and re-export traffic through such points make transshipment hubs
particularly vulnerable to the diversion of sensitive items to illicit
purposes.
To combat this risk, the United States Government has implemented a
number of initiatives to work with industry and foreign governments.
DOC, for example, has launched the Transshipment Country Export Control
Initiative (TECI). TECI seeks to channel existing and new export
control practices toward countering the diversion of controlled items
through global transshipment hubs. TECI has two principal prongs. Under
the first prong, DOC seeks to improve cooperation and communication
with relevant agencies in key transshipment hubs charged with
administering export and trade control laws.\1\ Such efforts are
already underway with respect to a number of key transshipment
countries and will be launched with respect to others in the near
future.
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\1\ A number of U.S. Government agencies, including the DOC,
also work with the governments of those hubs to strengthen their
indigenous export control regimes, including conducting technical
assistance activities as part of the Export Control and Related
Border Security Assistance (EXBS) Program managed by the U.S.
Department of State.
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Under TECI's second prong, DOC seeks to work with the private
sector businesses and individuals involved in the transshipment of
goods to enhance their ability to prevent the diversion of controlled
items. In the course of this dialogue, a number of organizations have
noted the absence of a clearly stated set of export control ``best
practices'' tailored to the particular activities and circumstances of
entities that facilitate the export or re-export of dual-use items to,
from, or through transshipment hubs (such ``Trade Facilitators/Freight
Forwarders'' include freight forwarders, brokers, air and marine cargo
carriers, express shipment carriers, port operators, and port
authorities) as well as entities that export dual-use items to
transhipment hubs or that re-export such items from such hubs
(``Exporters/Re-exporters''). The absence of a single organization or
forum representing these many diverse businesses involved in
transshipment makes it unlikely that such a set of best practices would
be developed without DOC coordination.
Set forth below, for public comment, is a draft set of best
practices for use by Trade Facilitators/Freight Forwarders and
Exporters/Re-Exporters in guiding the export control compliance
activities of companies involved in the transshipment, transit, and re-
export of dual-use items. They are based on input provided at DOC-
sponsored export control compliance seminars and other events, and on
the observations of best practices by DOC staff and export control
practitioners involved in both the administration and enforcement of
export controls.
The publication of these best practices creates no legal obligation
to comply with such practices on the part of any person. Compliance
with these best practices creates no defense to liability for the
violation of export control laws. However, demonstrated compliance with
these best practices by a company will be considered an important
mitigating factor in administrative prosecutions arising out of
violations of the Export Administration Regulations by that company.
Best Practices for Exporters/Re-Exporters and Trade Facilitation/
Freight Forwarding Companies Regarding the Transit, Transshipment, and
Reexport of Dual-Use Items
Purpose
To help industry, and in particular Trade Facilitators/Freight
Forwarders and Exporters/Re-Exporters, contribute to a reduction in the
illicit transshipment, transit, or re-export of dual-use items subject
to U.S. and foreign export controls, and to facilitate legitimate
global commerce by improving the capacity to distinguish between licit
and illicit transactions.
Principles
1. Industry and government should work together to foster secure
trade that reduces the risk of diversion of items subject to export
controls.
2. Secure trade will reduce the diversion of dual-use items to
prohibited end-uses, end-users, and destinations.
3. Secure trade will encourage the more expeditious movement of
legitimate trade through borders and ports.
4. Industry can achieve secure trade objectives through appropriate
export management practices.
Scope
The best practices identified herein:
1. Are designed Trade Facilitators/Freight Forwarders and
Exporters/Re-Exporters. The terms ``Company'' and ``Companies'', when
used herein, refer to all of these types of entities;
2. Are designed to apply to transactions subject to the
jurisdiction of the Department of Commerce; and
3. Complement the set of Best Practices for Exporters/Shippers
found in the U.S. Department of Commerce Export Management System.
Additional information on the Export Management System resides on the
BIS Web site at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.bis.doc.gov/ExportManagementSystems/Default.htm
.
Company Policy and Company Management
1. Each Company should develop a written policy against allowing
its exports or services to contribute to terrorism or programs of
proliferation concern.
2. Each Company should identify one person, who reports to the
Company's Chief Executive Officer, General Counsel, or other senior
management official (but not to a sales or marketing official), as the
ultimate party responsible for oversight of the Company's export
control compliance program.
3. Each Company should create an export control compliance program.
Companies should integrate this compliance program into its overall
regulatory compliance, security, and ethics programs.
4. Each Company should ensure that relevant Company personnel
receive regular training in export control compliance responsibilities,
and should consider offering to its employees incentives for compliance
(and disincentives for noncompliance) with their export control
responsibilities.
5. Exporters/Re-Exporters should seek to utilize only those Trade
Facilitators/Freight Forwarders that also observe these best practices.
Compliance Activities: General
6. An Exporter/Re-Exporter should classify each of its products
according
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the requirements of the Export Administration Regulations (EAR), 15 CFR
Parts 730-774 (2003), and should communicate the appropriate Export
Control Classification Number (ECCN) or other classification
information for each export to the Trade Facilitator/Freight Forwarder
and the end-user involved in that export (even if the shipment is made
under an EAR License Exception). Each Company involved in the
transaction should also maintain a record of such classification for
every export.
7. A Company should screen all parties to the transaction against
all relevant lists (such as the Denied Persons List, Unverified List,
Entities List, and lists of U.S. Government-sanctioned parties), and
should maintain a record of such screening.
8. A Company should screen all exports/re-exports against a list of
embargoed destinations, and should maintain a record of such screening.
Compliance Activities: Transshipment Hub \2\-Specific
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\2\ DOC's TECI has focused its efforts on the following
transshipment hubs: Cyprus, Hong Kong, Malaysia, Malta, Panama,
Singapore, Taiwan, Thailand, and the United Arab Emirates.
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9. With respect to transactions to, from, or through transshipment
hubs, Exporters/Re-Exporters should take appropriate steps to know who
the end-user is and to determine whether the item will be re-exported
or incorporated in an item to be re-exported. An Exporter/Re-Exporter
of a dual-use item under license should inform the end-user,
distributor, or other appropriate recipient of the item of the license
terms and conditions for such export.
10. With respect to transactions to, from, or through transshipment
hubs, Companies should have in place compliance and/or business
procedures to be immediately responsive to theft or unauthorized
delivery. This include procedures--including documented confirmation--
to ensure that the item exported has reached the proper end-user.
11. With respect to transactions to, from, or through transshipment
hubs, Companies should pay heightened attention to the Red Flag
Indicators on the BIS Web site (see http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.bis.doc.gov/Enforcement/redflags.htm
) and in the ``Know Your Customer Guidance'' set forth in
Supplement 3 to part 732 of the EAR.
Responding to Suspicious Transactions
12. When a Company encounters a suspicious transaction, it should
halt the shipment and consult with its export control compliance
specialist. If the transaction is determined to involve a potential or
actual violation of the EAR, the Company should contact BIS or another
U.S. law enforcement agency immediately and maintain all relevant
records.
Request for Comments
Parties submitting comments are asked to be as specific as
possible. BIS encourages interested persons who wish to comment to do
so at the earliest possible time. The period for submission of comments
will close June 16, 2003. BIS will consider comments on any aspect or
consequence of any part or all of this proposal. Comments received
after the end of the comment period will be considered if possible, but
their consideration cannot be assured. BIS will not accept comments
accompanied by a request that a part or all of the material be treated
confidentially because of its business proprietary nature or for any
other reason. BIS will return such comments and materials to the
persons submitting them and will not consider them in developing any
final ``Best Practices'' document that it may publish. All comments on
this proposal will be a matter of public record and will be available
for public inspection and copying. All comments must be submitted in
writing (including facsimile or e-mail).
The public record concerning these comments will be maintained in
the Bureau of Industry and Security, Office of Administration, U.S.
Department of Commerce, Room 6883, 14th and Constitution Avenue, NW.,
Washington, DC 20230; (202) 482-0637. This component does not maintain
a separate public inspection facility. Requesters should first view
BIS's FOIA website (which can be reached through http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.bis.doc.gov/foia
). If the records sought cannot be located at this
site, or if the requester does not have access to a computer, please
call the phone number above for assistance.
Kenneth I. Juster,
Under Secretary for Industry and Security.
[FR Doc. 03-12265 Filed 5-15-03; 8:45 am]
BILLING CODE 3510-33-P