U. S. Bureau of Industry and Security: August 31, 2011

Home >News > 2011 - BIS Publishes New “Best Practices” for Industry to Guard Against Unlawful Diversion through Transshipment Trade

FOR IMMEDIATE RELEASE	BUREAU OF INDUSTRY AND SECURITY
Wednesday, August 31, 2011	Office of Public Affairs
www.bis.doc.gov	202-482-2721

BIS Publishes New “Best Practices” for Industry to Guard Against
Unlawful Diversion through Transshipment Trade

WASHINGTON, D.C. – The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) today published a new set of “best practices,” developed in cooperation with U.S. industry, to help guard against the diversion of dual-use items shipped to a transshipment "hub," or to any intermediate country before being shipped to the country of ultimate destination.

Transshipment is a routine and growing part of legitimate world trade with logistical benefits, but also can be used illegally to disguise the actual country of ultimate destination. Transshipment practices may also create a risk that items are diverted to unauthorized end-users or end-uses.

“These new best practices provide a formidable tool to help secure trade through transshipment hubs,” said Assistant Secretary for Export Administration Kevin J. Wolf. "BIS is committed to working with industry to adopt best practices critical to safeguarding U.S. national security interests.”

The following new best practices will help exporters, re-exporters, freight forwarders and other parties to comply with US export control regulations and laws and augment BIS’s Export Management and Compliance Guidelines. BIS is encouraging industry to:

Pay heightened attention to BIS’s Red Flag Indicators and communicate red flag concerns internally.
Seek to utilize only those trade facilitators and freight forwarders that administer sound export control management and compliance programs that include transshipment trade best practices.
Obtain detailed information on the credentials of foreign customers to assess diversion risk.
For routed transactions, establish and maintain a trusted relationship with parties to mitigate risks.
Communicate export control classification and destination information to end-users and consignees on government and commercial export documentation.
Provide the ECCN or the EAR99 classification to freight forwarders for all export transactions and report the classifications in the Automated Export System (AES), if applicable.
Use information technology to the maximum extent feasible to augment "know your customer" and other due-diligence measures in combating the threats of diversion and increase confidence that shipments will reach authorized end-users for authorized end-uses.

This set of best practices, aimed at U.S industry, supports one of ten best practices suggested by the State Department’s Bureau of International Security and Nonproliferation to foreign governments at the Global Transshipment Seminar in Dubai, United Arab Emirates, in March 2011. That best practice suggestion encouraged industry to develop stronger internal compliance programs, conduct focused outreach, and raise awareness of export control obligations.

The 2011 “Best Practices for Preventing Unlawful Diversion of U.S. Dual-Use Items Subject to the Export Administration Regulations, Particularly through Transshipment Trade” are posted on the BIS website http://www.bis.doc.gov/complianceandenforcement/bestpractices.htm

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Ten “best practices” suggested by the Department of State as the basis upon which we can build effective international transshipment security measures:

First to have a transparent and interagency-coordinated legal and regulatory system that comprehensively controls items for export, re-export, transit and transshipment that extends fully to activities within free trade zones, and is consistent with the guidelines and lists of the four multilateral regimes and relevant Security Council Resolutions.
Ensure for listed items that licenses are required for the transshipment of all munitions and nuclear items, and for all exports of other listed items at least to countries and end-users identified as being of proliferation concern or those endeavors acting on their behalf. Coordination with the exporting country, as appropriate, to ensure that transshipments of listed items are consistent with the intent of the exporting country.
Ensure catch-all authority controls all items in transit and transshipment where there is a reasonable suspicion that the items are intended to be used in WMD, their related delivery systems, or conventional arms.
Adopt internationally endorsed requirements for manifest collection in advance of the arrival of all controlled goods, regardless of their end destination. This would provide the governments the ability to vet transactions against known end users of concern and for inconsistencies that raise suspicion, and do it in time to stop and seize the transaction utilizing catch-all controls if necessary. The WCO SAFE Framework provides a multilaterally accepted data model to simplify for shippers how this information can be selected, formatted, and transmitted.
Encourage industry to develop stronger internal compliance programs, and conduct focused outreach to manufacturers, distributors, brokers, and freight forwarders to raise awareness of their export control obligations and the potential penalties for non-compliance. A robust government-industry partnership in the context of transit, transshipment, and re-export is essential to effectively safeguard circumstances of transshipment trade from proliferation related activities.
Provide adequate resources and training for customs and enforcement officers so that they can identify proliferation-related items, including increasing cooperation between enforcement agencies and licensing authorities and other sources of technical assistance.
Fully use inspection authorities for cargos of potential concern, and adopt and deploy appropriate screening technologies—both non-intrusive inspection and radiation detection.
Make full use of authorities to seize and dispose of cargos of proliferation concern. Limit enforcement officials’ personal liability for the conduct of routine investigations of shipments.
Institute effective penalties sufficient to punish and deter proliferation-related transshipment activities. Prosecute transshipment violations to the full extent of the law and publicize prosecutions as a deterrent.
Establish and maintain information sharing exchanges with counterparts in other countries and ensure timely replies to inquiries for assistance.