Freight Forwarder Guidance and Best Practices

 

The Bureau of Industry and Security (BIS) provides this guidance and best practices document to further compliance efforts by freight forwarders and exporters (also known as a U.S. Principal Party of Interest, or USPPI) who use freight forwarders.  The freight forwarding community has a key role and obligation in securing the global supply chain stemming the flow of illegal exports, which helps to prevent the proliferation of Weapons of Mass Destruction (WMD), destabilizing military activities, enabling human rights abuses, or other activities contrary to U.S. national security or foreign policy interests.  The freight forwarder and the exporter must work together to ensure compliance with U.S. export controls and regulatory requirements. 

Those freight forwarders that are not familiar with the Export Administration Regulations (EAR) or the steps an exporter/USPPI must go through to comply with the EAR are strongly encouraged to visit the Export Administration Regulations Training section of the BIS website.

This document is not intended to be comprehensive guidance.

    

Freight Forwarder Roles and Responsibilities

This section provides an overview of the role, responsibilities, and best practices for freight forwarders.  Under the EAR, a freight forwarder or forwarding agent is “[t]he person in the United States who is authorized by a principal party in interest to perform the services required to facilitate the export of the items from the United States. This may include air couriers or carriers. In routed export transactions, the forwarding agent and the exporter may be the same for compliance purposes under the EAR.”

A freight forwarder’s expertise is moving cargo effectively and efficiently, and forwarders must comply with EAR requirements even when their actions are dependent upon information or instructions given by those who use their services.  Clear communication with the exporter/USPPI is critical to ensure freight forwarders meet their roles and responsibilities.   Responsibilities of the freight forwarder include:

• Obtaining the exporter/USPPI’s expectations of the service to be provided through a Shipper’s Letter of Instruction (SLI), Power of Attorney (POA), or other written authorization:
  • Obtain clear instructions from the exporter/USPPI on who will be responsible for filing the Electronic Export Information (EEI) in the Automated Export System (AES); and
  • Keep the SLI, POA, or other written authorization and the exporter/USPPI’s contact information readily available for the time period required by the EAR’s Recordkeeping provisions in 15 CFR 762.
• Complying with the ten general prohibitions in 15 CFR 736.2.

• Being knowledgeable of the EAR and other Federal agencies’ export regulations, including the proper handling and reporting of license exceptions and specific licenses.
• Being familiar with the EAR’s requirements for filing EEI in AES, found in 15 CFR 758, the Foreign Trade Regulation’s (FTR) requirements found in 15 CFR 30, and other Federal agencies’ export requirements, such as the U.S. Customs and Border Protection.
• When the exporter/USPPI is filing their own EEI:
  • Providing the exporter/USPPI with the correct transportation data elements and date of export and advising them of any changes so the exporter/USPPI can update the EEI; and
  • Obtaining the Internal Transaction Number (ITN) or FTR exemption code that exempts a shipment from requiring an EEI from the exporter/USPPI.   
• When filing the EEI on behalf of the exporter/USPPI: 
  • Obtaining a SLI, POA or written authorization to file the EEI;
  • Accurately preparing and submitting the EEI in a timely manner based on information received from the USPPI and other parties involved in the transaction;
  • Obtaining any missing information from the exporter/USPPI, including the Export Control Classification Number (ECCN) (or EAR99 designation) and license authorization (specific license, license exception, or NLR) for all exports under BIS jurisdiction and reporting it in the AES;
  • Questioning and resolving any discrepancies between the commercial invoice and SLI, POA, or other written authorization;
  • Reviewing the data before and after transmitting the EEI to verify that the data filed matches the data provided by the exporter/USPPI; and  
  • Updating the EEI in AES when data elements change per 15 CFR 30.9.
• Looking for red flags, including checking documents for boycott language.
• When there is a license, ensuring that the transaction, transportation, and the EEI filing are consistent with the license.
• Upon request, providing the exporter/USPPI with a copy of the export information filed in a mutually agreed-upon format.
• Retaining records as required in 15 CFR 762, including documentation to support the information reported to the AES, communications, shipping documents, licenses, and other documents related to the shipment.

In addition to these various responsibilities, there are several best practices recommended for freight forwarders to follow, including:

• Screening known parties to the transaction using the Consolidated Screening List (CSL) for all transactions, even those when the freight forwarder is not filing the EEI on behalf of the exporter/USPPI.  Freight forwarders should confirm that parties to the transaction are not on any of the U.S. Government’s lists of restricted and prohibited parties and/or are not involved in prohibited activities.
• Providing the following resources to the exporter/USPPI when information submitted to the freight forwarder is not consistent with the EAR or potential compliance issues are discovered during the course of doing business:
  • BIS Export Administration Regulations Training
  • BIS export counselor contact information
  • NCBFAA USPPI Responsibility Sheet
• Informing BIS of any exporters/USPPIs or other freight forwarders in non-compliance with the EAR via the Voluntary Self Disclosure process (also used for disclosures concerning other parties).
• Reviewing all industry guidance issued by BIS, the Departments of Justice, State, and Treasury, including guidance directed toward the financial or other sections, for red flags and best practices.

 

Roles and Responsibilities for Non-Routed and Routed Exports

Please refer to 15 CFR 758.3 for the responsibilities of parties to the transaction under the EAR and 15 CFR 30.3 for the responsibilities of parties to export transactions under the U.S. Census Bureau’s Foreign Trade Regulations.

Non-Routed Export Transaction

A non-routed export transaction, also referred to as a standard export transaction, is one in which the exporter/USPPI is responsible for facilitating the export of items from the United States and filing the EEI in AES or hiring a U.S. authorized agent (typically a freight forwarder) to file AES on their behalf.  The authorized U.S. agent for a non-routed export transaction has certain responsibilities under 15 CFR 30.3(c)(2) of the U.S. Census Bureau’s Foreign Trade Regulations.

If an authorized U.S. agent is used by the exporter/USPPI:

• The exporter/USPPI is responsible for providing the authorized U.S. agent with the information necessary to prepare and submit the EEI and maintaining documentation to support the information provided to the agent.
• The authorized U.S. agent is responsible for preparing and submitting the EEI, maintaining documentation to support the EEI, and providing the USPPI with a copy of the EEI upon request.
• Both the authorized U.S. agent and the exporter/USPPI who authorized the agent are responsible for the correctness of each entry made on the EEI.

Routed Export Transaction

A routed export transaction is one in which the Foreign Principal Party in Interest (FPPI) is responsible for facilitating the export of items from the United States and authorizing a U.S. agent to facilitate the export and prepare and file the EEI on their behalf.  The FPPI must provide a POA or written authorization to the U.S. agent, which can be either the exporter/USPPI or the freight forwarder, to prepare and file the EEI.  The authorized U.S. agent for a routed transaction has certain responsibilities under 15 CFR 30.3(e)(2) of the U.S. Census Bureau’s Foreign Trade Regulations.

Under the EAR, the exporter/USPPI is the “exporter” of record and must determine the license authorization (License, License Exception, or NLR) and obtain the appropriate license or other authorization for the transaction, unless the exporter/USPPI obtains a written document from the FPPI in which the FPPI expressly assumes responsibility for determining licensing requirements and obtaining license authority. In cases where the USPPI obtains this written documentation, the authorized U.S. agent of the FPPI then becomes the “exporter” of record for the purposes of the EAR.

The exporter as defined in the EAR is responsible for providing the authorized U.S. agent with the information necessary to file the EEI.  The exporter and authorized U.S. agent could be the same party, depending on the circumstances of the routed export transaction.

The authorized U.S. agent is responsible for preparing and submitting the EEI, maintaining documentation to support the EEI, and providing the USPPI with a copy of the EEI upon request.

Both the authorized U.S. agent and the FPPI who authorized the agent are responsible for the correctness of each entry made on the EEI.

 

Freight Forwarder Expectations of Exporters/UPPIs

• While a freight forwarder may offer a variety of services, its primary role is arranging and managing the transportation of goods.  The freight forwarder is a representative of the exporter/USPPI and relies on information provided by the exporter/USPPI in the export transactions.  The freight forwarder should expect, and if necessary request, its customers to do the following:  provide detailed documents regarding exporter/USPPI expectations (i.e., standard operating procedure);
• Be knowledgeable in applicable U.S. regulations and understand the role and responsibilities of exporters/USPPIs in the export transaction;
• Provide clear, accurate, and complete transaction information in writing, including ECCNs or EAR99 determinations and license authorization information (e.g., license number, license exception, or NLR), for all exported goods;
• Review EEI filings for accuracy;
• Meet with the freight forwarder regularly to discuss the forwarder’s performance, concerns, impact of new regulations, and other relevant topics;
• Communicate changes (for example: export control changes, new destinations, business organizational changes) to the freight forwarder; and
• Maintain an open dialogue with the freight forwarder.  

Additionally, freight forwarders should expect, and if necessary request, the following of exporters/USPPIs and/or FPPIs in routed export transactions (see Routed Export Transaction section for more information):

• Be knowledgeable in applicable U.S. regulations and understand the role and responsibilities of exporter/USPPI in the export transaction;
• Provide clear, accurate and complete information in writing, including ECCNs or EAR99 determinations and license authorization information (e.g., license number, license exception, or NLR) for all exported goods;
• Provide contact information.  Although the freight forwarder was not hired by the exporter/USPPI, a point of contact is needed to assist with questions, providing missing information, etc.;
• Review EEI filing records of the routed data elements to ensure accuracy; and
• Communicate questions and concerns to the freight forwarder.

 

Selecting a Freight Forwarder

Just as exporters/USPPIs should “Know Your Customer” and who they are selling to, they should know to whom they are entrusting their goods and, in some circumstances, their reputations and legal responsibilities.

Exporter’s/USPPI’s Best Practices when Selecting a Freight Forwarder

• Questions to consider:
  • Does the freight forwarder have knowledge and experience in the movement of the product to the destination country(ies)?
  • Does management oversee and support the staff?
  • Is there an export regulatory compliance program in place?
• Manage the selected freight forwarder’s service:
  • Document expectations in a written freight forwarder standard operating procedure or written agreement on services to be provided, ideally signed by both parties:
    • Include documentation to support possible staff turnover;
    • Include escalation process and points of contacts; and
    • State how information will be provided and who should be contacted when information is missing.
  • Require the freight forwarder to communicate any issues or document discrepancies in a timely fashion
• Maintain communication:
  • Hold regular meetings to discuss issues and solutions.
  • Keep records of communications.
• Provide complete documents:
  • An SLI provides clear and accurate instructions to the freight forwarder for filing and auditing EEI filings.
  • Provide POA or other written authorization to file the EEI.
  • Obtain documents from the forwarder and AES export reports [https://www.census.gov/foreign-trade/compliance/aesvetting.html] for internal audit purposes.

 

Antiboycott Overview and Best Practices

Antiboycott Overview

The antiboycott provisions of the EAR apply to certain activities of U.S. persons, including freight forwarders, undertaken with the intent to comply with, further, or support an unsanctioned foreign boycott.  The antiboycott regulations encourage and, in specified cases, require U.S. persons to refuse to take part in foreign boycotts that the United States does not sanction. They have the effect of preventing U.S. firms from advancing foreign policies of other nations which run counter to U.S. policy.  The antiboycott laws apply to all boycotts that are unsanctioned by the United States, including the Arab League boycott of Israel.

 

Antiboycott Guidance

 

The Office of Antiboycott Compliance (OAC) within BIS is charged with administering and enforcing the Anti-Boycott Act of 2018, Part II of the Export Control Reform Act of 2018 (ECRA), and the antiboycott provisions in 15 CFR 760 of the EAR.  These authorities discourage and, in some circumstances, prohibit U.S. companies from taking certain actions in furtherance or support of a boycott maintained by a foreign country against a country friendly to the United States.  U.S. persons must report to OAC the receipt of certain requests, including requests to take certain actions to comply with, further, or support an unsanctioned foreign boycott.  Prohibited activities include, but are not limited to:

• Implementation (by U.S. banking entities) of letters of credit that include prohibited boycott-related terms or conditions.

• Furnishing or agreeing to furnish information about:
  • business relationships with a boycotted country or its companies, nationals or residents, or any blacklisted persons;
  • religion, race, sex, or national origin of a United States person;
  • whether another person is a member of a charitable or fraternal organization that supports a boycotted country.
• Refusals or agreements to refuse to do business with or in a boycotted country or with blacklisted entities.
• Boycott-based discrimination or agreements to discriminate against U.S. persons based on religion, race, sex or national origin.
• Taking any action with intent to evade the regulations.

 

Antiboycott language may be found in the following types of documents and communication (non-exhaustive list):

• Request for Quote (RFQ)
• Letter of Credit (L/C)
• Commercial Invoice
• Shippers Letter of Instructions (SLI)
• Email
• Phone conversation
• Purchase order
• Sales contract

 

U.S. companies should report their receipt of requests to engage in boycott-related activities or to otherwise further or support an unsanctioned foreign boycott. If you have questions, please call the OAC Advice Line ((202) 482-2381) or contact OAC by email.  Reports may be filed electronically or by mail and must be postmarked or electronically date-stamped by the end of the month following the calendar quarter in which the U.S. person received the boycott request. The receipt of the request must be reported regardless of whether the recipient amends, deletes, rejects, or complies with the request.  Forms for both electronic and/or mail submission may be accessed from the forms request page of the OAC website.  Failure to report receipt of a boycott request within the time mandated by the regulations constitutes a violation and possible or probable penalty.

 

Freight Forwarder and Exporter/USPPI Red Flags

 

In addition to the below red flags specific to freight forwarders and exporter/USPPIs, red flags may be found on the BIS website at the following landing pages:  Red Flags Indicators [https://www.bis.doc.gov/index.php/enforcement/oee/compliance/23-compliance-a-training/51-red-flag-indicators], Don’t Let This Happen to You [https://www.bis.doc.gov/index.php/documents/enforcement/1005-don-t-let-this-happen-to-you-1], and Transshipment Best Practices [https://www.bis.doc.gov/index.php/compliance-a-training/export-management-a-compliance/transshipment-best-practices].

 

Red Flag For:	Red Flag Description:
Forwarder	ECCN/EAR99 and license authorization type (license number, license exception, no license required) not provided by the exporter/USPPI when requested.
	The exporter/USPPI does not provide a Power of Attorney (POA) or other written authorization to file the EEI.
	Exporter/USPPI routinely omits required EEI data elements.
	Exporter/USPPI is unfamiliar/unable to answer questions regarding applicability of the EAR or other export regulations to their export shipments.
	Exporter/USPPI is unfamiliar with/unable to answer question regarding its customers or the destination of the items being exported.
	Routed transactions are paid for and/or arranged by a company in a country different than the destination of the export and with no apparent connection to the transaction (e.g., not a parent/sibling/subsidiary company).
	Party listed as the ultimate consignee does not typically engage in business consistent with consuming or otherwise using subject commodities.
	A party’s address is similar to that of a party on a proscribed party or sanctions list, or their physical location is unusual (e.g., business address is a residence).
	The exporter/USPPI or an FPPI in a routed transaction requests a document certifying the carrying vessel is not blacklisted or is allowed to enter a named Arab country port.
	The freight forwarder is requested to certify no parties involved in the transaction, including the shipping line agent, are of Israeli origin.
Exporter/USPPI	Forwarder (authorized agent) filed an EEI and does not provide the USPPI with an EEI filing report upon request.
	Forwarder does not require a POA or other written authorization from USPPI for a routed export.
	ECCN/EAR99 and license type (license number, license exception, no license required) not requested when a forwarder is filing an EEI or when an exemption legend is being used in lieu of an EEI filing.
	The forwarder is not supportive or communicative regarding the services they are providing.
	AES filings made by forwarder on behalf of the exporter/USPPI routinely contain inaccurate information.
	Forwarder unable to recognize license exceptions codes provided by the exporter.
	Forwarder unfamiliar with the EAR or other export regulations.
	Forwarder (authorized agent) does not obtain a POA or other written authorization prior to filing an EEI.
	AES response messages are not being addressed, as appropriate.
	Forwarder routinely uses exporter/USPPI information for AES filings the exporter/USPPI did not authorize.
	Forwarder requests certification that no parties or commodities involved in the transaction are of Israeli origin.