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Final rules for international trade data highlight issues for routed export transaction

Sean McGowan Robert Shapiro Jim Slear February 11, 2015

Robert Shapiro, Teresa Polino, Jim Slear, Sean McGowan, Orisia Gammell and James Burnett

The International Trade Data System (ITDS) is intended to create a single window for reporting international trade activities to all government agencies that may have regulatory authority over a transaction. The Bureau of the Census (Census) finalized its August 22, 2014 interim rules for implementing ITDS with respect to Electronic Export Information (EEI) and for authorizing relevant government agencies to have access to this data. 80 Fed. Reg. 6900 (February 9, 2015).

The sharing of information between government agencies is not necessarily news, but the Federal Register Notice publishing the Interim Final Rule, 79 Fed. Reg. 49659, provides some interesting insight into the impact that ITDS is likely to have on the exportation of goods from the United States. Federal agencies may use EEI information for official purposes, including but not limited to:

  • Improving compliance with U.S. export laws and regulations;
  • Detecting and preventing violations of export, census, customs, homeland security, national resource and other laws, regulations and treaties;
  • Assessing potential threats to U.S. and international security;
  • Enforcing U.S. export-related laws and regulations;
  • Supporting proof of export for enforcement of laws related to exemption from or refund, drawback or other return of taxes, duties, fees or other charges;
  • Analyzing the impact of proposed and implemented trade agreements; and
  • Preparing statistics.

These purposes are not particularly impactful until one recognizes that the EEI will be processed by Customs and Border Protection’s Automated Commercial Environment (ACE) a sophisticated automated system for facilitating legitimate trade and identifying or targeting instances of potential non-compliance.

The Final Rule paves the way for the U.S. Principal Party in Interest (USPPI) (generally the seller) to receive EEI through its ACE portal, thus vastly facilitating the ability of the USPPI to implement effective compliance programs. The Census rules, however, limit the EEI data that may be released to the USPPI in a Routed Export Transaction (RET).

In an RET, the Foreign Principal Party in Interest (FPPI) (generally the buyer) takes on the responsibility for facilitating the shipment of the goods and for filing the EEI; the USPPI must only provide a few of the EEI data elements. Notwithstanding these limitations, the USPPI in an RET retains compliance liability under U.S. law. The limitations on the EEI data that may be released to the USPPI significantly compromise the ability to use this data to assure compliance.

In other words, in an RET the USPPI does not control the shipment of the goods and does not control the EEI that is reported, but retains liability should either of these activities result in a violation of the law. The implementation of ITDS for EEI illustrates that the USPPI will not be able to rely on EEI information to assist it in assuring compliance. U.S. regulators charged with improving compliance and enforcing U.S. export related laws do not face the same.