Issue 443, June 2, 2004
Exporters beware! If you're caught submitting incomplete or inaccurate information on Shipper's Export Declarations ("SED") or Automated Export System ("AES") records, you should expect real consequences, including the delay or seizure of shipments and increased monetary penalties up to ten times current amounts. Although most U.S. export transactions require filing an SED (whether in paper or electronic format), U.S. Customs and Border Protection ("CBP") has in the past been not been overly vigilant in scrutinizing the completeness and quality of SEDs, except in cases of sensitive exports. This is no longer the case. Based on antiterrorism concerns, Customs is cracking down, and it is not alone. The U.S. Commerce Department's Bureau of Industry and Security ("BIS") has also increased its scrutiny of the information reported on the SED and is increasingly pursuing violators in administrative and even criminal export enforcement actions.

The importance of the SED as an information-gathering tool for the U.S. Government cannot be overstated. While the U.S. Census Bureau ("Census") relies on it to track trade statistics, it is also perhaps the single most important "export document." It provides Customs, BIS, and other agencies with a snapshot of an export transaction -- allowing regulators to assess the type of items exported, the final destination, end-use, and end-user of the goods, as well as the authorization for the export. To complete the SED properly, therefore, exporters must invest the time and resources necessary to: classify their products; undertake sufficient due diligence to "know their customers"; assess whether any licensing requirements apply; obtain any required authorizations; and communicate this information accurately to the freight forwarder. The SED is not just more paperwork; it is a statement to the U.S. Government, and the exporter is primarily responsible for its accuracy and completeness.

Recent and forthcoming regulatory developments indicate that the U.S. Government is taking steps to enhance its ability to obtain accurate, real-time export information. Last year, Census introduced a number of SED-related changes, including: mandatory electronic AES filing for items controlled on the Commerce Control List and U.S. Munitions List; elimination of AES Option 3 and suspension of Option 4 for new applicants; and requiring the use of a new SED calling for additional data. Early next year, further amendments to the Foreign Trade Statistics Regulations ("FTSR") are expected to bring more sweeping changes, including steep civil and criminal penalties -- forfeiture of goods and fines of up to $10,000 per violation and/or 5-year imprisonment -- for failures to file or filing false or misleading information on the SED. Armed with new fines representing a tenfold increase over currently penalty levels and other enforcement tools, Customs will be well-equipped to step up enforcement of the FTSR.

BIS also has adopted an aggressive enforcement posture. In the past, BIS mainly targeted SED violations in connection with unlicensed exports, but now BIS is referring for criminal prosecution cases involving false statements on SEDs even where no export license is required. Recent administrative and criminal export enforcement actions typically focus not only on violations relating to export licensing requirements but also on making false statements on the SED, such as information on ultimate destination, license authority, and value of shipments. Moreover, BIS often will count each inaccurate line-item on an SED as a separate violation.

These and other recent developments send an unambiguous signal that, when it comes to representations on export documentation, the U.S. Government means business. Conscientious exporters should review their export compliance systems to ensure that they do not overlook the SED.
 

Our contributing writers Michael L. Burton and Sylwia A. Lis are attorneys for Miller & Chevalier Chartered in Washington, D.C. and can be reached at mburton@milchev.com or slis@milchev.com.

Please note that due to the complex nature of the subject matter, DHL Danzas Air & Ocean cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with DHL Danzas Air & Ocean.