ECommerce Export Readiness
U.S. Commercial Service Iowa
U.S. Export Assistance Center
Allen Patch, Director
Patricia Cook, International Trade Specialist
Presented in partnership with The Start Up Practice Group at
The U.S. Commercial Service
A worldwide trade development and problem solving network.

Trade Counseling. Get the information and advice you need to succeed.

Market Intelligence. Target the best trade opportunities.

Business Matchmaking. Connect with the right partners and prospects.
Disclaimer




This presentation and associated materials have been designed to provide
only general information about US export control agencies.
Seek out detailed information and/or official rulings from the agencies
mentioned.
These are serious matters with civil and criminal penalties for false or
intentionally deceptive practices.
Get educated, train staff, and consider professional legal counsel.
Myths and Misunderstandings

“They pick it up at our door. I am not responsible for any of the export stuff.”
– Reality: As a USPPI (as a US company in more general terms) you are
still responsible for all export reporting and compliance.
Myths and Misunderstandings

My product does not require a license, so I don’t have to worry about any of
those export regulations.
– Reality: Licensing requirements are only one part of the picture. Trade
compliance requires screening, classification, reporting, due diligence,
and record keeping.
PreExport
• Classification
• Jurisdiction
• Qualification
Order Entry
&
Processing
• Country
Screening
• Buyer & 3rd Party
Screening
• Export Control
Decision Tree
PreShipment
• Re-screen
parties
• Electronic
Export
Information
• Cargo Security
• Record
Keeping
Export Controls

US Government Enforcement
– Investigations
– Civil and Criminal Penalties – fines and prison
– Nothing less than $250,000 and possibly many times more
– Loss of Export Privileges

Supply Chain Efficiency
– Avoid hold ups at U.S. and foreign customs
– Demands from customers in their supply chain
Export Controls


Strategic Planning
- Know the regulations in each country
- Obtain certifications limiting entry to business
Business Management
– Avoid hidden liabilities
– Compliance programs improve record keeping & documentation
– Staffing for all roles
– Viral customer complaints will damage brand
Cloud Computing


U.S. Government policies & regulations
Compliance issues
Encryption Controls



U.S. Government Policies
Regulations
Classification
ECommerce Export Success Stories
View examples of ECommerce Success


http://www.whitehouse.gov/blog/2012/03/12/how-has-exporting-helped-your-businessExample of ECommerce
Failure
http://blog.trade.gov/2012/01/13/2011-export-success-highlights/
ECommerce Export Violation Stories
View Don’t Let This Happen To You Video
• http://www.bis.doc.gov/complianceandenforcement/othereetopics.htm#sba
• In the middle of the page find the link to the video, under Publications:
Don’t Let This Happen to You
• http://www.bis.doc.gov/policiesandregulations/index.htm (left nav related
links)
• http://efoia.bis.doc.gov/exportcontrolviolations/tocexportviolations.htm
Classification – Harmonized System Numbers


All Items individually classified
Harmonized System Goods Nomenclature
• World Customs Organization, Brussels
• 171 Member Countries
• 6 digits
•
•
Used by all countries to assess tariffs
U.S. government requires classification for export in most cases
Introducing a number, one part at a time
Sub
Heading
Heading
Chapter
85 09 40
Schedule B vs. HTS
Harmonized
Schedule
(first 6
digits)
Harmonized Tariff
Schedule
(imports)
U.S. International Trade
Commission
About 12,000
Schedule B
(exports)
U.S. Department of
Commerce
Census Bureau
Foreign Trade Division
About 9,000
Schedule B
Schedule B
Harmonized
850940 0020
Harmonized Tariff Schedule of the United States Annotated
HTSA
Harmonized
850940 0932
Who Controls your Product ?
Jurisdiction
U.S. State
Department
U.S.
Department
of
Commerce
U.S. Department of Commerce
Bureau of Industry and Security (BIS)
• www.bis.doc.gov
Export Administration Regulations (EAR)
• www.access.gpo.gov/bis/ear/ear_data.html
The Export Control Classification Number
(ECCN) (U.S. Commerce Department)
Optical sighting devices for
firearms
0 Category
0 A 987
Nuclear Materials, Facilities & Equipment (and Misc. Items)
A Product Group
Equipment Assemblies, Components
987 Type of Control
FC, CC, UN (738.2)
Product Groups
Materials
Equipment,
assemblies
and
components
Electronic Components
(see list)
Technology
Test,
inspection and
production
equipment
Software
Deemed Exports

Happens when a foreign national is given access to the technology or
source code (except encryption source code) of your product or
technology that is controlled by the CCL (not EAR99)
http://www.bis.doc.gov/policiesandregulations/basis_of_ccl_controls.htm
 You may need a license to show or share it with them
http://www.bis.doc.gov/deemedexports/deemedexportsfaqs.html
Country Screening - OFAC
You cannot sell goods or technology to these countries.
Office of Foreign Assets Control (OFAC), U.S. Department of Treasury
•
•
•
http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx
http://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx
http://www.ustreas.gov/offices/enforcement/ofac/programs/index.shtml
The 6 Lists to Check

Denied Persons List (BIS)
– A list of individuals and entities that have been denied export privileges. Any dealings with
a party on this list that would violate the terms of its denial order is prohibited.

Unverified List (BIS)
– A list of parties where BIS has been unable to verify the end-user in prior transactions. The
presence of a party on this list in a transaction is a “Red Flag” that should be resolved
before proceeding with the transaction.

Entity List (BIS)
– A list of parties whose presence in a transaction can trigger a license requirement under
the Export Administration Regulations. The list specifies the license requirements that
apply to each listed party. These license requirements are in addition to any license
requirements imposed on the transaction by other provisions of the Export Administration
Regulations.
The 6 Lists to Check



Specially Designated Nationals List (OFAC)
– A list compiled by the Treasury Department, Office of Foreign Assets Control (OFAC).
OFAC’s regulations may prohibit a transaction if a party on this list is involved. In addition,
the Export Administration Regulations require a license for exports or reexports to any party
in any entry on this list that contains any of the suffixes "SDGT", "SDT", "FTO", "IRAQ2" or
"NPWMD“.
Debarred List (State Department)
– A list compiled by the State Department of parties who are barred by §127.7 of the
International Traffic in Arms Regulations (ITAR) (22 CFR §127.7) from participating directly
or indirectly in the export of defense articles, including technical data or in the furnishing of
defense services for which a license or approval is required by the ITAR.
Nonproliferation Sanctions (State Department)
– Several lists compiled by the State Department of parties that have been sanctioned under
various statutes. The Federal Register notice imposing sanctions on a party states the
sanctions that apply to that party. Some of these sanctioned parties are subject to BIS’s
license application denial policy described in §744.19 of the EAR (15 CFR §744.19).
Red Flags
Know your customer!
View this guidance from the Bureau of Industry and Security.
http://www.bis.doc.gov/complianceandenforcement/redflagindicators.htm
1. The customer or its address is similar to one of the parties found on the
Commerce Department's [BIS's] list of denied persons.
2. The customer or purchasing agent is reluctant to offer information about
the end-use of the item.
3. The product's capabilities do not fit the buyer's line of business, such as
an order for sophisticated computers for a small bakery.
Destination Control Statement
"These commodities, technology or software were exported
from the United States in accordance with the Export
Administration Regulations. Diversion contrary to U.S. law is
prohibited.”

Technically only required for non-EAR99 items (EAR 758.6) but good
practice to use for all EAR shipments.

Put on your invoice, bill of lading, air bill.
Electronic Export Information



Filed through the Automated Export System (AES) or your shipping
company/freight forwarder.
Required by law for most exports to foreign countries and U.S. territories
– Don’t forget Puerto Rico, U.S. Virgin Islands & Guam
– Shipping from St. Croix to Puerto Rico? File your EEI.
Common exceptions:
– Shipments to Canada (if no license required)
– Shipments where value is under US$2,500 PER Schedule B number
(again, only if NLR)
U.S. Principal Party of Interest (USPPI)

Long story short = the seller
– “The person or legal entity in the United States that receives the primary
benefit, monetary or otherwise, from the export transaction”

Filing directly
– AESDirect.gov
– AES-certified software (AES PcLink or other certified software)
– Must register with AES and get approval before filing begins
– Provide Proof of Filing with your Internal Transaction Number (ITN)
• The AES generated number assigned to a shipment confirming that an EEI
transaction was accepted and is on file in the AES. The ITN must appear on the bill of
lading, air waybill, export shipping instructions, or other commercial loading
documents.
http://aesdirect.gov/
Recordkeeping



5 years from the date of export
Records can be scanned on disc for retention but must be able to be fully
retrieved in original form if audited
Recoverable records include:
– Proforma & Commercial Invoice, Packing List, Bill of Lading or INTL
AWB, Certificates of Origin, etc.
– AES Abstract from carrier
– Export controls research & documentation
– Sales contracts, notes and memoranda
– All financial records pertinent to the sale
– All other correspondence pertinent to the transaction
More Resources

BIS – Export Management & Compliance System guide
–

http://www.bis.doc.gov/complianceandenforcement/emcp_guidelines.pdf
Great presentation on export compliance
–
http://sbdcglobal.com/images/pdf/asbdc_2010/oscar_gonzalez.pdf
Question and Answer
Allen Patch, Director
allen.patch@trade.gov
Patricia Cook, International Trade Specialist
patricia.cook@trade.gov
Contact us today
to connect with a world of opportunity.
www.export.gov