Key Elements of International Trade Compliance
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The document discusses key elements of international trade compliance. It covers import compliance with US Customs and Border Protection, including import procedures, penalties, and intellectual property protections. Export compliance with agencies like the Bureau of Industry and Security is also examined, including export controls, license requirements, and penalties. Other trade regulations involving items like defense technologies and anti-boycott laws are reviewed. The presentation emphasizes the importance of having a compliance program, periodic reviews, training, and record keeping to avoid penalties from regulatory violations.
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Key Elements of International Trade Compliance
- 1. Key Elements of International Trade Compliance Presented by: Jim Chester JD, LL.M, CHB, CCS Chester/Associates, PLLC Dallas, Texas Chester/Associates, PLLC Trademark - Transactions - Trade
- 2. What is International Trade Law? International International Civil Business Litigation Transactions Life Cycle of International Transactions 2 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 3. I. Introduction Every international shipment implicates at least TWO legal regimes 3 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 4. I. Introduction US Trade Laws When importing, exporting or dealing with foreign affiliates, numerous US trade regulations must be observed. - Certain goods have special rules. 4 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 5. II. Import Compliance • Customs and Border Protection (CBP) – agency within Department of Homeland Security – primary responsibility for policing the U.S. border and enforcing U.S. import laws. – CBP also enforces import-related rules for over 40 federal agencies. 5 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 6. II. Import Compliance (Cont’d) • Brief History of Customs – Pre-NAFTA – After NAFTA • Reasonable Care • Audits – Post 9-11 • ISA/FA • C-TPAT 6 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 7. II. Import Compliance (Cont’d) • “Pillars of Importing” – Quantity – Classification – Value – Country of Origin • Marking 7 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 8. II. Import Compliance (Cont’d) • Import Penalties - Civil – False Statement or Omission • Domestic value of imported goods – Record Keeping • Up to $100,000 per transaction – Marking • 10% of domestic value • Other Customs Enforcement measures – Seizure & Forfeiture – Criminal – 5 yrs; $500,000 – Additional scrutiny, exams & audits – Referral to other agencies for action 8 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 9. II. Import Compliance (Cont’d) • Common Importing Pitfalls – Over-reliance on 3rd Parties – Failure to supervise and control vendors & agents – No (or inadequate) written ICP – Assists – Samples and other non-sales transactions – Country of Origin marking 9 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 10. II. Import Compliance (Cont’d) • Imports and IP – Generally, IPR owners must self-police – U.S. Trade law provides protections for certain IPR against infringing imports • Trademarks / Trade Names • Copyrights • Patent Surveys 10 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 11. II. Import Compliance (Cont’d) • IP Violations – 19 USC § 1526 – No “culpability” required – Detention, seizure & forfeiture – Penalties up to US resale price of goods 11 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 12. II. Import Compliance (Cont’d) • $$$ Savings Programs – Trade agreements (e.g., NAFTA, CAFTA-DR) – US Trade promotion programs (e.g., GSP) – Foreign-Trade Zones/Bonded Warehouses – Duty Drawback 12 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 13. III. Export Compliance • The Bureau of Industry and Security (BIS) has primary responsibility for enforcing export control laws – Export Administration Act (EAA) – Export Administration Regulations (EAR) • Other agencies have export-specific regulations that must also be observed. – (e.g., Department of Defense Trade Controls (DDTC) • Most export documents are delivered to CBP 13 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 14. III. Export Compliance (Cont’d) • What is an Export? – Physical shipment of EAR-subject goods, technology, or technical data outside US Customs Territory – Downloads and emails of technology and technical data outside US – “Sharing” technology with a foreign national, even on US soil (“deemed” export) 14 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 15. III. Export Compliance (Cont’d) • 4 Key Questions for Exports – What is it? • description & classification – Where is it going? • country – Who will be receiving it? • person/entity – How will it be used? • dual use 15 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 16. III. Export Compliance (Cont’d) • Pre-Shipment Checks and License Requirements (i.e., “General Prohibitions”) 1. Determine whether a license is required to export the commodity. Step 1: Obtain Export Commodity Classification Number (ECCN) for product on Commerce Control List (CCL), Step 2: Compare to Country Chart Step 3: If license is required, see if exception applies. Step 4: If license is required and no exception applies, apply for license from BIS. 16 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 17. III. Export Compliance (Cont’d) 2. Check the various “bad guy” lists 1. Denied Parties List - BIS 2. Specially Designations Nationals and Narcotics Traffickers - OFAC 3. Entity List - BIS 4. Debarred Parties List – State 5. Unverified List – BIS See http://www.treas.gov/offices/enforcement/ofac/sdn 17 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 18. III. Export Compliance (Cont’d) 3. Ensure export would not violate U.S. sanctions. – See current Office of Foreign Asset Controls (OFAC) Sanctions (http://www.treas.gov/offices/enforcement/ofac/sanctions) 4. Don’t ignore “Red Flags” 18 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 19. III. Export Compliance (Cont’d) • Penalties for Export Violations – Up to $1 million – Up to 5 years in prison – Denial of export privileges 19 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 20. III. Export Compliance (Cont’d) • Common Exporting Pitfalls – Failure to check “bad guy” lists – Failure to secure IP abroad – Unlicensed exports – Deemed exports – Recordkeeping – Incorrect SEDs/documents 20 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 21. IV. Other Trade Regulations International Traffic in Arms Regulations (ITAR) Prohibits shipments of certain defense articles and technology. Controls trade in “Munitions” - Including “Mil Spec/Std.” Requirements - Registration - Licenses - Recordkeeping 21 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 22. IV. Other Trade Regulations Common ITAR Pitfalls – No export/re-export license – Recordkeeping/Reporting – Shipments to affiliates – Dual use items – “Deemed” export 22 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 23. IV. Other Trade Regulations ITAR Penalties • Criminal & Civil: – Up to $1 million per violation for corporations – Up to $1 million per violation and up to 10 years in jail for individuals • Other Enforcement Measures: – Seizure or forfeiture of goods – Debarment from licensing for as long as three years – Potential debarment from Government contracting for up to three years 23 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 24. IV. Other Trade Regulations (Cont’d) 1 Anti-Boycott Laws Cannot support “illegal” boycotts. Prohibited conduct includes: – Agreements to do business with Israel or blacklisted companies, or other persons based on race, religion, sex, national origin or nationality. – Furnishing information about business relationships with these persons or entities. – Failure to report requests for boycott info 24 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 25. IV. Other Trade Regulations (Cont’d) 2 Common Anti-Boycott Pitfalls – Providing information unwittingly – Failure to report – Foreign agents/subsidiaries 25 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 26. IV. Other Trade Regulations (Cont’d) 3 Anti-Boycott Penalties – Fines up to $50,000 or five times the value of the exports involved, whichever is greater – Imprisonment for up to 10 years. – Loss of foreign tax benefits/credits – Penalties under EAR 26 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 27. V. Keys to Compliance - Know & Follow the Rules - Implement & update written compliance program - Periodic compliance training - “Hands on” management of vendors, agents, brokers, forwarders, etc. 27 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 28. V. Keys to Compliance - Check your Work - Periodic compliance reviews - Self-awareness cuts off “contingent” liabilities - Prior Disclosures reduce/eliminate potential penalties 28 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 29. V. Keys to Compliance - Use Technology to Reduce Costs - ABI - input data to Customs directly - AES/SNAP – filed SEDs and apply for export licenses online - DPL software to check for “bad guys” - Integrate Customs entry number and dates into inventory/accounting systems - Scan entry documents for storage and easy retrieval 29 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 30. V. Keys to Compliance - Implement record retention program - Different periods required for various records - Once Requisite period expires, record becomes unnecessary “contingent liability” 30 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 31. VI. Conclusion - International trade involves numerous rules & agencies - Must be aware of rules and ensure compliance through training and internal reviews - Rules change frequently - Self-policing reduces liabilities 31 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008
- 32. VI. Conclusion Failure to be diligent with trade compliance = Lost opportunities Substantial penalties Interruptions in global supply chain Companies can budget and plan for compliance, but not for enforcement. Socrates -“The unexamined life. . . .” 32 February 13, 2006
- 33. Questions? Email JFChester@TradeLawFirm.com Direct 214.800.2845 Toll Free 1.877.34.World Chester/Associates, PLLC 6060 NCX, Suite 560 Dallas, Texas 75206 www.tradelawfirm.com 33 Chester/Associates, PLLC Trademark - Transactions - Trade March 28, 2008