US Government Adds New Self-Disclosure Policy for Export Violations

The Department of Justice announced the release of a revised voluntary disclosures policy for export control violations.

The Department of Justice can prosecute wilful violations of the export laws, including:

  • The Arms Export Control Act (AECA), 22 U.S.C. § 2778,
  • The Export Control Reform Act (ECRA), 50 U.S.C. § 4801 et seq., and
  • The International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1705

The revised policy is meant to reward companies that engage in voluntary self-disclosure in situations that might otherwise lead to criminal prosecution.  Assistant Attorney General for National Security John C. Demers explained:

“Protecting our nation’s sensitive technologies and preventing transactions with sanctioned entities are DOJ priorities, but we cannot succeed alone.  We need the private sector to come forward and work with DOJ.  The revised VSD Policy should reassure companies that, when they do report violations directly to DOJ, the benefits of their cooperation will be concrete and significant.”

The new voluntary disclosure policy includes three key changes.  These changes are intended to promote voluntarily self-disclose to the DOJ.

    1. The Policy clarifies the benefits that are available to companies that voluntarily disclose a violation (“Self Disclossure”), fully cooperate with the Justice Department (“Full Cooperation”), and timely and appropriately correct the issues (“Timely and Appropriate Remediation”).
    2. The Policy was reformatted to more closely resemble other DOJ self-disclosure guidance. This was meant to better standardize the way that DOJ handles self-disclosures. Specifically, it harmonized the definitions of “Voluntary Self-Disclosure,” “Full Cooperation,” and “Timely and Appropriate Remediation” with the same terms in the Foreign Corrupt Practice Act Corporate Enforcement Policy.
    3. The Policy clarifies that disclosures of potentially willful conduct made to regulatory agencies, and not to DOJ, will not qualify for the benefits provided in the Policy.

The policy now clarifies that there is a presumption that the company will receive a non-prosecution agreement and will not be assessed a fine, in the absence of aggravating factors.  If aggravating circumstances warrant an enforcement action other than a non-prosecution agreement, but the company satisfies all other criteria, the Policy states that DOJ will recommend a fine that is at least 50 percent lower than what would otherwise be available under the alternative fine provision and will not require the imposition of a monitor.  The prior guidance did not provide a presumption of any kind, and did not assign any concrete benefits to companies that met its criteria.

The policy became effective on December 13, 2019.  It applies only to export control and sanctions matters before the National Division’s Counterintelligence and Export Control Section.  It does not apply to any other section in the National Security Division, any other part of the Department of Justice, or any other agency.

Ryan and I have counseled a substantial number of clients on voluntary disclosures before a number of agencies. The last change – that disclosures of potentially willful conduct made only to regulatory agencies will not qualify for the benefits provided in the policy – is a significant element in this policy.

This new policy may make it beneficial to make a disclosure to the DOJ, in self-disclosure situations.  Because it will but it will create additional burdens on the disclosing company, it is important to review the occurrence to assess whether there is a reasonable possibility of criminal prosecution.  Where there is no reasonable possibility of criminal prosecution, or where prosecution would likely emanate from another division of the DOJ, disclosure might be unnecessary.  Any company considering self-disclosure of any occurrence or issue should consult with a qualified attorney who understands self-disclosure law, to make sure your disclosures are made to the right parties, and made in the right form and with the right information, in order to be effective.

Protect Your Exports – Screen Your Business Partners, Every Time

Looking for some tips on how to ensure you remain in compliance with the US export regulations (including the re-export regulations as they apply to goods re-exported to a third country after being first exported from the United States)?

My law firm has helped build compliance programs for aviation companies for decades.  When we are helping a company build an export compliance program, we always recommend developing a mechanis to ensure that you can compare all of the relevant businesses and individuals involved in each transaction to the US Government lists that regulate exports.  Specifically, we recommend searching the business and individual names through the US Government consolidated screening list.  This list consolidates a number of different US Government lists into one screening tool: https://www.export.gov/csl-search.

We recommend searching all of the relevant parties for every transaction, every time.  The problem that arises is one of human nature battling against the company’s procedures.  If you just searched a name last week then you might decide not to search that same name again, this week.  If you’ve done business with someone for years you might feel that you have no worries about thath person.  But the lists change almost every day.  So someone who was not on the lists yesterday might have been added this morning; and if you don’t know this, then you might export to that forbidden party in violation of the law.

In order to avoid the risks that complacency can breed, we recommend to companies that they integrate an electronic search of all partners for every transactions.  This can be done by tying some aspect or your computerized system to the US Government consolidated screening list (which is designed to be a searchable database that can be integrated with outside search systems).  Make sure you tie the search to something that is enterred for EVERY transaction. Because we like to see the search done as early as possible, we sometimes recommend tying the search to the quoting system, but unless you issue a quote for EVERY transaction, this cannot be your only search.  Sometimes it also makes sense to build your system so that documents like shipping tickets and invoices cannot be generated without a completed search on the consolidated screening list.

It also helps to build a system where you must enter the names of the individuals involved in your transaction (or else have them mined from your electronic correspondence) so those names are part of the search process.

For example, imagine you get a purchase order from Cham Wings Airline.  Before responding to the purchase order, you run a search on the consolidated screening list.  A search for “Cham Wings Airline” would yield this result:

Source Specially Designated Nationals (SDN) – Treasury Department
Entity Number 21244
Type Entity
Name CHAM WINGS AIRLINES
Remarks (Linked To: SYRIAN ARAB AIRLINES)
Source List URL http://bit.ly/1I7ipyR
Source Information URL http://bit.ly/1MLgpye
Programs
  • SYRIA
Alternative Names
  • AJNEHAT AL SHAM
  • SHAM WING AIRLINES
  • CHAM WINGS
  • AL-SHAM WINGS
Addresses Al Fardous Street
Damascus
SYSaadoon Street
Baghdad
IQ8 March Street
Lattakia
SY

Hai Al Gharbi-Alraees Street
Kamishli
SY

P.O. Box 1620 Tal-Kurdi, Adra
Damascus
SY

IDs
  1. Type: Registration ID
    Number: 14683
    Country: SY

You can see from this that Cham Wings Airline is listed as a specially designated national.  The next step is typically to perform a more direct and in-depth investigation.  In this case,  Cham Wings Airline is listed as a specially designated national so we should check the Treasury Departments list of specially designated nationals.  That list is found online at https://www.treasury.gov/ofac/downloads/sdnlist.pdf.  In that list, you will find that one of the relevant entries reads:

AJNEHAT AL SHAM (a. k.a. AL-SHAM WINGS; a.k.a . CHAM WINGS (Arabic:  أجنحة الش ام); a.k. a. CHAM WIN GS AIR LINES  (A ra bic: أجن حة الشام );  f.k.a. SHAM WING AIRLINES, Al Fardous Street, Damascus, Syria; Saadoon Street, Baghdad, Iraq; 8 March Street, Lattakia, Syria; Hai Al Gharbi -Alraees Street , Kamishli, Syria; P. O. Box 1620 Tal-Kurdi, Adra, Damascus, Syria; Registration ID 14683 (Syria) [SYRIA] ( Linked To : SYRIAN ARAB AIRLINES).

This provides more information about the specially designated national in order to help distinguish it from another party with a similar name.

How common is it to find aviation companies who are listed in restricted lists like the Treasury Department’s list of specially designated nationals?  More common than you might think.  Here is a list of just some of the airlines and aviation companies included on the SDN list (this list changes, and companies go on-and-off the list, so always confirm a company remains on the SDN list – do not rely on this as your sole source of SDN information):

  • Aero Continent
  • Aero Continente
  • Aero Courier Cargo
  • Aero Express Intercontinental
  • Aero Sky One
  • Aerocaribbean Airlines
  • Aerocomercial Alas De Columbia
  • Aerocondor
  • Aerolineas Aeroamanecer
  • Aeronautica Condor
  • Aerospace Industries Organization
  • Aerospace Research Institute
  • Al-Naser Airlines
  • Al-Sham Wings
  • Avia Group LLC
  • Avia Import
  • Aviation Capital Solutions, Ltd
  • Butembo Airlines
  • Caspian Airlines
  • Cham Wings Airlines
  • Cubana Airlines
  • Dart Airlines
  • Dena Airlines
  • Empresa Cubana de Aviacion
  • Fars Air Cargo Airline
  • Hors Airlines Ltd
  • Intercontinental de Aviacion
  • International Airline Consulting
  • Iran Air
  • Khors Air
  • Kyrgyztransavia Airlines
  • Mahan Air
  • Pouya Airlines
  • Sky Blue Airlines
  • Syrian Arab Airlines
  • Ukrainian-Mediterranean Airlines
  • UM Air
  • Yasair Cargo Airline

ASA Workshop in London, with Special Guest Neil Williams of the UK CAA

Need to know the latest changes in the rules that apply to aircraft parts transactions?  Your trade association is here for you!

I will be teaching a regulatory workshop in London later this month (on October 23).  The workshops will deal with the following topics:

  • Aircraft Parts Regulations (European and US)
  • Recent and Prospective Changes in European Law (and how these changes affect the global community
  • Brexit (Neil Williams of the UK CAA plans to join us to discuss the latest developments)
  • International Documentation (and where the norms come from)
  • Compliance with US Import and Export Laws (and how these laws affect international commerce)

As you can see, the broad focus is on compliance standards to help ensure your domestic and international transactions are conducted properly.  As usual, we will focus on some recent and upcoming changes so that the members can plan for those changes and help ensure their business models keep up with the ever-changing world of aircraft parts.

Need to register for the workshop?  You can find workshop details and registration information on ASA’s website.

Can’t make it to London?  No problem!  I am teaching a total of six workshops this Fall:

  • September 20, 2019 – Los Angeles Airport area
  • September 24, 2019 – Singapore Airport area
  • October 23, 2019 – London Heathrow Airport area
  • November 19, 2019 – Ft Lauderdale Airport area
  • December 3, 2019 – Chicago, IL area
  • December 5, 2019 – Dallas, TX area

While I am in London, I will be visiting Aviationweek’s MRO Europe Conference.   If you will be in London and want to meet, then send me (or Katt Brigham) an email and let’s set up a time.  I look forward to seeing you there!

Upcoming ASA Regulatory Workshops Help Aviation Parts Businesses Plan for Industry Changes

Need to know the latest changes in the rules that apply to aircraft parts transactions?  Your trade association is here for you!

I will be teaching regulatory workshops in Los Angeles this week and in Singapore next week.  The workshops are each a little different to reflect the localities, but each workshop will deal with the following topics:

  • Aircraft Parts Regulations (European and US)
  • Recent and Prospective Changes in European Law (and how these changes affect the global community
  • Brexit (how will it affect the rest of the world?)
  • International Documentation (and where the norms come from)
  • Compliance with US Import and Export Laws (and how these laws affect international commerce)

As you can see, the broad focus is on compliance standards to help ensure your domestic and international transactions are conducted properly.  As usual, we will focus on some recent and upcoming changes so that the members can plan for those changes and help ensure their business models keep up with the ever-changing world of aircraft parts.

Need to register for the workshop?  You can find workshop details and registration information on ASA’s website.

Can’t make it to LAX or SIN?  No problem!  I will be teaching a total of six workshops this Fall:

  • September 20, 2019 – Los Angeles Airport area
  • September 24, 2019 – Singapore Airport area
  • October 23, 2019 – London Heathrow Airport area
  • November 19, 2019 – Ft Lauderdale Airport area
  • December 3, 2019 – Chicago, IL area
  • December 5, 2019 – Dallas, TX area

While I am in Singapore, I will be speaking at Aviationweek’s MRO Asia-Pacific Conference.   I will be part of a panel on traceability challenges – and I will be sharing this stage with Jason Reed (President of the Component Solutions Group at GA Telesis) and Brent Webb (President of Aircraft Inventory Management & Services).  If you will be in Singapore, then be sure to catch both events.  I look forward to seeing you there!

International Court Requires U.S. to Sell Aircraft Parts to Iran

The International Court of Justice (ICJ) has ruled that the United States must remove all sanctions that would prohibit the export of aircraft parts to Iran.  The ruling also directs the United States to “ensure that licences and necessary authorizations are granted and that payments and other transfers of funds are not subject to any restriction in so far as they relate to the goods and services.”

The Iranian Complaint in this matter was bought on or about July 16.

The Decision was issued on October 3.  It is a preliminary ruling in the case.  The court describes it as a “provisional measure[] responding to humanitarian needs [that] would not cause irreparable prejudice to any rights invoked by the United States.”  This is analogous to preliminary injunctions issued by U.S. courts (including a finding of irreparable harm, likelihood of success on the merits, and a weighing of the equities).

In response, the United States announced that it would withdraw from the Treaty of Amity that serves as the legal basis for the Iranian claim.  Article XXI of that agreement explicitly granted jurisdiction over US-Iranian disputes to the ICJ.

What effect will this ICJ ruling have?  In the United States, the Administration has already been critical of the decision, and has announced plans to withdraw from treaties that serve as the legal basis for elements of the court’s jurisdiction over the matter.  This is a strong signal that the US intends to ignore the ICJ ruling.  For US exporters, this is likely to mean that US law will continue to apply sanctions prohibiting export of aircraft parts to Iran.  But there is a stronger likelihood that the United States may stand alone in these sanctions, and other nations will continue to follow the Joint Comprehensive Plan of Action (JCPOA) that permitted nations to begin exporting certain aircraft parts to Iran.  US exporters will have to be especially vigilant about compliance in international transactions, to ensure that they are not inadvertently made parties to exports with a forbidden final destination.

For now, US exporters should continue to forbear from exporting aircraft parts to Iran unless the exporter has a valid export license covering the transaction, from the United States government.

Sanctions for Aircraft Parts Transactions: Exercise Due Diligence With Your Business Partners

It remains important for aircraft parts exporters to check their customers against the U.S. government export databases.

In today’s Federal Register, restrictions were renewed against an individual and her companies for supporting an Iranian airline, Mahan Airways, that has been designated by the United States as a Global Terrorist.

  • Gulnihal Yegane, Merkez Mah. Hasat Sok. No: 52/6, Sisli, Istanbul, Turkey;
  • Trigron Lojistik Kargo Limited Sirketi, Yanibosna Merkez Mah., Degirmenbah[ccedil]e Cad. No. 11, Airport Hill Sitesi Blok D.6,
    Bah[ccedil]elievler, Istanbul, Turkey;
  • Ufuk Avia Lojistik Limited Sirketi, Merkez Mah. Hasat Sok., No: 52/6, Sisli, Istanbul, Turkey;
  • RA Havacilik Lojistik Ve Tasimacilik Ticaret Limited Sirketi, Yesilce Mah. Dalgic SK., 3/101 Kagithane, Istanbul, Turkey

According to the Federal Register, Ms. Yegane was originally one of 19 persons accused of procuring parts to support the operation of Mahan Airways in Iran. 78 FR 75,463 (Dec. 12, 2013).  Mahan Airways is designated by the United States as a Specially Designated Global Terrorist. 77 FR 64,427 (Oct. 18, 2011).  Most recently (in 2017), Ms. Yegane was accused of obtaining CFM-56 engines and gaskets and isolators used on Boeing aircraft for shipment to Iran.  83 FR 4897 (Feb. 2, 2018).

Aircraft parts distributors should be cautious in their business dealings to ensure that they are not supporting persons or entities members in violation of the law, and this includes forbidden business dealings with parties subject to export restrictions.

As we’ve discussed in our export classes, one efficient way to identify parties who might be subject to export restrictions is to search the consolidated screening list found online at https://www.export.gov/csl-search.  The Consolidated Screening List is a list of parties for which the United States Government maintains restrictions on certain exports, reexports or transfers of items.  The restrictions are drawn from eleven export screening lists published by the U.S. Departments of Commerce, State and the Treasury.

We recommend that you check your business partners with every transaction, because a previously “clean” partner could be added to the lists at any time.  Linking your computer-based transactions system to the Consolidated Screening List is one way to automatically ensure that every transaction is scanned.  If you choose to do this, then make sure that other parties who are not entered into the system, but who are nonetheless part of the transaction, are also checked by hand.  You can link to the database using the Application Programming interface (API), which enables computers to freely access the CSL in an open, machine-readable format. From this API, any company can build a search engine to quickly find names, aliases, and other screening information. Developers can find more information about the API online at https://developer.export.gov/consolidated-screening-list.html.

 

Recordkeeping for Aviation Exports – What Do You Need to Retain?

Exporters must maintain records as proof of compliance with U.S. government regulations for a minimum of 5 years.  During this retention period, these retained records may be requested by Customs and Border Protection (CBP), or the Bureau of Industry and Security (BIS), Census, or any other U.S. Government Agency that has jurisdiction over your export.  This can be a daunting task and I have seen businesses that failed to retain such records.  This article seeks to provide some guidance on the scope and length of your recordkeeping obligations as an exporter.

What records should be kept, you ask? The Export Administration Regulations (EAR) provides a list of records that must be retained.

  1. Export control documents.  Examples include license and license application, AES record, dock receipt, 7512 forms, and antiboycott reports. The only exception is a party that submits documents electronically to BIS via the SNAP-R system; these parties are not required to retain copies of submitted documents. Note:  I would not count on this and I would be sure to keep all copies for reference purposes.
  2. Memoranda.  Examples include written records of business communications, reminders, agreements, and contracts.
  3. Notes.
  4. Correspondences.  Chances are, there are emails concerning your transaction.  These are supposed to be retained.
  5. Contracts.  A series of communications that result in an agreement may be considered a contract.
  6. Invitations to bid.  This could include any RFP/RFQ.
  7. Books of account.  This means accounting records, which may be used to defend against an audit.
  8. Financial records.  All formal records of the financial activities of a business or person.
  9. Restrictive trade practice or boycott documents and reports.
  10. Notifications from BIS.  This includes notification from BIS of an application being returned without action, of an application being denied, of the results of a commodity classification or encryption review request conducted by BIS.
  11. Other records pertaining to any other transaction subject to BIS regulations (pursuant to 15 C.F.R. § 762.1).
  12. Any other record that is required to be retained under other BIS regulations.  There is a partial list of these regulations in 15 C.F.R. § 762.2(b).

I said that you have to retain these documents for at least five years.  What does this mean?  Export Regulations state 5 years from the latest of the following times:

  1. The date of export from the U.S.
  2. The date of any known re-export, transshipment, or diversion. If you are shipping to a overseas broker, then you may need to start the clock when the broker re-exports the articles.
  3. The date of the termination of the transaction, whether formally in writing or by any other means. If the articles are returned under an RMA, then you still need to keep the records for five years from the return.
  4. In the case of records of pertaining to transactions involving restrictive trade practices or boycotts, the date the regulated person receives the boycott-related request or requirement.

Another caveat: if any U.S. government agency makes a formal (or informal) request for records before that 5 year period is up, or give you any reason to believe that the record may be relevant to a court action, then that record may not be destroyed or disposed-of.  If this happens, make sure you get legal advice about the disposition of the records, in order to avoid an allegation of spoliation.

There is a list of records that are exempt from the recordkeeping requirements; however  some of these records may need to be retained because of other reasons (including other regulatory systems and your own quality assurance system).  These include:

  • Inspection certificate (but some documents like a raw materials certification may need to be retained under other provisions like your written quality system);
  • Warranty certificate (but if it is part of the contract then it may need to be retained);
  • Packing material certificate (but certificates like a shipper’s declaration of dangerous goods may be required to retained under other laws);
  • Goods quality certificate (but some documents like 8130-3 tags may need to be retained under other provisions like your written quality system);

Don’t forget that other agencies may have other overlapping retention requirements and you must comply with all such requirements.  For example, under the State Department regulations, 22 C.F.R. § 123.22 of the International Traffic in Arms Regulations (ITAR) explains that the exporter of ITAR-controlled defense articles must file information prior to export and then under 22 C.F.R. § 122.5 must retain records for a period of five years from the expiration of the license or other approval.

As always, if you need help, contact us and we can work with you on developing the right systems for compliance!

BIS Revises Sudan Licensing Policy

The U.S. Department of Commerce Bureau of Industry and Security (BIS) issued a final rule today revising its policy for review of applications for the export of parts in support of Sudan’s civil aviation industry from a policy of presumptive denial to one of presumptive approval.  This change makes it possible for exporters of aircraft parts to obtain a license to export parts “intended to ensure the safety of civil aviation or the safe operation of fixed-wing, commercial passenger aircraft.”

Prior to this rule change BIS maintained a general policy of denial of export license applications for “[a]ll aircraft (powered and unpowered), helicopters, engines, and related spare parts and components.” 15 C.F.R. § 742.10(b)(1)(iv).  The rule revision replaces that policy “to a general policy of approval for parts, components, materials, equipment, and technology that are controlled on the CCL only for anti-terrorism reasons and that are intended to ensure the safety of civil aviation or the safe operation of fixed-wing, commercial passenger aircraft.” The new rule goes into effect January 17, 2017.

The rule explains that these changes are being made “in connection with ongoing U.S.-Sudan bilateral engagement, and with the aim of enhancing the safety of Sudan’s civil aviation” in furtherance of U.S. goals to improve regional peace and security. The support and enhancement of safety in civil aviation was one of the carrots the United States used during its negotiations of the Iran nuclear deal as well.

One important caveat to the rule change is that a general policy of denial of export (or reexport) license applications has been retained if the transaction would “substantially benefit a sensitive end user.” Sensitive end users include (but are not limited to) Sudan’s military, police, and intelligence services, or persons owned or controlled thereby. Should you be contacted by a potential customer from Sudan it is therefore important to ensure that you follow your export compliance procedures to establish the identity of the ultimate end users.

The relevant text of the new rule is as follows:

15 C.F.R. § 742.10(b)(3)(ii) General policy of approval. Applications to export or reexport to Sudan the following for civil uses by non-sensitive end-users within Sudan will be reviewed with a general policy of approval.

(A) Parts, components, materials, equipment, and technology that are controlled on the Commerce Control List (Supp. No. 1 to part 774 of the EAR) only for anti-terrorism reasons that are intended to ensure the safety of civil aviation or the safe operation of fixedwing commercial passenger aircraft.

. . .

Note to paragraph (b)(3)(ii). Applications will generally be denied for exports or reexports that would substantially benefit a sensitive end user. Sensitive end users include Sudan’s military, police, and intelligence services and persons that are owned by or are part of or operated or controlled by those services.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has simultaneously amended its Sudanese Sanctions Regulations to authorize these exports.

Remember, this policy change does not mean that you can ship to Sudan without a license; rather, it means that as a general rule an export license will be granted for the export of aircraft parts in support of Sudan’s civil aviation industry. Sudan remains the only country on the Commerce Country Chart controlled under column Anti-Terrorism 1 (AT1), and AT1 applies to ECCN 9A991.d, under which most aircraft parts are categorized.

As always, anyone seeking to engage in new, complex, or unfamiliar export transactions should consult an export compliance attorney.

New ITAR Export Reporting Requirements Now in Effect

For those who may have missed it over the busy holiday season, a new method for submitting export and temporary import reporting information for ITAR-controlled articles went into effect as of December 31, 2016.  This change was part of the DDTC’s efforts to conform reporting requirements to the International Trade Data System “single window” administered by  U.S. Customs and Border Protection in accordance with the SAFE Port Act and Executive Order 13659.

Readers should already be familiar with the “single window,” better known as the Automated Commercial Environment (“ACE”) that has subsumed AESDirect for the purpose of most of your export filings.  Exporters will have been using ACE for their export filings for several months now, so the change to your systems and procedures should be minimal.  The revision to the ITAR effective December 31 harmonized those regulations by removing references to AESDirect and replacing them with references to CBP electronic filings and systems.

In theory this should make filing the appropriate reports for export of ITAR-controlled articles easier. Using the single window, an exporter of ITAR-controlled goods reports the required information to CBP via ACE, and CBP relays the relevant and necessary information directly to the DDTC. There is no need for the exporter to notify DDTC directly. This should help to eliminate confusion as to which reports must go to which government entity, and also eliminate the cost and burden of duplicative reporting requirements.

Exporters should note, however, that this does not eliminate all your requirements to correspond with the DDTC. You will still need to ensure you are obtaining the appropriate licenses for your ITAR-controlled exports, and ensuring your registration remains current. The new rule also did not amend any part of 22 CFR part 130, so your reporting requirements related to fees and commissions remains unchanged, for now.

As always, when in doubt, consult your export compliance attorney to ensure you are acting in accordance with the ITAR and all other export compliance laws and regulations.

 

Export Alert: New Destination Control Statement Required

Under current law, the US regulations require exporters to include a destination control statement (“DCS”), on each commercial invoice that accompanies an export shipment.  The export control documents that are required to show this statement include the invoice, the bill of lading, the air waybill, and any other export control document that accompanies the shipment from its point of origin in the United States to the ultimate consignee or end-user abroad.

This is sometimes known as the ‘non-diversion statement’ because the current version includes language stating that “diversion contrary to U.S. law is prohibited.”  The purpose of the DCS was to alert parties outside the United States that the item is subject to the US export regulations.

The rules have always held that compliance with the comparable ITAR requirement was an acceptable means of compliance where the shipment included both ITAR and EAR-controlled articles.  The comparable ITAR requirement requires slightly different language.  Many people nonetheless found the different language in each regulation to be confusing.

The Commerce Department has changed their DCS language to harmonize it with the ITAR-required-language.  This is meant to make compliance easier.  Starting on the implementation date of the rule (November 15, 2016), exporters of articles subject to BIS jurisdiction (those with ECCNs) should use the following destination control statement on all exports:

“These items are controlled by the U.S. Government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations”

In addition, the DCS should show the Export Commodity Classification Number (ECCN) for any 9×515 or ‘600 series’ (nx6nn) items being exported.

There are exceptions to this DCS requirement for EAR 99 exports and also for exports under license exceptions BAG (baggage) and GFT (gift parcels and humanitarian donations), but typically these do not apply to exports of aircraft parts.

Another important change that will take effect with the November 15th implementation affects where the DCS goes.  Under the old BIS rules, it went on the export control documents.  Now the DCS only needs to go on the commercial invoice.

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