Keys To Trade Compliance
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Transcript of Keys To Trade Compliance
Chester/Associates, PLLCTrademark - Transactions - Trade
Key Elements of InternationalTrade Compliance
Jim ChesterJim ChesterJD, LL.M, CHB, CCS
Chester/Associates, PLLCDallas, Texas
Presented by:
March 28, 2008
Chester/Associates, PLLCTrademark - Transactions - Trade
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InternationalBusiness
Transactions
What is International Trade Law?What is International Trade Law?
International CivilLitigation
Life Cycle of International TransactionsLife Cycle of International Transactions
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Every international shipment implicates at leastTWO legal regimes
I. Introduction
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I. Introduction
US Trade LawsWhen importing, exporting ordealing with foreign affiliates,numerous US trade regulationsmust be observed. - Certain goods have special
rules.
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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-relatedrules for over 40 federal agencies.
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II. Import Compliance (Cont’d)
• Brief History of Customs– Pre-NAFTA– After NAFTA
• Reasonable Care• Audits
– Post 9-11• ISA/FA• C-TPAT
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II. Import Compliance (Cont’d)
• “Pillars of Importing”– Quantity– Classification– Value– Country of Origin
• Marking
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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 Enforcementmeasures– Seizure & Forfeiture– Criminal – 5 yrs; $500,000– Additional scrutiny, exams & audits– Referral to other agencies for action
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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
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• 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
II. Import Compliance (Cont’d)
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II. Import Compliance (Cont’d)
• IP Violations – 19 USC § 1526– No “culpability” required– Detention, seizure & forfeiture– Penalties up to US resale price of
goods
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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
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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 thatmust also be observed.– (e.g., Department of Defense Trade Controls (DDTC)
• Most export documents are delivered to CBP
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III. Export Compliance (Cont’d)• What is an Export?
– Physical shipment of EAR-subject goods,technology, or technical data outside US CustomsTerritory
– Downloads and emails of technology and technicaldata outside US
– “Sharing” technology with a foreign national, evenon US soil (“deemed” export)
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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
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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 CommerceControl List (CCL),
Step 2: Compare to Country ChartStep 3: If license is required, see if exception
applies.Step 4: If license is required and no exception
applies, apply for license from BIS.
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III. Export Compliance (Cont’d)
2. Check the various “bad guy” lists1. Denied Parties List - BIS2. Specially Designations Nationals and
Narcotics Traffickers - OFAC3. Entity List - BIS4. Debarred Parties List – State5. Unverified List – BIS
See http://www.treas.gov/offices/enforcement/ofac/sdn
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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”
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III. Export Compliance (Cont’d)
• Penalties for Export Violations– Up to $1 million– Up to 5 years in prison– Denial of export privileges
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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
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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
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IV. Other Trade Regulations
Common ITAR Pitfalls– No export/re-export license– Recordkeeping/Reporting– Shipments to affiliates– Dual use items– “Deemed” export
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IV. Other Trade Regulations
ITAR Penalties• Criminal & Civil:
– Up to $1 million per violation forcorporations
– Up to $1 million per violation and up to 10years 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
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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 personsbased on race, religion, sex, nationalorigin or nationality.
– Furnishing information about businessrelationships with these persons orentities.
– Failure to report requests for boycottinfo
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IV. Other Trade Regulations (Cont’d)2 Common Anti-Boycott Pitfalls
– Providing information unwittingly– Failure to report– Foreign agents/subsidiaries
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IV. Other Trade Regulations (Cont’d)3 Anti-Boycott Penalties
– Fines up to $50,000 or five times the valueof the exports involved, whichever is greater
– Imprisonment for up to 10 years.– Loss of foreign tax benefits/credits– Penalties under EAR
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V. Keys to Compliance
- Know & Follow the Rules- Implement & update
written complianceprogram
- Periodic compliancetraining
- “Hands on” managementof vendors, agents,brokers, forwarders, etc.
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V. Keys to Compliance
- Check your Work- Periodic compliance
reviews- Self-awareness cuts off
“contingent” liabilities- Prior Disclosures
reduce/eliminate potentialpenalties
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V. Keys to Compliance- Use Technology to Reduce Costs
- ABI - input data to Customsdirectly
- AES/SNAP – filed SEDs and applyfor export licenses online
- DPL software to check for “badguys”
- Integrate Customs entry number anddates into inventory/accountingsystems
- Scan entry documents for storageand easy retrieval
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V. Keys to Compliance
- Implement recordretention program
- Different periods requiredfor various records
- Once Requisite periodexpires, record becomesunnecessary “contingentliability”
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VI. Conclusion
- International trade involvesnumerous rules & agencies
- Must be aware of rules andensure compliance throughtraining and internal reviews
- Rules change frequently- Self-policing reduces
liabilities
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VI. Conclusion
Failure to be diligent with trade compliance =Lost opportunitiesSubstantial penaltiesInterruptions in global supply chain
Companies can budget and plan for compliance,but not for enforcement.
Socrates -“The unexamined life. . . .”
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Questions?Questions?Email [email protected]
Direct 214.800.2845
Toll Free 1.877.34.World
Chester/Associates, PLLC6060 NCX, Suite 560Dallas, Texas 75206
www.tradelawfirm.com