Expeditors International of Washington, Inc. (EXPD) Earnings Call Transcript & Summary

All right. So we'll get started. So again, thank you for joining us today for our Export Compliance Basics webinar. My name is Sarah Maas, and I am in the regional sales operations role for the Midwest, and I'm based in our Minneapolis branch. And I will be your webinar host for today. Before we begin, I want to cover a couple of items to note for the webinar. So this webinar today will be approximately 90 minutes in length and there will be 60 to 70 minutes of content with about 15 to 20 minutes at the end for Q&A. And all attendees will be on mute, and we ask that if you have any questions on any of the material that's presented today, please type the question into the Q&A window only as the chat box has been disabled. We will address as many questions at the end of the webinar as possible. But if we do not get to your question, we will follow up after the webinar to make sure that your question is answered. Today's webinar will be recorded. So -- as you probably have received a pop-up screen alerting you that the recording has started. All attendees will receive a thank you e-mail from myself, which includes a short survey that we would like you to complete with feedback from this webinar. And after you complete the survey, you will receive the presentation material. So now I'd like to introduce our speakers for today. Ashley Hubbell is the Ocean Export Supervisor for our Chicago branch; and Cara Lemire is our regional trade and customs Compliance Manager for the Midwest region. And just one last friendly reminder. Please remember that all questions should go into the Q&A window. And with that, I'll turn it over to the ladies.

Hi, everyone. Thanks for joining us today. We appreciate your time. Today, we're going to talk about some Export Compliance Basics. And we have quite a few things on our agenda to get through. So we will kind of look at the different types of exports. We're going to look at the parties of the export transaction. We'll talk about EEI requirements and all the data elements that go into it. We're going to look at the parties in the transaction and what their responsibilities are. We're going to talk about the timing of the electronic information. We're going to look at all the government agencies that control exports and their penalties. We're going to talk about some things that you should know before you export and some best practices as an exporter that you should look at putting into place. Let's kick off. Let's look at the types of exports. Okay? So let's define an export, okay, first. So an export is an act of shipping or transmitting an item subject to the EAR from the United States to a foreign destination. The regulations define a shipment as all goods being sent from one U.S. party to one consignee located in a single country of destination on a single conveyance in the same day. So the U.S. government requires exporters to file what's called an electronic export information or an EEI whenever they are going to export items out of the U.S. And exports are a little bit unique. And as the government has software on which an exporter can file this export declaration themselves through AESDirect or they can look at hiring authorized agents such as a broker and the broker can file those EEIs through their filer software. This whole process is regulated by the Bureau of Census and Customs and this all falls under the foreign trade regulations when it's talking about the export declaration information. All right. So we've got a couple of different types of exports out there. Probably everyone thinks about the physical goods as an export, okay? When you're putting something in a box or a crate or a container and you're going to be moving a commodity out, it's physical. Then we have a different type of export, which could be like a deemed or a technology export where you maybe don't have anything physical that's even going out, right? So I want to talk a little bit more about these deemed and technology exports, because they're not a package. They're not the things that are physically tangible. So a deemed export, okay, the technology that's released for export. So this can happen in several different ways. It can happen through visual inspection. So if you have someone who is not of U.S. origin and they're here in the United States, and we could be talking to them. We could be showing them an application, showing them documentation. All of this would be considered a release or export of that information, okay? And things to keep in mind, okay, when we're talking about deemed exports is knowing your commodity. Do you have a commodity that's controlled by the government. And we'll talk about controlled commodities a little bit later on. But if you have something that the government says, "Hey, not everybody can have access to this information, there's certain controls in place." You want to make sure you're considering that type of information when you're having any type of discussion, anybody coming in to visit, maybe a section of a plant, if you're in manufacturing, just to make sure that you are not releasing information that's controlled, that can't be released without permission of the government. So let's talk about technology, okay? So many things with technology have changed drastically in the last -- even in the last 10 years, okay, and how we do everything. Everything goes to the cloud, we back up daily, okay? It's different, okay? So we have to think about those places that we're putting information, right, where we're pushing that data out to, if it's controlled, right? So if we think about technology, in general, okay, so it could be the information that's behind development, production of a product, something that take -- it could take the form of technical instructions or technical data, technical assistance, instructions, training, consulting services, working knowledge, right? So say you're sending someone -- to show someone how to operate a piece of equipment, okay, so are you bringing someone in to train them on how to work a particular piece of equipment. These are all things that can fall under that deemed or technology export, and it's something to keep in mind. We'll probably have a variety of individuals on the call today where maybe your job is -- you prepare the export documentation or maybe your job is more the transportation side. The point here and why we really talk about it, one of the reasons is that you want to make sure that everyone in your supply chain per se, understands us. So if you have someone in your HR department, right, that's deciding what location someone is going to work at in your facility, we have to take these types of considerations into play, especially if they are a foreign national, okay? There could be a license required in order for them to be able to do their job, okay? So I just want to make sure that the HR knows this process, if you have someone who's in receiving or documentation that they all kind of understand what can be considered an export here, right? We're going to look at export transactions, okay? And we're going to circle back around. You guys will see this slide again. But we want to break out the 2 different types of export transactions that are out there. You have a standard export transaction, which means the USPPI or the party here in the United States, they are the person that selects the forwarding agent to arrange the transportation, to arrange the export of the goods from the U.S. And then, we have what's called a routed export transaction, which -- the FPPI, which is typically the buyer, the foreign buyer. They're the party that selects the forwarder to arrange the export of the goods from the U.S. And the reason why we kind of drill in on this a little bit more is because depending on what type of transaction you have, it's going to change what your responsibility is in the transaction, okay, as a shipper. So keep that in mind, okay? Standard and routed, okay? As we shift gears to talk about parties to the transaction, and I'm going to hand over slide control to Ashley here. She is going to take the next group.

Good morning. So we're going to start with discussing the different parties within Export transaction. All right. So there are 5 parties involved in the Export transaction. There's the USPPI, the FPPI, the ultimate consignee, the forwarding or authorized agent and the carrier. So your USPPI -- this is your United States (U.S.) Principal Party in Interest. This is the person or an entity that is receiving the primary benefit from the export transaction. They're located within the U.S. The benefit is generally monetary, but there are other benefits they could be receiving. In most cases, your USPPI is going to be the seller, the manufacturer or the order party that is located in the U.S. There are instances where a foreign entity can also be the USPPI. They must be within -- physically located in the United States at the time that they purchase or obtain the goods. So a few questions to think about when you're determining who your USPPI is, who sold the goods for export or who arranged for the sale and who benefits from the sale within the U.S. Again, in most instances, the USPPI is the party selling the goods to the foreign party. There are a couple of instances where a customs worker or a freight forwarder can be the USPPI. It's not common, but it can happen. In both cases, they would be listed as the broker as -- I'm sorry, listed as the IOR, Importer of Record, on a consumption or warehouse entry with entering into the U.S. or they will be listed as a broker on a formal entry into the U.S. for a foreign entity. And then in both cases, the goods would be subsequently exported and unchanged. Sorry, the FPPI. So this is our Foreign Principle Party in Interest. This is the party purchasing the goods for export from the U.S. In some cases, they can be the party that is receiving the final delivery or the actual end user of these goods. This party may be the ultimate consignee, but it's not a requirement for this designation. So really the ultimate question on this determining the FPPI is just who purchased these goods from the USPPI or the ultimate consignee. This is the party at the time of export. This is going to be your foreign party that will ultimately use, manufacture or process the goods further. This is often the party actually receiving the goods from the export. They are located abroad. And -- yes. So they ill be -- sorry about that -- receiving the goods. Then we have the forwarding or authorized agent. This is a U.S. party. And this party is authorized by the Principal Party in Interest. So it says just PPI because it could be the USPPI or the foreign -- the FPPI based on the type of export transaction. So this is the party authorized to facilitate the movement of the cargo from the United States to a foreign destination. They may also be authorized to prepare and file required documentation. They are required to obtain a Power of Attorney or written authorization to act on the behalf of the USPPI or the FPPI, which again may include completing and filing the EEI with U.S. Census. And then our final party is the carrier. So this is the company that's actually transporting the goods or in some cases, people by land, air, sea, on either its own vessels or by the chartered vessel or equipment. And they are also named as the carrier in the Contract of Carriage. They are responsible to deliver required documents to CDP. This would contain their AES, proof of filing citation, which is the ITN number or they would be required to provide an exemption legend that states the cargo does not require an EEI for export. Examples of the carrier would be your airlines, trucking company, shipping lines, railroads, pipeline companies. So now we'll discuss some of the requirements of filing the EEI and the data elements. So an EEI is required when we're exporting to foreign countries from the United States, to Puerto Rico, U.S. Virgin Islands,or if we are exporting from the U.S. to Puerto Rico or the U.S. Virgin Islands. The EEI also must be filed when the value of the shipment is $2,500 or greater and/or when there is a license required. There is a low value filing exemption, FTR under 30.37a. This does not require to apply for items, so that $2,500 value does not apply if you have a cargo shipping under within ECCN and is destined to China, Hong Kong, Russia or Venezuela. So those must be reported regardless of -- those commodities must be reported regardless of value. An EEI is not required in a few circumstances. So if we're shipping from Canada or from the U.S. to Canada, from the U.S. Virgin Islands to either United States or Puerto Rico. If we are shipping from the United States to Puerto Rico or Virgin Islands to other U.S. territories or from other U.S. territories to the United States. Some examples of other U.S. territories are American Samoa, The Northern Mariana Islands, Guam, Midway Islands. Then we have some exemptions. So then the Schedule B value is less than $2,500 is one. Another exemption would be shipments traveling in bond through the U.S. So these are shipments where the cargo is originating in a foreign country and destined to another foreign country. So they're just moving through the U.S., not actually entering the commerce of our country. Diplomatic pouches are also exempted. Human remains, intercompany business records or correspondence such as Comac are not required. Pets as baggage. So these are just a few exempted commodities. You can find the list in the FTR 30.37 for more. And even though these are all exemptions or why when we would not be required to file the EEI, you would still be required to confirm license determination. So whether a license -- an export license is required to export the shipment. If the license applies, many would be required. This next slide reviews some of the data elements required. In this -- in all instances, the USPPI is responsible to provide these data elements, except when the FPPI takes on the responsibilities for licensing determination, which would be in a routed transaction. So some of these data elements are the name and address of the USPPI. The USPPI is the ID number. So this is their government-issued ID number. So in the case of a company, it would be their tax ID, their EIN. If it were to be an individual, it would be their Social Security Number or another number issued by the government. And they need to confirm who the ultimate consignee is and the country that the ultimate consignee resides in, the U.S. state of origin, or if it's moving out of an FTZ, the FTZ origin or location. The Schedule B number as well as the description of the commodities based on that Schedule B. The origin of goods indicator, so whether they are cargo originated from the U.S., manufactured within the U.S. or outside of the U.S. The quantity and unit of measure for the quantity of goods shipping, the value of the goods shipping. And then if an ECCN or another government agency license identifier applies, that would need to be provided. And then if the USPPI was relying on another company to assist them with license determination, they would need to provide sufficient technical information which would allow that party to determine licensing authority. So again, the USPPI is responsible for providing these data elements. So when we file the EEI and it is accepted by CDP and U.S. Census, they return the ITN number, the internal transaction number, which is the reference confirming that we filed. So this is your proof of filing and this number is provided to the carrier on shipping instructions for all U.S. exports. So we provide either this ITN number or again, an exemption legend stating why an ITN number is not required or will not be provided. So this is generated by the AES system, and assigned to a shipment and it's unique to each shipment, and it always begins with X and the date it was filed. So in this example, we have this filing was done on February 18, 2024. And then the last 6 digits are randomly assigned. So now we will discuss the responsibilities of the parties that we just reviewed in export transaction. So here is the export transaction slide again. So in the standard export transaction, as a reminder, the forwarding agent is selected by the USPPI. So the Foreign Principle Party in Interest will place their order with the USPPI. And then the USPPI selects their authorized agent within the U.S. to arrange the transportation of the goods. They will also be responsible to filing the EEI and then the goods will ship. In a routed export transaction, the Foreign Principal Party in Interest will select the forwarding agent located within the U.S. to act on their behalf. And in this case, the FPPI places the order with the USPPI. Then FPPI uses their authorized agent to arrange transportation of the goods. And then the USPPI provides the FPPI with the data for the EEI. So all those data elements, we are just reviewing. So their name and address, their ID number, the origin of the goods, the Schedule B and description, all those items. If they are not going to file the ITN or the EEI on their own, they would provide that to the -- to the FPPI so their agent can file. And then the EEI is filed and the goods shipped -- and exported from the U.S. I think this was a really great visual for explaining the standard versus routed transaction. This is a subject that gets -- that trips up a lot of exporters. So it's good to save for future reference. And just one question that we always throw out to exporters when they're determining Standard versus Routed. It's just who -- which party is the responsible party for arranging the export? So in a Routed transaction, the FTR, or the Federal Trade Regulations defines a Routed transaction. An export transaction in which the Foreign Principal Party in Interest authorized as a U.S. agent to facilitate the export of the shipment from the U.S. and to prepare and file the electronic export information. Routed export transactions are a risk to -- are consider riskier because the FPPI controls the movement. But despite the FPPI's control, the USPPI is still responsible providing, again, the data elements that we discussed earlier. The FPPI also still needs to have that authorization from the U.S. agent to facilitate the export and when needed, prepare and file the EEI. So here are some of the USPPI's responsibilities. So in a standard transaction -- or standard export transaction, the USPPI can file the EEI on their -- on behalf or they can authorize a U.S. agent in the U.S. to prepare and file the EEI for them. They need to provide the EEI information to the party that will file for them. If that is the case, they also need to provide the authorization with Power of Attorney or written authorization to act on their behalf. They are required to make license determination, which would indicate if the -- if an export license is required to export the commodity and they must retain documentation for the shipment. In a Routed export transaction, the FPPI would file the EEI or they would actually have their authorized agent do so. And then they need to have a Power of Attorney or provide written authorization to their agent to file the EEI on their behalf. They need to provide U.S. -- the USPPI would also need to provide the authorized U.S. agent of the FPPI with specific export and licensing information. So if the USPPI is allowing the FPPI to file the EEI, they would need to provide the data elements to their authorized agent -- to the FPPI's authorized agent. They need to obtain in writing from the U.S. -- from the FPPI. And then they also need to retain documentation. So a couple of points. If the USPPI is making -- in general, makes the licensing determination, unless the USPPI obtains in writing from the FPPI that they will assume the responsibility for determinating licensing -- determining the licensing requirements, this would make the U.S. agent of the FPPI, the exporter. The authorized agent are, in most cases, the forwarding agent for -- in the U.S. would have the following requirements or responsibilities. So on a Standard export transaction, they would need to obtain authorization or POA from the USPPI. They would provide the transportation data back to the USPPI. So booking details, carrier, mode, vessel name, route, export date. They will provide the USPPI with the export information that it provided as submitted through AES. So this would be a copy of the EEI filing if they were the ones to file the EEI on the behalf of the USPPI. And then they are also required as the authorized agent to retain the documentation. In a Routed export transaction, the authorized agent provides the USPPI with a copy of the POA that the Foreign Principal Party in Interest that hired them for the Routed export transaction. But this is only in the case when the USPPI requires -- or requests this information. The authorized agent would also prepare and file the EEI record, if it is under the FPPI's responsibilities for the transaction, they would do that on their behalf. They would also obtain authorization or Power of Attorney from the FPPI. And then upon request, they will provide the USPPI a copy of the data elements provided by the FPPI. So again, they would provide the USPPI a copy of the EEI filing in a routed transaction as well if it's requested. So here are some key points to remember about Routed transactions. The FPPI controls the movement of the goods exporting from the U.S. The FPPI provides the authorization to the U.S. agent to prepare and file the EEI, and the USPPI provides the information to the U.S. agent regarding the shipment or they can file the EEI on their own. And then they would have to provide ITN or the proof of filing citation as long as they have authorization from the FPPI. And again, the information they need to provide would be the data elements. So for record keeping, which the parties are all required to retain their documentation for a period of 5 years from the latest event, which is either the date of export or any known reexport or transshipment, any termination of the transaction or the date person received the boycott quest, if applicable. So here's a list of items that should be kept. So the commercial invoice, packing list, shippers letter of instructions, any memos or notes or correspondence, invitations to bid on the shipment, books of account and then export control documents such as license, applications, the EEI filing copy, the leading adhocracy, any documents issued by the government and delivery certifications. Original documents are required and the regulated person must maintain the original records in the form in which they received or created them unless the person meets specific requirements from Section 762.5 which would be relating to reproduction. And then this confidentiality of the EEI. So the EEI data is considered confidential and used solely for official purposes as authorized by the Secretary of Commerce. It is collected and used by various government agencies such as the Department of Commerce Census, which uses it for statistical purposes, the Department of State. Outside of these reasons from the government, the EEI information or data cannot be shared with any party other than the USPPI or the authorized agent. It is actually prohibited to share the EEI information with a foreign party, government or entity for any nonofficial purpose. There are instances where your buyer might request such information. You can give them the ITN number as provided on the [indiscernible] or the proof of filing exemptions legend. But you cannot actually provide them with the data elements used. And then -- just to review the timing of when you need to file the EEI. So if it's a non-ITAR shipment, the -- in most cases, the filing is going to be done predeparture. So for -- if it's moving by a vessel, it's 24 hours prior to loading the vessel; per air, 2 hours prior to scheduled departure; truck, 1 hour prior to the truck's arrival at U.S. border; and by train, 2 hours prior to the time the train arrives at the U.S. border. In some cases, some shippers or exporters have post-departure filing. This is to be known as Option 4 and must be approved by the government, and they are required to file their EEI 5 calendar days from the date of exportation. This requirement does include weekends. And if you do not file timely, there is a penalty of $1,100 per day, up to $10,000. If the shipment is considered ITAR -- falls under ITAR regulations, the filing timing is a bit more strict. It's for -- by vessel, it's 24 hours prior to loading the cargo on the vessel. For train, it is 24 hours prior to the time the train arrives at the U.S. border. If it's moving by truck, it is 8 hours prior to arrival at the U.S. border. And then if it's then going by airplane, 8 hours prior to the scheduled departure time of the aircraft. And now I will pass the presentation back to Cara to discuss government agencies and their controls.

Okay. Thank you, Ashley. All right. Let's talk about the agencies that are involved here. Let's take a look at the purpose of export control laws. So the U.S. really has these controls to protect our national security interest and promote the foreign policies that we have in place. This has begun with the purpose to we want to restrict exports of goods and technology that could contribute to the military potential of adversaries. We don't want bad stuff. We don't want stuff to get into the hands of bad actors and bad players, okay. It is to prevent proliferation of weapons of mass destruction, nuclear, biological. It's to help prevent terrorism and to also help ensure compliance with U.S. trade agreements and trade sanctions against other nations, right? So we have quite a few players involved when it comes to export controls, right? First, we have the Bureau of Industry and Security or the BIS. The BIS is going to cover EAR equipment, materials and technology that could have both the commercial and a military application. So these items are called dual use technologies. And it just means that something could be used in a different way than what it was intended for. That could be manipulated to be harmful, right? Items that fall under the EAR could be chemicals, satellites, software, computers, a variety of different types of commodities. Next, we have the Office of Foreign Asset Controls. So this was another Department of Treasury, okay. And they enforce economic and trade sanctions based off of U.S. foreign policy and the national security goals and interests, okay. This targeted foreign countries and regimes, terrorists , narcotics traffickers and anybody that's engaged in activities that are about developing weapons of mass destruction. OFAC operates under presidential National Emergency powers as well as specific legislation to impose controls on transactions and they freeze assets under U.S. jurisdiction. So many of the sanctions that are based on United Nations and other international mandates. We work unilaterally with other governments in close cooperation for the better of all humanity, for the most part. Some of the common sanction programs, I think, are probably highlighted more in today's world and today's environment. There are sanctions against Belarus, Cuba, Iran, Libya, North Korea, Russia. So those are just some of the sanctions programs that are out there. We, of course, do have certain things that are fully sanctioned, meaning where we're not doing any business or any kind of trade with those governments and other sanctions are going to be based off of parties, based off of commodities. There's a lot of variety out there when it comes to the sanctions. Then we also have the Department of State, right? So Department of State, right? These are items that are covered under the ITAR regulations, which is the international traffic and arms regulations. These are for items that are inherently military in nature. They were designed, developed, made to be used in the military application. Exporters that are -- exporting items that are controlled under the Department of State. They actually have to register with the Federal Government and they need export licenses in order to export their commodities. And the Department of State has their own list of controlled technologies, which is called the munitions control list, okay, or you may hear that refer to as a USML. And our last player here that we have on this slide is Customs and Border Protection. And they're really the muscle here. They're the agency that's asked to enforce all the regulations on behalf of all of the other government agencies that are out there. So Customs can have a tough job. They're out there enforcing everything that everybody else has in play. Do you want to talk a little bit more about items under the EAR, okay. So commodities, software and technology that have been exported from the United States are generally subject to the EAR with respect to export, okay? Now here in a minute, we're going to go through this whole decision tree. We're going to talk about how do you decipher if my item is even under the EAR or what my item -- is my item under the EAR or should it be under the ITAR. Should it be under the Department of State, right? So really what we are looking at here for the BIS is going to be those dual use items, okay, that aren't inherently military, but they could be used in a military application or a function or the items that could be used for other types of uses such as nuclear proliferation or any other types of commercial actions. And this is also where we have to keep in mind that whole deemed export concept of like am I releasing information or technology to a party. And is that information controlled, would the government care about who has that and what could be done with that technology? So some items, I think, are pretty obvious that they're controlled, and we want to know where they're at it all time. The U.S. government wants to know where we're sending them to, right? But there are items that are not so obvious as well. And our government in conjunction with other international governments in agreements, we all kind of say like, hey, these are the items that we're concerned about that we think could be dual used. So besides the United States, European Union and almost every country out there has items that they consider controlled. Some items that are not obvious could be -- an example here is a picture in the lower left-hand corner, okay? We think about carbon fibers, okay? These -- carbon fibers are used to make tennis rackets and golf clubs. But carbon fibers are also an ideal material to be used to make nosecones of intercontinental ballistic missiles. So any of you guys that are -- guys or gals that are golf players, think about that next time you're swinging the clubs, that material, it's controlled by the government because it could be used on missiles, right? Other items that I think are pretty common, like ball bearings, cameras, computers, cable valves, airplane parts -- there's all sorts of items that could fall under this dual use. And the BIS has that list that they call the commerce controlled list that has all those items out there. And you can look up those items by -- they have like an alphabetical index to try to help you with your search and what falls. But any time you're preparing something for export, you want to understand is there a control classification number or an ECCN involved on my commodity? And if there is, what other kind of controls are in place. So let's talk about this decision tree. Because I mean I would like to say, hey, it's clear as mud and it's never gray and there is -- it's always easy to [indiscernible] cater in this stuff. I would be lying if I told you guys that. Sometimes, yes, it's very clear and very easy, but sometimes not so much. okay? Do my items fall under the EAR. Do my items fall or the ITAR, okay? Because there can be a great area. But this is a great flow chart, and this is actually available out on the Department of Commerce's website, okay, where it's a, hey, if you're exporting, these are the steps that you want to follow to help guide you to make sure you're doing things compliantly, and that you're abiding by the regulations. So the very first thing that we want to do is say, hey, are these items subject to the EAR. So out in the EAR or the Export Administrations Regulations under Part 734, they actually have 5 steps listed to help you determine are the items subject to the EAR to the scope. So step #1 would be all items in the United States, including U.S. -- foreign trade zones or items moving in transit throughout the United States from 1 foreign country to another, those are all subject to the EAR. Any U.S. or an item, wherever you're located, is subject to the EAR, it's underneath the regulations, or may commodities that incorporate control U.S. origin commodities, those are under control. So if there's U.S. components and something that matters, any kind of foreign produce direct products that are made with specified technology and software, that's controlled, again, things that are maybe made with those deemed exports that's still considered controlled or subject to the EAR. And then foreign produced products, those are also, if they were made using specific technology or software, those are also subject to the EAR. So if you find that, hey, and most things are, if you're exporting from the U.S., okay, you're probably under the umbrella of the EAR. So most of the time are going to be moving right under to that ECCN to say, hey, do you have an ECCN is it classified on the CCL, so that's where you would go out and you would look at the commerce controllers and determine whether or not your commodity was controlled. I will -- at the BIS, they have some great videos if you've never had to try classify something or you don't know where to start, they have like a little training room there that has great videos that kind of walk you through how to look at the CCL list as well. I just want to make sure I share that information with you. Some of you guys may have individuals in your company where that's part of their role where they do the export classification, right? So if you see that your item has a CCL, right, then the next thing you have to do is you have to take that export control number. And you have to look at the table within the commerce control list that has the reasons for control so the government has various reasons why something may be controlled, national security, nuclear proliferation, antiterrorism. And they have what's called a country control chart, they have all the countries listed, and you'll check basically your ECCN against that country list. And if there is an X in a box that would indicate that you would -- a license would be required. So if you have an X you would say I either have to have a valid license or I have to have a license exception available. Now the government will say as far as a license exception, if you can meet certain requirements, a common example is encryption that can be used in lieu of a license. You want to use that into play. If you can't okay, then you would have to apply for a license, okay? So kind of come across here. This is a tough and I looked at the license, okay? No, there's no license exemption, you have to apply for a license. Let's say, I look and there's not -- and there is a license exemption available then we have to go to these things that are called the general prohibitions. And I have to say, okay, do any of these general prohibitions apply -- and there's 10 of them. All right. So let me sort of run through these 10. I'll hit the highlights on them. And these are found in part 736 of the EAR, just so you know where you can find them, okay? General Prohibition 1, export and reexport of controlled items to listed countries. So then they'll provide the countries that it can't go to. General Provision 2 reexport and export from abroad the foreign made items incorporating more than de minimis amount of U.S. controlled content, okay? So something is controlled and there -- your buyer is wanting to reexport it somewhere else, they are going to have to come and get permission of the United States government in order to be able to do that. General prohibition 3, okay. Export and reexport, okay, abroad from a foreign product directly produced from the United States. So you have to go through this list and check, do any of these apply to me. That's what we're doing here, okay? General prohibition 4, engagement in activities prohibited by a denial order, okay? Number 5, export or reexport to prohibit end-users or -- and what countries. General prohibition #6, reexport to embargo destinations. Number 7, support of proliferation activities. Number 8, in-transit shipments and items to be unladen from vessels and aircraft. Number 9, violations of any orders, terms or conditions. And number 10, okay, knowledge that a violation is going to occur, okay? So if you have reason to know or reason to believe that a violation has occurred or is about to occur, that puts a stop on it. So as you're going through these general prohibitions, if you're saying yes to any of this, than not to stop signs saying, "Hey, oh I can't move forward here if any of these general prohibitions provisions apply." So if any of them apply your stop sign would say, hey, now we have to go, apply for a license, right? If you run through those 10 items, I know I ran through them quick. If none of them apply, then you would be able to use that license exception, right? So there's a clear path that says, if you have a controlled commodity, this is what you do if there's an X, you got to apply for a license basically. If there is not an X, then do any of those provisions apply. If they don't, then you can move forward using a no license required. So it's all about like what your commodity is, right? It's like the [ doobie ] used, like who's involved, what's involved, where is it going, what are they doing with it? Those are all the things that you have to consider when you're going through this decision tree as far as licensing. Now I'm going to jump back, okay, to this whole export control classification, okay, the CCL diamond, right? If you're out there and you look at the CCL and your item is not specifically called out on that control list then it goes into what we call like a catch-all bucket what is called EAR99, meaning it's controlled underneath the EAR, but it's not specifically called out on the commerce control list. So EAR99 is not technically an ECCN. It's just kind of a catch-all bucket for items that are not on the CCL but are still controlled under the EAR. And you have to go that same check, okay, of the general prohibition, okay, to see if they apply, okay? If none of those general prohibitions apply, then you're free to use the NLR, meaning no license required. If you get any of those general prohibitions, you're like, oh, this one applies, then you would have to stop and apply for a license, okay? And anything on this, if you hit that -- get to that spot where you're applying for a license, you're going to be applying for a license under the BIS, okay. And it would be -- if you had to apply for license for military for ITAR that will be under a different system, okay? The system that the BIS uses is called SNAP -- Snap-R. There's step-by-step instructions in the regulations on the license application as well as out on the Department of Commerce on that training site that they have. They also have videos, how to apply for a license as well to walk you through an application. So I think it's always good to know that the government -- they do have a lot of information out there posting to help the trade. They want us to do it right. They want exporters to do it right, and they really try hard to get that information out there and make it available. So you've got quite a few checks to go through when you're determining is it under the EAR. Is it controlled. Do I need a license or not. Well, let's talk about ITAR a little bit. One I'll talk about ITAR real in-depth here, right? So -- the Department of State is responsible for the control of military items that are permanently or temporarily exported or imported. And they have their own set of regulations, okay, which some of them are very much in line with the EAR. But as Ashley was talking about the timing requirements, you can see there are some special requirements when it comes to ITAR, commodities and ITAR freight. There is also a decision tree out there that's -- you can find it on the Department of Commerce website. It's like a catch-all where you go in and you can tell a little about your commodity, and it's going to give you guidance on, hey, does it really -- does it go under ITAR? Or does it go under EAR? Because I guess maybe export reforms may be been like -- maybe 8 years or so ago, time goes gets out from underneath me, where we had a whole series of ECCN created for items that used to be a on the ITAR, they got moved to the Department of Commerce list, okay? Because the government said, "Hey, we really want to just control the things that we really need to control under ITAR." Meaning I have a bolt that was maybe originally designed to go on a military aircraft. But over time, that bolt is now used on both commercial planes and military planes. So the decision was made that, hey, those don't really need to be long or ITAR anymore. Those can go under the Department of Commerce in the specialized series called the Series 600. And when that happened, it really grade the lines on, okay, what is EAR, what it ITAR. And sometimes you have to go to the departments and ask them for like a scope ruling to tell them about the commodity. And they will tell you whether or not your item is subject to ITAR or your item is subject to EAR or they may tell you, your item is actually controlled by both of us. So there are a few different versions that you can get back when you go for a scope ruling. Let's look next a little bit more about the office for asset controls or OFAC. There has been a lot going on in the world of OFAC, especially over the last couple of years. And I saw today in a little publication called Export Compliance Daily, the President has promised that we're going to see some more sanctions against Russia. I'm so excited see what those are going to be. I'm being a little sarcastic here because Russia is already so complicated already. So it's going to be good times when we have more sanctions announced. And that's really a good example to show how OFAC is under presidential powers. So if you've ever have an opportunity to go take a look at OFACs information. They have a lot of great publications out there that break it down really into more layman terms to say what can I do or what can I not do when I'm trying to export something to a particular country, are there general licenses that I can use or do we have to apply for a specific license, right? But OFAC's job is to monitor the sanctions programs, okay? Again, they could be comprehensive, meaning unless it's humanitarian and the government has given you a license. We're not able to do the type of trade with them, any type of shipments to or from those countries, right? It could be blocking particular individuals. OFAC publishes what we call the S&D list, okay? So really, anybody who's on that list, everything is frozen for them, and they cannot be involved in any type of export out of U.S. So we have the country sanctions. There's also non-proliferation sanctions. There's counterterrorism sanctions. These are all the types of different sanctions that are going to fall under OFAC. So and we see these change. [ How do you ] right away anymore, it seems like there's something added or deleted or I saw that there's going to be some changes with North Cuba -- with North Korea that were announced. But looking at those, it's not going to really affect trade. So I don't see us shipping to North Korea anytime soon, but there were some changes made to the North Korea sanctions in the last week. So just something to make sure that you're aware and abreast of and that you're checking, hey, here's my commodity. What kind of -- where am I shipping to? Are there any controls in place for OFAC -- this is where we'd be looking to say, a, does my company do screening, are we screening for restricted parties and -- which would include that S&D list. Are we making sure that everybody is involved with our transaction is a good player and that we don't have any bad actors out here. And then customs. Customs again, there are enforcer, right? They're the party that's asked to take all the rules from all these other government agencies and make sure that everybody plays by those rules, right? Now CBP has what they call the Exodus team, which is their export control team. And really what they're doing is they're trying to prevent weapons, components, things that could be used by terrorists or other criminal entities, they're going to keep it out of their hands, right? They enforce ITAR regulations, the EAR and OFAC regulations. They are always on the lookout for counterfeit merchandise and [ IN ] stolen vehicles. These are two items that are the biggest contributors for financing terrorism, counterfeit merchandises, in particular. So customs is always on the lookout for those types of commodities. And then, of course, they're looking for hazardous materials, okay, anything that's not compliant when it comes to hazardous goods. Okay. So in addition to customs and Exodus team, there are also other agencies that conduct investigations under export controls, and export control violations. So anybody under the umbrella of DHS, okay, the Department of Homeland Security or ICE immigration and Customs Control. The DOC, even the FBI, all of these agencies have the ability to investigate export control violations. Let's take a look at penalties under the FTR, okay, and walk in at right? So the FTR, okay, I'm only going to talk about the FTR penalties today. So these are things involving the filing of the EEI declaration, okay? So we're not going to talk in depth about penalties under the EAR. I do want to note that the EAR, okay, has a set of penalties. And so does the FTR, okay? And you could have a violation and put those silos for a particular shipment. So let's talk about the common ones under the FTR, right, which is going to be failure to file or delayed filing. So for civil penalty, it's $1,100 per day with a maximum of not more than $10,000 violation, Terminal penalty would be okay, $10,000 or less and no more than 5 years imprisonment are both per violation. So let's talk about the difference between civil and criminal. Civil is going to be administrative, okay. So there was no intent behind the action. Criminal law is going to be that there was intent behind it, it was fraudulent. You were trying to evade the regulations. And so that's one that's going to put you into a criminal bucket. And as you glance down, anything with criminal is also going to have -- could have prison time involved with it in addition to a monetary penalty. The next type of penalty. Filing false or misleading information, okay? This $10,000 per violation if it's civil or 10,000 and less or criminal plus the jail time. So this could be -- meaning we had -- the wrong information was filed on a declaration, okay. So you have wrong port of export, a bad licensing determination. You had the wrong quantity. There could be a variety of reasons why something could be considered filing false or misleading information. Then you have furtherance of the legal activities. So this would be -- an example of this could be circumventing the law by [indiscernible] any shipping to an end-user and a sanction destination, but showing a different country of destination. So you say it's going to the UAE, but you really know what's going to Iran. That's definitely a problem. And that one is going be a problem, if you know that that's happening, that will put you in that criminal silo there. If you knew it was really going to Iran, you said it was only going to the UAE that is going to put you right there in that bucket. So a couple of things to note here, okay? So every penalty that we see issue is issued for the full amount, right? So -- and you may or may not be able to mitigate it to a lower amount. So customs never issued any type of penalty. They always issue it for the maximum amount, okay? And then you can either try to mitigate or you could petition to have it dropped. Another thing to consider is that you could have multiple violations, okay, per shipment, okay? You could have a late file, a wrong port of export, any other data element could be incorrect. They're going to hit you for $10,000 for each one of those in fractions, okay? We see as a broker, okay? Sometimes we see specific ports, okay, they are focusing on certain items, okay, and that changes over time. We have certain ports that we see, hey, they really focus on the date of export or certain areas in the country where the ports can be a little confusing, whether it's Seattle or Tacoma, that's an example of one that we see, okay? So -- and then depending on the types of penalties that someone receives and then a number of penalties they receive. At some point, you could lose your ability to mitigate, and in each customs port they have that authority to make that decision okay, they can say, "Hey, sorry, exporter, you've had so many number of penalties in our port. You can't mitigate anymore. Every penalty that you have, you're going to have to pay the full amount of the penalty on." So they have discretion to do that. And then if you ever receive a notice of a penalty, you want to make sure that you take note to the date the penalty was issued, not necessarily the date that you received it, okay? Because you only have 60 days from the date of the penalty to either pay the penalty or petition against the penalty. So it's always very important to make sure I note the date that's on the penalty, not necessarily when you received it in your hands? Let's talk a little bit about what's called voluntary self-disclosure, right, or VSD. This is where you will go to the government and say and disclose to them, okay, violations that you've had or suspected violations against FTR. The voluntary disclosure is considered a mitigating factor when the government is looking at applying administrative sanctions, penalties. The Enforcement Authority for VSDs is delegated to the BIS and customs, okay? Now something to note VSD does not prevent transactions from being referred to the Department of Justice, okay? So it could be a mitigating factor from a penalty, okay? But it's not going to protect you for other areas. So it's really strongly recommended that if you're looking into and you have found potential or apparent violations and you're looking at filing a VSD that you make sure that the disclosure be conducted by or after the direction of an attorney in order to preserve your attorney-client privilege regarding advice, immaterials produced as a result of the investigation because VSD is an admission of potentially improper conduct, okay? So criminal violations may be referred to the Department of Justice for prosecution. So a VSD can create knowledgeable violation, which could create liability should knowing violations occur after that disclosure. A VSD can lead to a loss of confidentiality. Regulatory authorities may require waivers of certain defenses or extensions of time periods, basically tolling the statute of limitations on the violations. So it can become very publicated if they're going to go down a VSD route. Then companies do file VSDs, they really are a good thing, okay? It's always better to go to the government and say, Hey, we found something here as XYZ. This is what we're going to do going forward to make sure that this never happens again. This is how we've updated our controls. So it is a good thing, but you don't want to go into it blindly and you want to understand how it -- the impact it can have outside of BIS and CDP when you start looking at violations from the Department of Justice, for looking at anything monetarily. I just want to make sure you do that under the advice of an attorney. Okay. Let's talk about some things that you can do before you export, it's some best practices so that hopefully you don't find yourself in a position where you're like, oh man, we need to file a VSD or we need to talk to an attorney about what we need to do. So I don't think I'm going to blow anyone's mind here, okay? Most of these things are if you -- once we start looking at and you'll be like, okay, this makes sense. Even you need to know your customer, you need to know the who, right? Have you screened the parties to the transaction against those denied parties or other restricted parties list and those parties that are on OFAC sanctions list, okay? Are there any embargoes to the destination country, right? Have I been asked to make any prohibited or reportable boycott statements. Ashley talked a little bit about record-keeping where it says like, hey, if you get a request for boycott, in boycott statement you need to keep records up against that day, okay? So you want to take note of that because some statements that are considered anti-boycott statements even if you do not agree to go along with those, you may still have reporting requirement to the Department of Commerce, or the Department of Treasury to report that anti-boycott request that you received. Do you have knowledge of any prohibited end use of your product by your customer end-user, right? So What is your customer going to be using the product before for? If you're shipping, okay, a product and they say, send it to my forwarder, okay, that you should be saying, okay, well, what's your forwarder are doing after that, okay? So if you're shipping to an intermediate type of party, a trading company or they're shipping it to -- you're shipping it to an FTZ, okay? Don't self blind, you need to understand as the exporter from the U.S., what's happening to that product to ensure that it doesn't ultimately end up and a party that is a party of concerned or a sanctioned party or a country where that something can't belong in. And again, knowing does your shipment have any hazardous materials, and are you compliant with the hazardous materials regulations? Other red flags, okay? And these are taken directly from of 15 CFR, okay? So this is written within the regulations. These are the things that the government says, "Hey, you need to pay attention. These are what we consider red flags." It because is new to you and you don't much about them. That's you need to find out more about them, not the red flag, right? The customer or its address is similar to one of those parties found on the Commerce Department's list of denied persons. If the customer is reluctant to offer information about the end use of the goods, if they provide an unconvincing explanation as to why these going to required. If they're ordering things that don't make sense for the kind of business they're in, the example they provide here is like why would a bakery need sophisticated computers, right, a small bakery, that will be a red flag right? Just to know red flags, right? If you offer routine installation or training or maintenance and the customer doesn't want anything to do with that, that's a red flag. Customers willing to pay cash for a very expensive item when the terms of sale would normally call for financing. The customer has little or no business background, if it's apparent, they don't know what they're doing. If they're not familiar with their products, performance or characteristics, but they still want it, the routing, if it's abnormal for the product in the destination, packaging, is it inconsistent with the stated method of the shipment or destination? And if you're asking questions, Is the buyer invasive or unclear about whether or not the purchase product is for domestic use, for export, reexport. So you do have an obligation to understand what the party that you're selling the goods to, what they're planning on doing with it, right? So some best practices, know your customer, watch out for those red flags, do business with compliant companies, know who you're dealing with. Ensure continuing education of your staff, engage your departments with an organization to make compliance everyone's business. So taking advantage of training available that's out there like you did today, with [indiscernible], government agencies, they host trainings and webinars to given a couple of a blogs to the Department of Commerce and some of their training videos that they have in their training room. They also have a list of seminars and webinars that they offer. Some are free, some are not free. It just depends on what the subject matter is, right? And then just sharing this information throughout the organization, right? So again, looking at, is the person that's handling the staff and doing the placement of people in my organization, do I need to be concerned about the type of commodity we have. If we're going to put someone in a particular location, do we need approval from the government to do that if they're not a U.S. party, right? So just making sure the information regarding export compliance is known through every section of that silo that's handling anything to do with exports. All right. So that's going to bring us to the end of the presentation portion and to our questions and answers or question -- Q&A session, I should say.

Okay. Thank you, Cara and Ashley. I'm going to stop recording the seminar. All right. So we have around 10 minutes for Q&A. So like I said before, if we don't get to your question, we'll follow up with you so you can get an answer. So Cara, Ashley, is there a way to see a previously submitted EEI on ACE online. Is there a way to retrieve a report on export operations?

Okay. So if you are a U.S. part, you can apply to Customs and Border Protection for what's called an ACE portal account. And within that ACE portal account, you can request to have an exporter role. And within that role, you can -- there's reporting that you can pull historical EEI information. You can see all of the data elements, you can see the origins. You can see the -- you see everything with the EEI basically, all the data elements. So is that what you were looking for, hopefully?

Yes. Can we share certain elements of the EEI data with foreign colleagues, examples from Europe or Asia Pacific?

Unfortunately, we cannot. The government is very clear that the EEI in any form cannot be shared with a foreign entity. They put out a great letter that's available that you can provide to foreign entities and foreign governments when they ask for electronic export information that kind of explain why they can't have it. The only thing we can really provide is the ITN number.

Okay. who receives a penalty if the EEI is filed late? Is it the filer, the agent or the USPPI?

The -- typically, we'll see the penalty issue to however the filer is. Now it's well within the Customs Authority to be able to issue penalties to all parties involved, depending on what the situation is. So if there is a light file, not only, let's say, the carrier didn't provide updated information on a split, a carrier could get a penalty, the filer could get a penalty and even the USPPI could receive a penalty as well. Typically, the ones that I have seen, they always come to the filer.

Okay. Another question on filing EEI. How do you determine domestic or foreign goods?

Okay. Well, that's a great question, and it's not always -- doesn't always come with an easy answer. So you have to take into look to see what components are involved. So something is clearly manufactured here in the U.S. with all components that were made in the U.S. then your country of origin is going to be U.S. Okay. But if you have foreign components involved, it's going to be a calculation of those foreign components in U.S. components to make that final determination of your country of origin.

Okay. Is the FPPI obligated to provide POE if the USPPI request it?

Inter-border transaction, okay, if a U.S. agent when they have to obtain the authority to file on behalf of that FPPI. The regulations are written that if the USPPI as your authorization for a copy of that POA or authority of file that we are required under the regulations to provide to the USPPI.

What is the difference between the consignee versus the end user?

They can be the same, and they can be different. So a consignee is going to be who the goods are delivering to, okay, when the shipment is going out. They may be the end user meaning they may be consuming that product, okay, and making something else or just using it, right, or they could be a reseller, okay? And that's going to go to someone else other than that party that's the ultimate consignee. So end user and ultimate consignee can be the same, but the end-user is going to be the very last person that's going to receive those goods ever. They're not going anywhere after that.

What is the way to tell if items are subject to EAR?

The best way to look at that will be to say, start by saying, here are my goods in the U.S. and am I shipping them from the U.S. or are the goods transiting through the U.S. So within the regulations, I believe it's part 736 or 734 to give you the exact citation here -- 734, okay? It's 15 CFR 734, okay? There are advised to help you determine if something is under the umbrella of the EAR, okay? First one will be anything within the U.S., okay, which includes foreign trade zones or things moving in, in transit. So those are definitely under the umbrella of the EAR. In any IDMS origin wherever they're located within the United States are still with under the umbrella of the EAR. So meaning if they're going to be exported to somewhere else, okay, if the items are controlled, then they definitely have to have written permission from the U.S. government to reexport those items out. Those are the most 2 common ones. There are a total of 5. The other 3 are about production of items made with technology, that's of U.S. origin, but those are going to be your 2 main things that are going to put it under that umbrella.

Okay. I think we'll have time for one more question -- and like before, any other questions that we don't get answered today, we will be following up with those who submitted their questions. So for last one, Cara, if someone has a customer that wants to drop ship to a foreign customer and they make them provide the commercial invoice and make arrangements for the shipping on their own because they are the USPPI, in this case or the exporter of record is that accurate?

So say I'm a shipper here in the U.S. and I sold a commodity, I'm just going to say to a party in the United Kingdom. And that party in the United Kingdom says hey, Cara, I don't want you to ship that to me I'm going to ship that directly to my exporter and to my customer in Australia. But I want you to use my invoice for documentation because I don't want them to know basically where I'm getting the commodity because then I'm risking giving up my supplier, which is a pretty common scenario. I'm still considered the USPPI because I'm a party that sold that for -- to a foreign party regardless of where it's going, it's that financial transaction, but through the USPPI sold the goods to the FPPI. I would still be the exporter of record. Now I have a situation where I'm a shipper here in the U.S. or a party in the U.S., let me rephrase that. I'm a party in the U.S. And I get a purchase order from another company and let's say that company is also here in the U.S., and they say, "I don't want you to send that to me here in Boston, Cara. Send it directly from St. Louis to Australia." Okay? So myself from -- it would be to the party in Boston, that sale is a domestic sale. I'm only a vendor in that transaction. The party that I sold it to in Boston, that party would be the USPPI and the exporter of record because the financial transaction that's happening is from that party Boston to the foreign party. So the financial transaction that's crossing internationally is between the party in Boston and the party in Australia. I would only be the vendor in that case, and I would not be obligated to be the USPPI at all. I could give information to my party in Boston to say, hey, this party -- commodity doesn't have an ECCN. I can help them in those instances. But ultimately, the government would hold that in Boston I sold the goods to responsible for the EEI data information.

Great. Thanks so much, Cara, Ashley, and thank you, everyone, for attending today. As I did mention at the beginning, you will receive a thank you e-mail for myself that includes a short feedback survey. And after you complete the survey, you will receive a copy of the reference material. Thank you, everyone.

Thank you.