TRANSPORTATION NEWSLETTER - U.S. Census Bureau is Close to Issuing Final Rule On Mandatory AES Filings and Penalties

Exporters, freight forwarders, carriers and other parties involved in exportation of goods from the United States should be aware that the long-awaited regulation mandating electronic filing of Shipper’s Export Declarations (SEDs) through the Automated Export System (AES), and increasing penalties for inaccurate export filings, is now being finalized. Reliable sources indicate that the Census Bureau, after more than two years of reviewing public comments and consulting with U.S. Customs and Border Protection (CBP), the Bureau of Industry and Security (BIS) and other government agencies on various points of inter-agency disagreement, expects to publish its final rule in the Federal Register during the coming weeks.

The final rule, like the proposed rule published in the Federal Register on February 17, 2005 (70 Fed. Reg. 8200), will completely phase out the paper version of the SED (Form 7525-V) and will refer to the data filed through AES as Electronic Export Information or EEI. As a result, U.S. exporters and freight forwarders should automate their export operations and procedures, if they have not done so already, to prepare for AES filing.

The new rule also will raise penalties for inaccurate or late filed EEI to $1,000 to $10,000 per violation. The increased penalties, coupled with the universal requirement for electronic filing, complete the evolution of U.S. export reporting requirements from primarily a statistical tool to a mechanism for enforcement of export controls.

Both exporters and freight forwarders can be held liable for inaccurately filed EEI. Exporters are encouraged to audit entities that have been filing SED/AES data on their behalf, and forwarders may need to increase their due diligence regarding information supplied by customers for AES purposes.

The final rule will also affect carriers. Under current regulations, carriers must attach SEDs to the manifest. As a result of the final rule, carriers will be required to show proof of filing (i.e., a citation to an Internal Transaction Number or ITN assigned in the AES filing process) and/or an exemption legend. The ITN or legend will have to appear on the bill of lading, air waybill, or other shipping document attached to the manifest.

The following is a summary of additional major provisions of the proposed rule that we expect to see in the final rule:

The name of the Foreign Trade Statistics Regulations at 15 CFR Part 30 will be changed to the Foreign Trade Regulations (FTR). The new name will more accurately reflect the scope of the revised regulations, such as the inclusion of Department of State requirements and the advanced filing requirements previously implemented by CBP.
The rule will allow four optional means for the required electronic filing of EEI: (1) Using AESDirect (a free service offered by Census); (2) purchasing AES filing software from certified vendors; (3) developing software using the Automated Export System Trade Interface Requirements (AESTIR); or (4) using an authorized agent (such as a freight forwarder -- many of whom charge a fee for filing AES data on an exporter’s behalf).
The final regulation will include the current language specifying that in "routed" transactions (where a foreign party authorizes a U.S. agent to facilitate exports on its behalf), the U.S. principal party in interest (USPPI) must compile and transmit export information on behalf of the foreign principal party in interest (FPPI) when it receives written authorization from the FPPI to do so.
The rule will specify when and where EEI must be filed. With some exceptions, EEI with the appropriate ITN citations and/or exemption legends will have to be transmitted to the exporting carrier within specified time frames depending on the mode of transportation used. For example, transmissions for vessel cargo will need to be provided to the exporting carrier no later than 24 hours prior to departure of the vessel from the U.S. port where the cargo is laden. Currently, the required export information need only be presented to the exporting carrier prior to exportation.
A procedure will be set forth for reporting the value of goods through AES when inland freight and insurance charges are not known at the time of exportation.
The rule will indicate that EEI is used for statistical and export control purposes, and will warn that “[a]ll parties to an export transaction must comply with all relevant export control regulations, including the requirements of the statistical regulations of this part.” The rule also will require the retention of documents or records pertaining to a shipment for five years from the date of export, and in the format required by the regulations of the controlling agency.
The limited exemptions available for the filing of EEI will remain largely unchanged from current law. For example, exports of commodities with a value of $2500 or less per Schedule B line item will be exempt from the EEI filing requirements.
The rule will provide that penalties may be remitted or mitigated if they were incurred without willful negligence or fraud, or if other circumstances exist that justify a remission or mitigation.

The new regulation will provide for enforcement of FTR penalty provisions by three agencies: CBP; U.S. Immigration and Customs Enforcement (a sister agency of CBP within the Department of Homeland Security), and the Office of Export Enforcement within BIS at the Department of Commerce.

We expect that once the final rule is published, there will be a ninety-day transitional period before the penalty and other aspects of mandatory AES filing will take effect. Thus, now is the time for all affected parties to review and assess their compliance with AES filing and recordkeeping requirements.