BIS Issues Red Flags and Guidance for Freight Forwarders

The Department of Commerce’s Bureau of Industry and Security (BIS) published a document containing updated guidance and best practices for freight forwarders and exporters who use freight forwarders to help them ensure compliance with U.S. export controls and regulatory requirements. 

According to Assistant Secretary for Export Enforcement Matthew S. Axelrod. “This guidance emphasizes the importance of a risk-based compliance program to ensure that freight forwarders and exporters prevent sensitive items from going to the wrong place, including into the hands of terrorists and other malign actors."

"The freight forwarding community has a key role and obligation in securing the global supply chain and stemming the flow of illegal exports. Fulfilling this role helps to prevent activities contrary to U.S. national security and foreign policy interests, including the proliferation of weapons of mass destruction, destabilizing military activities, and the enabling of human rights abuses."

The guidance and best practices document contains discussions on: freight forwarder roles and responsibilities; responsibilities with respect to routed and non-routed exports; expectations of the exporter or U.S. principal party in interest (USPPI); considerations in selecting a freight forwarder; how the antiboycott regulations apply to freight forwarders; and red flags  specific to freight forwarders and USPPIs. 

Summary of Notice:

The Bureau of Industry and Security (BIS) has issued guidance and best practices to enhance compliance among freight forwarders and exporters, collectively referred to as U.S. Principal Parties of Interest (USPPI).

This initiative underscores the critical role of the freight forwarding community in safeguarding the global supply chain against illegal exports, thereby preventing activities detrimental to U.S. national security and foreign policy interests, including the proliferation of Weapons of Mass Destruction (WMD) and human rights abuses.

Freight forwarders, particularly those unfamiliar with the Export Administration Regulations (EAR), are advised to engage with the EAR Training resources available on the BIS website.

The guidance emphasizes the collaborative responsibility of freight forwarders and exporters in adhering to U.S. export controls and regulatory requirements, though it is noted that this document does not encompass comprehensive guidance.

Roles, Responsibilities, and Best Practices

Freight forwarders are defined under the EAR as entities authorized by a principal party to facilitate exports from the U.S., including arranging transportation. They must ensure compliance with EAR requirements based on information provided by service users, necessitating clear communication with the exporter/USPPI. Key responsibilities include:

• Securing detailed service expectations via Shipper’s Letter of Instruction (SLI), Power of Attorney (POA), or equivalent authorizations.
• Adhering to the EAR’s general prohibitions and being versed in export regulations from various federal agencies.
• Handling Electronic Export Information (EEI) filings in the Automated Export System (AES) accurately, whether on behalf of the exporter/USPPI or providing assistance when the exporter/USPPI files their own EEI.
• Screening transactions against the Consolidated Screening List (CSL) and guiding exporters/USPPIs on compliance issues.
• Retaining records as mandated by EAR’s Recordkeeping provisions.

The guidance further outlines best practices for freight forwarders, including rigorous screening for restricted parties, collaborating with exporters/USPPIs on compliance matters, and engaging in continuous education on industry standards and regulations.

Export Transactions: Non-Routed and Routed

For non-routed export transactions, the exporter/USPPI bears primary responsibility for EEI filing, either directly or through a U.S. authorized agent. In routed transactions, the Foreign Principal Party in Interest (FPPI) oversees export facilitation and EEI filing, necessitating authorization for a U.S. agent to act on their behalf. Both transaction types underline the importance of accurate and compliant EEI submissions.

Expectations of Exporters/USPPIs

Freight forwarders rely on exporters/USPPIs to be knowledgeable of U.S. regulations, provide accurate export information, and maintain open communication to ensure regulatory compliance. This includes detailed documentation of export transactions and adherence to applicable licensing requirements.

Selecting a Freight Forwarder

The guidance advises exporters/USPPIs to meticulously select freight forwarders based on their regulatory compliance programs, experience, and capacity to manage export transactions effectively.

Best practices for managing freight forwarder relationships emphasize clear documentation, regular communication, and thorough record-keeping.

Antiboycott Compliance

The document highlights the importance of adhering to U.S. antiboycott regulations, which prohibit participation in unsanctioned foreign boycotts. U.S. persons, including freight forwarders, are required to report receipt of boycott requests and are advised against engaging in activities that support such boycotts.

Redl Flags for Forwarders: 

The full guidance can be found here.