ExportU.S. Bureau of Industry and Security (BIS)U.S. Office of Foreign Assets Control (OFAC)

Everything You Need to Know About Exporting

posted by Jennifer Diaz November 16, 2009 0 comments

In the next few weeks, I am giving lectures and doing a webinar on the general topic of export compliance.  In my legal practice over the past 20 years as a Customs and International Trade attorney, I am increasingly involved with clients on export compliance and penalty matters.  The laws and regulations have changed dramatically over the past few years, as has the name and number of Federal agencies enforcing them, plus the penalties for non-compliance are much higher now.

Please call (305) 260-1053 with any questions regarding the below seminar/webinar (or compliance generally).

(1) On Wednesday, November 18, from 9 to 12 noon at the Doubletree Miami Mart, on behalf of the Florida Customs Brokers and Forwarders Association, I am lecturing on complying with the Bureau of Industry and Security (BIS) requirements.  The seminar is entitled “Export Controls Compliance and Best Business Practices,” and it will cover everything from identifying the correct ECCN (Export Commodity Classification Number) in the Export Administration Regulations (EAR), to submitting an export license, to  the decrementing of the license by U.S. Customs and Border Protection, to interacting with Special Agents of the BIS’s Office of Export Enforcement conducting an investigation, to negotiating a favorable resolution after a Notice of Proposed Penalty has been issued against the company for an export violation.  I will also cover the various trade embargoes and sanctions with countries and foreign nationals and foreign organizations enforced by the Office of Foreign Assets Control (OFAC).  That means everything from Cuba to Zimbabwe and from Specially Designated Nationals (SDN) to narco-traffickers.   Violations of BIS and OFAC regulations may result in severe criminal punishment or monetary penalties in the millions of dollars, plus individuals have personal liability.

(2) This Thursday, November 19, from 6:30-8:15 p.m, at the University of Phoenix, 11410 NW 20th Street, Miami, on behalf of the South Florida Chapter of the National Association of Purchasing Management (NAPM), I will discuss “Export Controls Compliance and Penalties”. 

(3) On December 3, 2009, I will be a speaker in an “AES Compliance Webinar” from 12 noon to 1:30 p.m.  It is sponsored by the National Customs Brokers and Forwarders Association of America (NCBFAA) Educational Institute. To participate, simply go to www.ncbfaa.org and select “AES Compliance Webinar” under “Upcoming Events.” The webinar answers the questions of how, when, and why to file the required Electronic Export Information (EEI) using AESDirect.  U.S. Customs is now regularly issuing penalties against exporters or freight forwarders for not properly filing the EEI.  If you are wondering what happened to the old Shipper’s Export Declaration (SED) form, you should participate in this webinar that I am doing in cooperation with the U.S. Census Bureau.




U.S. Transportation Security Administration (TSA)

New TSA Penalties and Procedures

posted by Jennifer Diaz October 26, 2009 0 comments

Effective August 20, 2009, the new Transportation Security Administration (TSA) regulations increased the maximum amount of its monetary penalties against aircraft operators and freight forwarders/indirect air carriers (IACs) for violations of the Transportation Security Regulations.  TSA also made significant change to its Investigative and Enforcement Procedures in 49 CFR Part 1503.

Following the tragic events of September 11, 2001, when the United States was attacked by terrorists, the U.S. Congress and President George Bush quickly passed the Aviation and Transportation Security Act of 2001 which created the Transportation Security Administration (TSA). The primary responsibilities of the TSA was to ensure the security of passengers and cargo in air transportation.  Many responsibilities formerly handled by the Federal Aviation Administration (FAA) were transferred to the TSA.  After moving from the U.S. Department of Transportation to the U.S. Department of Homeland Security, as part of the Homeland Security Act of 2002, the TSA had its first Administrator to lead the agency, and moved into its current physical headquarters office in Arlington, Virginia.

In a critical U.S. General Accountability Office report entitled “Aviation Security: Vulnerabilities and Potential Improvements for the Air Cargo System,” dated December 2002, the GAO stated:

U.S. air carriers transport billions of tons of cargo each year in both passenger planes and all-cargo planes. Typically, about one-half of the hull of each passenger aircraft is filled with cargo. As a result, any vulnerabilities in the air cargo security system potentially threaten the entire air transport system.  Numerous government and industry studies have identified vulnerabilities in the air cargo system. These vulnerabilities occur in the security procedures of some air carriers and freight forwarders and in possible tampering with freight at various hand-offs that occur from the point when cargo leaves a shipper to the point when it is loaded onto an aircraft. As a result, any weaknesses in this program could create security risks.

It was a serious and urgent challenge for the TSA to correct these weaknesses.

The Transportation Security Regulations, 49 CFR Parts 1500 to 1572, were issued on July 23, 2002, and implemented the various laws that created and outlined the functions and expanded powers of the TSA.  Important operational regulations are Part 1542 (Airport Security), Part 1544 (Aircraft Operator Security), Part 1546 (Foreign Air Carrier Security), and Part 1548 (Indirect Air Carrier Security) whereby the TSA sets forth all the many new and comprehensive requirements that attempt to prevent any person, luggage, provisions, or cargo getting aboard an aircraft that could cause it to crash.

What is most important for this discussion is the amended TSA regulation at 49 CFR Part 1503 (Investigative and Enforcement Procedures) whereby the TSA describes how and when it may issue a monetary civil penalty against an airline or IAC (a.k.a. “freight forwarder”) for a violation of the Transportation Security Regulations.

In the new TSA regulations, the TSA announced that certain penalties that previously were at a maximum of $25,000 per violation are now $27,500, and those that were at a maximum of $10,000 per violation are now $11,000.  More importantly, the TSA announced:  “TSA may assess a maximum penalty per case of $50,000 if the violation is committed by an individual or small business.  TSA may assess a maximum penalty amount per case of $400,000 if the violation is committed by a person other than an individual or small business.”  Those are big numbers by any count in the airline and cargo transportation business.

Often, a monetary civil penalty is issued months after the violation actually occurred. Typically a TSA Inspector visits the airline or warehouse of an IAC unannounced to verify that it is complying with all of the relevant TSA regulations.  If a violation is discovered, the TSA Inspector issues a Letter of Investigation (LOI) to the alleged violator, and allows 30 days for a written response. If the response is not forthcoming or is not satisfactory to the TSA Inspector, the case is referred to an attorney for TSA in its Office of Chief Counsel.  The TSA attorneys are located at all major international airports in the United States.

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U.S. Transportation Security Administration (TSA)

TSA’s New Air Cargo Screening Rules Have A Serious Flaw

posted by Jennifer Diaz October 5, 2009 0 comments

Peter A. Quinter, Florida Customs LawyerOn September 16, 2009, the Transportation Security Administration (TSA) issued new air cargo screening rules.   The rules are generally well thought out, except for one glaring problem.

Some background first.  After the tragic, terrorist events of September 11, 2001, the U.S. Congress convened a Commission to investigate how it happened and how it could be prevented from happening again. A primary result was the "Implementing Recommendations of the 9/11 Commission Act of 2007 ("9/11 Act").  The amended law at 49 U.S.C. section 44901(g)(1) required all airlines to screen 50% of the cargo on passenger aircraft by February 3, 2009.  The law also required 100% of the air cargo to be screened by August 3, 2010.  The challenge was that with 12 million pounds of cargo that is now transported on passenger aircraft daily, the TSA concluded that airlines by themselves could not achieve the 100% screening requirement.

Hence, the September 16, 2009 Air Cargo Screening Interim Final Rule, effective November 16, 2009, created the certified cargo screening program (CCSP) so that companies other than airlines could be approved by TSA to screen cargo before it was delivered to an airline at the airport to be put in the belly of a passenger plane.  The companies that would screen the cargo would be known as certified cargo screening facilities (CCSF).

The term "screening" is defined as a "physical examination or non-intrusive method of assessing whether cargo poses a threat to transportation security.  Methods include x-ray systems, explosive detection, explosives detection canine teams, or a physical search together with manifest verification."

TSA has an elaborate (read ‘bureaucratic’) system for which screening companies may apply, be reviewed, selected, trained, and finally approved to work with shippers, freight forwarders, and airlines to allow cargo to be placed aboard a passenger aircraft.  My concerns are with new 49 CFR Part 1522 which established a system to authorize TSA-approved ‘validators’ to perform assessments of CCSFs, and with new 49 CFR Part 1549 which provided for a qualifications process for facilities participating in the CCSP.

In summary, TSA selects ‘validators’ who them will visit, review, and qualify applicant CCSFs to be approved to screen cargo.  As stated in the Federal Register on September 16, 2009:  "These validators are responsible for conducting the assessments of the facility seeking certification as a CCSF under part 1549…The CCSF applicants…will pay the validation firm for the validation assessment.  TSA will not charge or establish a fee for that purposes."  In other words, the TSA selects the validator, the validator selects the CCSF, and the CCSF screens the cargo which is then moved to the airline.  To me, there is a glaring problem for anyone seriously interested in air cargo security.

In my opinion, a validator hired by and paid by the applicant for a CCSF has an inherent conflict of interest with the applicant whom she or he is evaluating.  TSA apparently thought of this, and created its own, specific conflict of interest rule which states at 49 CFR 1522.1(b) that a conflict of interest exists "in a situation in which a relationship with, or a financial interest in, the person being assessed may adversely affect the impartiality of the assessment."  Exactly my point!  TSA’s proposed system is like a builder directly handing a suitcase full of cash to the building inspector to approve the certificate of occupancy for the building.  That would be called corruption.

TSA announced this "Interim Final Rule" effective November 16, 2009 because it believes further delay using its cost/benefit analysis would be too costly.  TSA stated that the typical cost scenario is when an explosive device placed in the cargo shipped on a flight in the belly of a plane destroys the aircraft in flight.  It figures that means 128 passengers and 5 crew members dead along with loss of the aircraft.  The loss of aircraft is valued at $22 million, and the monetary loss of life at $771 million for a total of $793 million.

It has been more than 8 years since 9/11/01, and even though $793 million is a huge sum of money, getting it right the first time to prevent a weapon of mass destruction (WMD) exploding aboard an aircraft is more important.  The Validators have not yet been selected by the TSA.  So TSA, my recommendation is take a few more months to iron out the concern that I have identified above.