Freight Forwarder Roles in the Export Transaction

Michael Ford

Presenter

• Michael J. Ford – Vice President of BDP International forRegulatory Compliance and Quality

– Over 31 years of service with BDP working in both Import and Export operations

– Current Member of COAC – Commercial Operations Advisory Committee – to Customs and Border Protection

– Past chair of NCITD – National Council on International Trade Development – non-profit trade group base in Washington, DC.

– Current member of U.S. Customs and Border Protection’s Trade Support Network (TSN), Co-Chairs the Export Committee.

– Appointed in October 2004 as one of twenty-one National Trade Ambassadors to advise Customs and Border Protection on their new commercial processing system known as the Automated Commercial Environment (ACE).

– Corporate liaison between BDP International and all U.S. Government agencies that have international trade responsibilities.

– Adjunct professor at Saint Joseph’s University at the graduate level for 10 years

Todays’ world

• A freight forwarder is one of the important links in the global supply chain

• Freight forwarders over the past 10 years have built up core functionality in Freight Handling ( domestic and international) as well as Documentation expertise

• Many have developed technology tools ( website, trace and track et…) to assist in the process

Definition

• A freight forwarder is an agent who handles export shipments for a fee. Freight forwarders play a very important role for exporters.

– International documentation and packaging

– Carrier and routing information

– Export license assistance

– Marine insurance rates and coverage

– Warehouse and distribution services

– Hazardous materials shipping compliance information

For shipments leaving the U.S., the freight Forwarder is the expeditor, interfacing with all the necessary government agencies and companies

involved in getting the cargo to its foreign destination

Many Different Sizes and Styles

• Freight Forwarders are many, with different levels of services and styles to exporters.

• Many Freight Forwarders are multi-national while many are local / regional service stations that address the local needs.

• The services that a Freight Forwarder differs today then what was required just 10 years ago

Services

• A Freight Forwarder is placed into the transaction to manage the physical movements of goods

• To file the necessary paperwork / electronic filing to achieve “export clearance”

• Offer “value-added” services to exporters to assist them in the physical movement of goods

– Keep in touch with industry trends

– Offering solutions for freight management

– Better understanding of freight options with proper costing structure

Regulations and Freight Forwarding

• While most of the Transportation industry ( ocean , air, truck ) carriers have been significantly deregulated, ocean freight forwarding is still regulated by the Federal Maritime Commission under the body of the laws of the Shipping Act of 1984, the Foreign Shipping Practices Act of 1988 and title 46 of the Code of Federal Regulations

OTI – Ocean Transportation Intermediary• An Ocean Transportation Intermediary is either an ocean

freight forwarder or a non-vessel operating common carrier (NVOCC).

Ocean Freight Forwarder

• An ocean freight forwarder is an individual or company in the United States that dispatches shipments from the United States via common carriers and books or otherwise arranges space for those shipments on behalf of shippers.

• Ocean freight forwarders also prepare and process the documentation and perform related activities pertaining to those shipments

NVOCC – Non-vessel Ocean Common Carrier • An NVOCC is a common carrier that holds itself out to the

public to provide ocean transportation,

• Issues its own house bills of lading or equivalent document, but does not operate the vessels by which ocean transportation is provided,

• Is a shipper in relation to the involved ocean common carrier.

In the US the Freight Forwarder is….

• Licensed by the Federal Maritime Commission and must post a Bond

• Issued a FMC license and this number must be posted on all stationary items

• Issued one license per company

• Ocean Transportation Intermediary

NVOCC or Freight Forwarder- Choose

• Ocean freight forwarders are required to obtain a license to provide services in the United States.

• U.S.-based NVOCCs are also required to be licensed.• NVOCCs that are not based in the U.S. are not required to be

licensed, but may choose to obtain one if desired, as licensing results in lower financial responsibility levels

The Federal Maritime Commission ( FMC)

• Issues out the regulations that Freight Forwarders and NVOCC must follow when offering services

• Conducts investigations

• Issues and takes away forwarding licenses

• Issues civil penalties for violations of the law

• Issues awards to injured parties

According to Bureau of Industry and Security (Department of Commerce)• BIS states that the Export Administration Regulations (EAR)

place legal responsibility on all persons who have information, authority, or functions relevant to carrying out export transactions subject to the EAR

• Forwarders have the same level of responsibility to the regulations even when their actions are dependent upon information or instructions given by those who use their services.

Be Aware

• A Freight Forwarder should be aware of, and understand the “Know Your Customer” Guidance and Red Flags found in Supplement No. 1 to Part 732 of the EAR, and we should engage in the process of deciding whether there are Red Flags, inquiring about them, and ensuring that suspicious circumstances are not ignored.

• This holds especially true, when they act as agents for a foreign entity (buyer). (routed orders)

The Export Administration Regualtions states• That a Freight Forwarder may not proceed with any

transaction if they have knowledge that a violation has occurred, is about to occur, or is intended to occur with this transaction.

• This action would be conceived as a criminal violation

Denied Parties List

• A Freight Forwarder is responsible for having and consulting the Denied Persons List (Supplement No. 2 to Part 764) in order to ensure that no party to the transaction has been denied export privileges

• Which in BDP’s case this step is taken care of through the automatic checking program in the BDP export System.

In the Census Regulations

• A Freight Forwarder is responsible, along with our customers, for the correctness of each entry that we make on the Electronic Export Information (EEI) in the AES filing or other export control documents;

• Although good faith reliance on information obtained from our customers can help to protect BDP,

• However careless use of unsupported data that is sent on the EEI filing entries can get a Freight Forwarder into trouble with Census as well as other US Government agencies.

According to Census

• A Freight Forwarder is responsible for the representation when submitting the Electronic Export Information (EEI) in the Automated Export System (AES) on behalf of our client.

Export Authorization

• If BDP is acting as an agent for an exporter, a Freight Forwarder, then BDP must be designated in a formal power of attorney or other written form by an authorized officer or employee of the exporter.

• Copies of the authorization must be kept in a Customer Master file or in the single transaction.

Routed Transactions

When a Freight Forwarder act as agents for a foreign entity (buyer) then

• they should clearly communicate to the US supplier what aspects of the transaction will be completed, prior to accepting the shipment,

• A Freight Forwarder must have a signed Power of Attorney from the Buyer (FPP – Foreign Principal Party) overseas or written authorization that details out the actions that we are required to perform on their behalf.

Legal Requirements

FTR – U.S. Census Bureau – 15 CFR Part 30

• Accurate Trade Statistics

• Provides Provisions for completing the EEI or AES record

EAR – Bureau of Export Administration – 15 CFR Parts 730-774

• Export Control

• Simplify Export Clearance

Responsibilities of the Exporter (PPI)

• Prepare the EEI record OR authorize a Freight Forwarder or other agent to prepare and file the EEI record, with a power of attorney, written authorization

– If authorizing a forwarding or other agent, provide information to such agent for completing the EEI record

– Maintain documentation to support the information repeated on the EEI record

Responsibilities of the Exporter in a Routed Order• Provide basic commodity information to the forwarding or

other agent for completing the EEI record, including name, EIN, Schedule B. No. and value, excluding ultimate consignee.

• Maintain documentation to support information to the forwarding or other agent.

– Note: in a routed export transaction, the U.S. Principal Party in Interest is not required to provide the forwarding or other agent with a power of attorney or written authorization.

Responsibilities of the Forwarder

• Transportation and delivery of the merchandise to the Carrier, facilitates the export of Merchandise.

• Obtains a copy of the EEI record.

• Accurately prepares and submits the EEI record based on information supplied.

Responsibilities of the Forwarder (continued)• Prepare the EEI record based on information received from the exporter

(U.S. principal party in interest) or other parties to the transaction.

• Obtain a power of attorney, written authorization, from a principal party in interest.

• Provide the exporter (U.S. principal party in interest) with a copy of the export information filed in the form of a completed EEI, electronic facsimile, or in a manner prescribed by the exporter (U.S. principal party in interest).

• Maintain documentation to support information required on the EEI record.

Forwarder’s Role in a Routed Order

• Prepare, sign and file the EEI based on information obtained from the exporter (U.S. principal party in interest) and/or other parties to the transaction.

• Obtain a power of attorney or written authorization from the foreign principal party in interest to act on its behalf in the export transaction.

• Maintain documentation to support information reported on the EEI.

• Upon request, provide the U.S. Principal Party in Interest ( US PPI) with documentation that the information provided by the U.S. Principal Party in Interest was accurately reported on the EEI record.

Record-Keeping Requirements

• CFR15 Section 762.2 sets forth the legal requirements for records that must be retained for BIS.

– Five years from transaction date.

• Section 762.3 sets forth the types of records that have been determined from record-keeping procedures.

Record Keeping Requirements

• All original records must be retained in the form they were originally received unless an electronic system/format meets all requirements under “reproduction” of original records.

Penalties

• Criminal: $250,000.00 or imprisonment for not more than 5 years, or both for each violation.

– Failure to file, submission of false or misleading information.

– Furtherance of illegal actions.

– Forfeiture penalties: any person convicted could forfeit goods or interest in, or security of claim against export of goods that was subject of violation.

Penalties

• Civil: $1,100.00 each day late to $250,000.00 per violation.

– Delayed filing

– Filing false/misleading information

– Failure to file

– Furtherance of illegal activities

• Penalties for other violations subject to 15CFR Part 30.

At the end of the working day you should expect ?• A Freight Forwarder is to be an extension of your

export process• Bring Value to your process, in the form of new ideas,

solutions• Understand and keep current with export regulations

as it pertains to them as well as to the export industry• Set up good metrics for all parties to follow, ensure that

each key step is measured and a high performance level is achieved

Contact information

• Michael Ford– Phone: 215-629-8924– Mobile: 215-620-5568– Email : michael.ford@bdpinternational.com– 510 Walnut Street, Philadelphia, Pa. 19106

– To download today’s presentation please make note of the following link

– http://www.bdpinternational.com/news/Events.aspNext session topic will be

Filing your EEI Information into AES - February 17, 2011

Freight Forwarder Roles in the Export Transaction

Michael Ford