Recent Trade & Tariff Perspectives

August 25, 2021 | Jeff Simpson Director of Compliance – Global Forwarding

close-up view of paper money in various currencies 

Why Export Filings Are Important

We all know that the development of an export compliance program is critical to minimizing risk and avoiding fines and penalties from violations of the numerous export laws and regulations. But how important is it really, and is it all just about the ‘control’ portion of an export transaction?

Two critically important pieces: controls and procedures

There are two parts to every export transaction: the control and the procedure. The ‘control’ piece refers to why, and to what level, the U.S. government controls an item for export purposes. The ‘procedural’ piece refers to how, when, and what export information is filed with the U.S. government. Both pieces of an export are equally important and deserve the same amount of care and due diligence.

Generally, exporters are acutely aware of the fines, penalties, and ramifications of not adhering to the ‘control’ portion of exporting. The Bureau of Industry and Security even broadcasts annually their Don’t Let This Happen to You publication where they highlight companies and individuals they have investigated, fined, or, worse yet, helped put in prison for export violations.

Penalties happen often, and the costs add up quickly

There is a misguided belief among exporters, however, that there are no consequences for neglecting to follow the ‘procedural’ portion of an export transaction. This could not be further from the truth.

U.S. Customs and Border Protection (CBP) routinely sends out penalty notices on behalf of U.S. Census (often jokingly referred to as ‘traffic tickets’) for even the smallest of clerical errors or incorrect information in the Electronic Export Information (EEI) filed in the Automated Export System (AES), the procedural piece of an export. Most of the time, these penalties are more than $14,000 per infraction and can be triggered by simple mistakes, such as an incorrect port code, vessel name, or Schedule B/HTS code.

When penalties are issued, there are only two choices. You can either pay the penalty or attempt to negotiate with the CBP port which issued the penalty to mitigate the fines down to a more reasonable level. Most companies choose the mitigation path and, in general, are successful to some degree.

However, this fight costs a company time, effort, and resource allocation and is not always successful—especially for repeat offenders. The best approach is to avoid these penalties altogether and focus your time, talent, and resources where they belong—on core business operations.

The keys to export compliance happiness

Again, the solution is a robust export compliance program that includes auditing export transactions to look for errors and fix root causes. It also includes partnering with a quality freight forwarder who files your EEI in the AES consistently, timely, and accurately. Partnering and building a good working relationship is the key element here.

There is an old saying: You date your forwarder, but you marry your customs broker. The point is that you work closely with your customs broker but not so much with your forwarder.

After many, many years on both the importer/exporter side and the customs broker/freight forwarder side of the industry, I can honestly say that I disagree with this adage. In my opinion, it is critical to foster a close working relationship with BOTH customs brokers and freight forwarders—especially if your forwarder is filing in AES on your behalf.

Just say no to 'dating' your forwarders

Companies need to foster a cooperative and symbiotic relationship between the exporter (or United States Principal Party in Interest, USPPI) and the forwarder who is filing EEI in AES on their behalf. The filer is dependent upon the information the USPPI is giving, and the USPPI is dependent upon the forwarder filing the information timely and correctly.

The forwarder must also act as a second set of eyes, looking for any potential errors. Trust, communication, and an understanding of the business from both ends, is critical for both parties to ensure an accurate, compliant AES filing and the avoidance of fines and penalties for incorrect filings.

Being compliant with exports can be difficult and, at times, confusing. The ‘control’ portion of exporting is always in the limelight with exporters, but do not forget about the ‘procedural’ piece either. Partner with a great forwarder to do your filings, build that business understanding, have open, honest, regular two-way communications with them, and audit to find issues and fix root causes as a team. Avoid those parking tickets!

Next steps

If you have any questions about export filings or any other topic, please do not hesitate to contact your C.H. Robinson commercial representative or connect with one of our trade policy experts.

Review recent perspectives

warehouse employees looking at a clipboard with freight boxes

Have trade or tariff related questions?