Recent Trade & Tariff Perspectives

October 19, 2022  |  Jeff Simpson  Director of Compliance

Routed export transactions are one of the most misunderstood and frustrating parts of 15 CFR §30 (the Foreign Trade Regulations (FTR)) for most companies—and with good reason. There are multiple agencies that control exports out of the United States, each with their own focus of concern, and subsequently, their own set of regulations to support their areas of responsibility. This often creates overlapping regulations, which can make things difficult to follow, and the routed export rule is a perfect example of this.

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First, let us quickly define what a routed export is. A routed export is a special subset of export transactions specifically called out in the FTR. The Bureau of the Census, which promulgates the FTR, defines a routed export transaction in 15 CFR §30.1(c) as:

“A transaction in which the FPPI [Foreign Principal Party in Interest] authorizes a U.S. agent to facilitate export of items from the United States on its behalf and prepare and file the EEI [Electronic Export Information].”

In essence, what this means is the FPPI directs the physical movement of the goods out of the United States and authorizes their U.S. agent to file the EEI in the Automated Export System (AES) for that shipment. Though the FPPI is “controlling” the export transaction, the USPPI still has responsibilities to which they must adhere.

This process includes not only the FTR (15 CFR §30.3(e)), but also various other export regulations such as the Export Administration Regulations (EAR), which is promulgated by the Bureau of Industry and Security (BIS), and the International Traffic in Arms Regulations (ITAR). The ITAR is promulgated by the Directorate of Defense Trade Controls (DDTC), depending on which agency has commodity jurisdiction (CJ) over the item being exported.

This overlapping of regulations and responsibilities is exactly where confusion and frustration happen. Census, who is responsible for the collection of EEI data filed in the AES, is concerned about the collection of accurate trade statistics, while BIS and DDTC are concerned about national security and making sure controlled items do not get into the hands of unauthorized entities. Exporters have significant responsibilities to ensure compliance with all export regulations (FTR, EAR, ITAR, etc.)—thereby avoiding costly penalties, which can come from multiple agencies.

The short answer to this question is yes. Even though Census has tried to help clarify and give public guidance around routed exports for years, there is still confusion. Census has long recognized this as a serious problem and is working with the other export agencies to address it. In 2017 Census published an open comment period in the Federal Register asking the public to weigh in on “the definition of a routed export transaction as well as the responsibilities of parties in routed export transaction.”

Even though Census “owns” the collection of export information and the system which collects this data, i.e., AES, they must still work with the other agencies to ensure their regulatory needs are also met.

Simply put, the routed export rule is complex, and changes to regulations generally take time. This is only amplified when you have multiple agencies that are also impacted and there is a need for consensus.

COVID-19 and the Russian/Ukraine conflict have also taken priority for the other export agencies as they try to make changes to their regulations to support United States foreign policy.

Even though routed exports moved to the back burner several times since 2017, Census and the other agencies are still committed to moving these changes forward. Active discussions are already taking place and are expected to continue for the remainder 2022. Since there has been significant work done in the past regarding routed exports, there is a possibility we will see the proposed routed export rule changes published in the Federal Register as early as 2023.

What the exact changes will be is still unknown, and will only be made available for review once there is consensus across the various agencies. However, based on previous comments—what is expected to change are major updates to the filing responsibilities amongst parties to the transaction, and to address critical information sharing among all parties.

Routed exports have been a part of U.S. exports for a very long time. Along the way, they have caused at best confusion, and at worst export violations resulting in fines and penalties. All parties to an export transaction should make every effort to thoroughly understand their responsibilities across all the various export regulations. This understanding will go a long way to be compliant and help mitigate the chances of fines and penalties.

Keep a sharp lookout for these much-anticipated changes in the Federal Register in the coming months. Hopefully by this time next year you will be reading about the actual changes to the routed export rule in the Foreign Trade Regulations. Based on what has been discussed in public thus far, there are high hopes across the industry that these new rules will simplify, and more importantly, clarify how routed export transactions should be handled and who is responsible for what.

Have additional questions, or require further assistance with this or any other customs and trade matters? Connect with one of our trade policy experts to learn more.

Our information is compiled from a number of sources that to the best of our knowledge are accurate and correct. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information published herein.