Susan L. Beecher, Attorney for Families and Small Business in Kent, Washington
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This week's tip:

Export Compliance


The weakened state of US currency brings with it many problems, but also one blessing; U.S. goods are now more competitively priced for overseas buyers. Accordingly, many companies that manufacture or otherwise deal in goods will find that overseas markets are opening up for the first time, or are becoming more robust, just as domestic markets are sagging.


U.S. companies that find a new opportunity to initiate or to expand their exports to overseas buyers should take full advantage of that open door. However, they should do so with informed awareness that just as exports are growing, so is government scrutiny. In 2006, the Justice Department established the National Security Division, with authority to aggressively pursue export controls prosecutions. In October of 2007, the FBI, the Justice Department, the State Department and the Department of Commerce announced an interagency initiative to further beef up enforcement. Also at about this time, the International Emergency Economic Powers Act was signed into law. This increased penalties for violations of the Export Administration Regulations (administered by the Treasury Department’s Office of Foreign Assets Control, or OFAC) and for violations of the Commerce Department’s Bureau of Industry and Security’s (or BIS) regulations. Penalties were increased five-fold, to $250,000 per transaction, or twice the value of the transaction, whichever is greater.


Put very simply, U.S. exporters are prohibited from selling product to embargoed countries (see my earlier tip on this subject). They are also prohibited from selling product to persons or entities identified on a collection of lists maintained by U.S. government agencies (more details are available immediately below). Finally, they are prohibited from exporting certain products without an export license (details follow about this as well).


Both the OFAC and the BIS maintain lists of individuals and companies with whom trade is restricted. While exporters have urged a consolidation of the lists, the agencies decline to do so, as the restrictions are different for each. For example, the OFAC’s list of Specially Designated Nationals (SDN) includes individuals and companies with whom U.S. exporters may not trade under any circumstances. The BIS’ Entity List, however, includes companies with whom exporters may in some cases trade if they first secure an export license. Links to the OFAC and BIS websites, where these lists are available, are at the end of this tip.


Finally, U.S. exporters must have an export license to export certain tightly controlled products, including those using some new technologies and those with possible military application. More information about which products are controlled can also be found at the BIS website.


Exporters must also be alert to a few more pitfalls. Exporters must be careful not to run afoul of the Foreign Corrupt Practices Act (please see my tip on this subject for more details.) Also, sales within the U.S., where the merchant might have reason to suspect that goods will ultimately be exported, may be considered a deemed export. Finally, exporters need to be aware of the regulations and restrictions at the country of destination. In order to avoid problems with this last problem area, exporters would do well to listen to the instructions and advice of their overseas customers, and to rely on the assistance of a competent freight forwarder.


The links for OFAC and BIS are below. Each website also lists contact information where exporters can turn for further help. Exporting can be profitable, and with proper safeguards, need not be risky. The secret to lucrative and compliant exporting is in becoming informed and in relying on professionals to help you get started.

Treasury Department OFAC

Department of Commerce BIS

Previous tips:

Carrier Limits of Liability


“I told them to get those puppies off that plane, or I was going to own an airline.” So my friend explained how he made clear to cargo handlers that he had seen the two puppies loaded, in their crates, into the cargo hold on the plane at the point of origin, and there would be legal trouble if the puppies were not produced forthwith at destination. The cargo hold was searched again, and the puppies were found and safely restored to their owner.


Had the story had a less happy ending, my friend would have no doubt been disappointed at not only the loss of his puppies, but also the paltry compensation he would have received from the airlines. Far from owning an airline, he would have received instead a check likely inadequate to replace even one of the purebred pups.


Both ocean and air carriers limit the extent of their liability in the terms on the backs of their bills of lading. Ocean carriers generally provide a $500 “per package” limit to their liability, while air carriers usually limit their risk to $20 per kilo. (That’s a little over $9 per pound.) This is not surprising or unreasonable; carriers are limited in their ability to verify shippers’ claims about the value of their goods, and it is unjust to ask them to bear limitless risk without an opportunity to be compensated for bearing that risk.


Accordingly, carriers give shippers the opportunity to declare the value of their goods prior to shipment for the purpose of having the full value of their goods protected. A shipper who declares the value of her shipment for this purpose, however, should expect to pay a higher, ad valoreum, rates. (Rates and liability coverage are both unaffected by value declarations made for the purpose of complying with government regulations, such as amounts stated in commercial invoices for customs clearance purposes, or given for purpose of completing the AES filing.)


Courts in the U.S. generally do not interfere with this contractual limitation on liability, reasoning that shippers agree to these terms when they accept the bill of lading, particularly when the bill of lading makes provision on the face of the document for the shipper to declare a value. (This means, when a shipper receives a bill of lading with a space for “value”, he should not necessarily complete that space unless he is willing to pay the additional freight charges for the greater protection.) A large U.S. based drug company learned this to its detriment when the air carrier lost $800,000 worth of cargo, but was only willing to cover $28,000 per the terms of the airway bill. The drug company argued to apply the laws of the country where the cargo disappeared, and where the airway bill terms might have been set aside under the circumstances, but the court ruled that the contract was firm, and declined to apply foreign law.


Cargo owners concerned about possible loss of cargo valued higher than carrier liability limits may wish to consider declaring the cargo value, but are usually better served by purchasing cargo insurance on their own. Freight forwarders and customs brokers often can supply cargo insurance at a reasonable premium. Cargo owners should check the costs both ways and proceed accordingly. You may find my earlier article about cargo insurance, below, to be helpful. But do not wait until after the cargo is lost or damaged to act and expect to hold the carrier’s feet to the fire. They are wearing asbestos boots.

International Law and Anti-Trust Violations


Most business owners understand that the federal government works to prevent competitors from joining together to set prices. This includes directly agreeing to charge a specified price, but also includes agreeing to limit production or to assign sales territory, with the inevitable result that prices go up. For more detail concerning what constitutes an anti-trust violation, please see my post, “Getting Friendly with the Competition” in the General Business Tip of the Week section.


Some may wonder whether it might be safe for competitors to reach such agreements if one party is outside the United States. The short answer is “no”.


The long answer is that nearly all countries with reasonably healthy economies have laws against such collusion, and the governments of the various countries work together to enforce their anti-trust statutes and regulations. In a recent example, the U.S. Justice Department, in cooperation with the European Union and the foreign competition authorities of several other governments moved against several large freight forwarders. Significantly, on October 10, 2007, investigators simultaneously descended on the offices of several forwarders in different countries. This move follows a similar enforcement action against a group of foreign air carriers by the U.S. government. The message here is that questions of jurisdiction are not likely to provide a protective barrier for competitors cooperating illegally across international boundaries.


Those with some experience in ocean shipping may wonder how it is that many steamship lines are able to coordinate with each other to set prices. Such cooperation is not only not kept hidden, it is formalized and widely published. Those who have checked into the question will know that ocean carriers enjoy anti-trust immunity and, within certain constraints peculiar to that industry, can form conferences and agree amongst themselves what to charge.


If this seems unfair and indefensible to you, you are not alone. Fortunately, this appears to be changing. In October of 2008, the European Union regulations banning such conferences will go into effect. China has already taken steps to enact similar legislation effective August 1, 2008, and India appears to be on its way to outlawing steamship line conferences as well. Because of other laws in effect in China, the legislation there may not be as effective as in Europe. Still, there is a clear trend, and it is being propelled forward by the efforts of shipper advocate groups and by countries (such as India and China) that buy more vessel capacity than they provide.


For the small importer or exporter, then, the anti-trust news is mixed. Collusion with competitors to raise prices is a dangerous idea. However, with luck, the small business engaged in international commerce may also see some benefit from these laws soon, as costs for ocean transportation may begin to fall in coming years.

The Binding Ruling – Establishing Your Duty Rate


Importers are sometimes frustrated to find that they are being assessed a different duty rate than they had anticipated and budgeted for, with the result that anticipated profit from sale to the importer’s customer evaporates. Sometimes CBP (Customs and Border Protection) and the importer differ on the classification of the product. Sometimes they differ as to what the country of origin is, whether the product is adequately marked, or whether a free trade agreement should apply.


Such ambiguity can be removed through the use of the binding ruling. A binding ruling is essentially a letter from CBP that says that for a particular product meeting a specific description from a particular manufacturer to a particular importer, the issue of commodity classification, country of origin, applicability of trade agreement or acceptability of marking, is resolved for all future shipments. These rulings are provided for under 19 C.F.R. 177.


The binding ruling is not transferable to other parties or to other products being shipped by the parties concerned. However, binding rulings are accessible on line at the link below, through the CROSS program, and may provide similarly situated importers with some guidance.


How does an importer get a binding ruling? The best and shortest recommendation is to consult with the importer’s customs broker. Brokers make these applications on a regular basis, are familiar with the procedure, and probably will even take the initiative to recommend them in many appropriate cases.


The importer should be prepared to provide the broker with a product sample, with a detailed description of the product, and the following information:


  • Name, address, email address and phone number of the requesting party
  • Names, addresses, email addresses, identifying information and (if applicable) manufacturer’s ID code for all other interested parties
  • Ports of entry, if known
  • Description of the transaction
  • Statement that there are, to the importer’s knowledge, no issues on the commodity pending before CBP or any court
  • Statement as to whether advice has been sought from a CBP office, and if so, from whom and what outcome.


In addition to the above, other detailed information will be required, depending on whether the desired ruling concerns classification, country of origin, marking or applicability of trade agreements.


Some may wonder how country of origin can be an issue. Where did the ship come from? Of course, as many importers realize, few products move from raw material to finished merchandise in one place. Cotton may be harvested in one country, spun and woven into fabric in another, cut in a third country and assembled into finished garments in yet another country. Which is the country of origin for purposes of determining the duty rate?


The outcome of a binding ruling may not give the importers the answers they are hoping to hear, but these rulings will permit the importers to decide before committing capital whether they can establish competitive selling prices for their products while still making reasonable profits.


More information and access to the CROSS database is available at the link below.

Customs Binding Ruling and CROSS information

Foreign Corrupt Practices Act


When the subject of paying bribes (gifts, tea money, or whatever euphemism you care to apply) in the course of conducting business overseas came up in conversation among my classmates in law school, they were shocked, shocked, to learn that a large, publicly traded company had recently been involved in such a thing. Anyone who has been involved in international trade, however, can confirm that various forms of baksheesh are a common part of the scenery in the marketplaces of many countries, and nothing particularly shocking.


The risk for the American business person engaged in international trade is that this awareness will become complacency. Even though a practice of giving incentives under the table may be considered morally or culturally acceptable in an overseas country, if it is against the laws of that country (no matter how tepid the authorities may be about enforcement) it may still run afoul of the federal Foreign Corrupt Practices Act.


Specifically, the Act forbids corrupt payment of anything of value to a foreign official to influence his (or her) official actions in violation of his duty, to secure any improper advantage, or to induce the foreign official to use his influence to affect an official action in order to obtain or retain business or direct business to some other person. This law applies to US citizens, residents, nationals, US based businesses and foreign persons or entities acting on behalf of those individuals or businesses.


The definition of who is a government official is quite broad. It includes anyone acting in an official capacity for or on behalf of the government. This would include government employees, employees of private companies operating under contract to the government, or employees of businesses owned at least in part by the state. In many countries where the state is controlling the economy (China is an important example), this category could include almost anyone that one does business with.


The definition of what constitutes an improper payment is also broad. It includes gifts, payments of cash not accounted for by the contract between the trading partners, and inappropriately excessive travel and entertainment. It also includes promises of payment.


Many US businesses try to avoid liability by working with agents in the country of their trading partner, taking the “we don’t wanna know” approach. Because the Act covers payments made to direct business to others, and also covers foreign entities working on behalf of US companies, this method at best makes detection a little more difficult, but provides no legal shelter. Businesses that are working with overseas agents and paying them a commission based on a percentage of sales need to be particularly vigilant. Such overseas agents have a great incentive to boost revenue by passing along a percentage of profits to insider partners. Because “we didn’t know” is not a defense, companies using this compensation structure should be especially cautious. This is so even if the commissions are preferred because that is accepted practice in the industry, not because of any intent to conceal.


In order to avoid being at risk for being found to be in violation of the FCPA, businesses should take the following steps:


1)     Books and records should be kept in reasonable detail so that they accurately and fairly reflect transactions and dispositions of assets. Overseas subsidiaries should also be required to do the same. As a practical matter, it is difficult to dictate to agents how their books will be kept, and business owners should be aware of this as a risk factor when dealing with overseas agents.

2)     When dealing with overseas agents, do not agree to commission rates that are higher than is to be expected, especially when it is implied that the higher rates are needed to cover “undisclosed expenses”.

3)     Books should be audited for danger signals, including excessive, unexplained, or inadequately documented expenses.

4)     Business owners should take the steps necessary to determine whether overseas trading partners are state owned or controlled enterprises, or entirely privately held.

5)     Overseas agents and employees should be provided guidance regarding the FCPA, and if there are any doubts about their English proficiency at all, it should be provided in their native language.

6)     Pay particular attention to travel and entertainment expenses. Require credit card use (which often provides a more accurate paper trail) whenever possible for travel and entertainment expenses.

What is a Pre-Shipment Inspection?


Many new exporters, and many experienced exporters branching into new markets, are surprised to find in their letters of credit a requirement for a pre-shipment inspection, sometimes also called an SGS inspection (after SGS SA, one of the most widely used inspection services).


First, it is important to understand what a pre-shipment inspection is, and what it is not. It is not generally a service that the consignee opts for in order to ensure quality or quantity of the goods. When a pre-shipment inspection is required, it is nearly always mandated by the government of the importing country. Concern about substandard product is often mentioned in the regulations, but the real concern is usually inconsistency in application of customs laws at the destination country.  To put it a bit harshly, many countries where corruption of government officials can be an issue instead arrange for inspection by a private agency at country of origin to replace customs inspection at destination. This practice makes it more difficult for customs officials at the destination to over- or undercharge, or solicit under-the-table subsidies.


Currently, 32 countries require pre-shipment inspections, though many only require inspections of certain products or of shipments over a particular value. It is up to the buyer or consignee in the destination country to be aware of when the inspection is required. Exporters here need not wonder whether one is needed unless they are so advised by the consignee or (in some cases) by the inspection company.


It is also up to the consignee to arrange the inspection and generally, to pay for it. It is the responsibility of the shipper, when advised of the need for an inspection, to cooperate with the inspection company and to have the product ready to ship early enough to allow time for the inspection. If the inspector must make supplementary visits, however, this will be for the shipper’s account. Costs associated with the inspection (such as unpacking and repacking) are also the shipper’s responsibility. Shippers should also be aware that inspectors will need copies of shipping documents, including commercial invoices.


Generally these inspections are uneventful, and most inspectors are mindful of their obligation to protect pricing and other proprietary information from disclosure to anyone except the relevant government officials. However, should a problem arise, when the governments involved are members of the WTO, exporters may look to the WTO Agreement on Pre-shipment Inspection for their next step. This document spells out obligations of the member countries and of the inspectors, appeals processes and dispute resolution procedures.


These pre-shipment inspections differ from inspections carried out by the U.S. government for exporters in order to meet import requirements overseas, and sometimes, to meet U.S. regulatory requirements. For example, APHIS (Animal and Plant Health Inspection Service) will inspect plant products and issue phytosanitary certificates, which may be used to demonstrate that the product meets the regulatory requirements of the destination country. FGIS (Federal Grain Inspection Service) inspects export shipments of grain, pulses, oilseeds and other products in order to comply with the U.S. Grain Standards Act. (Such inspections are not required for shipments to Mexico and Canada under NAFTA.) For these inspections conducted by U.S. government agencies, it is the responsibility of the exporter to know when they are required by the U.S. government, while the importer bears the burden of advising the exporter, if they are required for the destination country. The exporter bears the cost, and so should include the expense in its selling price.

Should I purchase marine insurance?


If you have ever waded through the small print on the back of your bill of lading, you know that for many shipments, it is a good idea for either the buyer or the seller to purchase marine insurance for ocean shipments. The determination of whether buyer or seller should take care of the insurance should be arranged at the time price is negotiated. For those who have never had the time or the inclination to suffer eyestrain needed to read the fine print, I offer this week’s tip.


First, bills of lading for marine transport cap carrier liability at $500 per package. Many products are worth much more than this. Also, in some situations, a sealed FCL container will be deemed to be one package. (Air freight waybills and motor carrier bills have similar caps on liability if additional insurance is not purchased.)


Second, even if the carrier’s liability is adequate to cover your loss, carriers habitually take a long time to cover liability claims, particularly if the amount is large. This policy is not seen as inconsistent with the carriers’ marketing efforts, because they expect the cargo owner to claim against his or her insurance carrier, and they expect the insurance carrier, and not the cargo owner, to experience the delays. If you are the owner of a small importing operation, and have borrowed the money to buy the product in expectation of quick resale to a ready buyer, having your funds tied up in a claim for six months may bring your enterprise to an untimely end. (Remember, you can claim for the value of the goods as stated on the commercial invoice, plus cost of importing, including freight, duty paid and customs broker’s fees. You cannot claim for lost profits.) If, however, your cargo is insured by a reputable company, you should be paid for legitimate losses promptly.


Finally, cargo insurance will protect you from the losses that can occur when the vessel meets peril at sea and “general average” is declared. “General average” is a concept that is at odds with the modern understanding of how shipping works, and is past due for retirement, yet it remains in use. The original notion was that the owner of the vessel and the owners of the various shipments were all partners together. If one suffered loss out of proportion to what the others suffered, the one suffering the loss should be compensated by the others. Thus, if some of the cargo had to be jettisoned in order to prevent the vessel from sinking resulting in loss of life and economic loss for all, the other cargo owners and the vessel owner would compensate the cargo owner whose cargo was sacrificed.


In modern times, vessel owners avoid declaring general average if they possibly can. Cargo owners are understandably appalled to learn that although their freight may have been damaged in heavy seas, the vessel owner will not be compensating them, but instead will be seeking compensation from them. This nightmare therefore happens rarely, but when it does, the cargo owner with marine insurance is sheltered from the problem.


Cost of marine insurance is determined by the type of cargo being shipped, country of origin and destination, and level of coverage desired. (Some cargo owners choose to purchase coverage only for total loss.) Premiums are based on value of the goods, but for low risk items traveling between low risk ports, premiums are generally under 0.5%.


Not everyone needs marine insurance, but the decision to forego it should be based on a clear understanding of the risks.

Letters of Credit – The Trusted Go-Betweens


Buyers and sellers in international transactions often know very little about each other, and even less about the legal system in their counterpart’s country. The safeguards inherent in a shared legal system are not present to help the parties to an international transaction when one of the parties does not perform. Several alternatives exist, but one of the most accessible and cost effective devices is the letter of credit. Letters of credit allow buyers and sellers to rely upon the promises of banks, rather than on the promises of unknown parties in a foreign country, for performance. (Buyers become “applicants” in this process, and sellers become “beneficiaries”, but for the sake of clarity in this context, we continue here to refer to them as buyers and sellers.) Letters of credit, however, are not without problems and carry some degree of risk.


1)     Documents presented to comply with the letter of credit MUST conform to the letter of credit in every detail. “Close enough” is never good enough. If, for example, the letter of credit contains an asterisk in the middle of the seller’s com*pany name, the shipping documents must spell the shipper’s com*pany name in the same odd way.  If all parties agree, the banks will accept discrepancies, but will assess a fee for each one.

2)     Technically, negotiation of a letter of credit is a separate transaction from the actual shipment of goods. What is required is only that the documents conform to the letter of credit. The banks (whether the issuing bank, which works with the buyer, or the bank working with the seller, referred to as the advising, confirming or nominated bank, depending on the circumstances) make no effort to confirm that the cargo actually shipped or that either party otherwise performed. This is the reason banks strongly discourage the use of non-negotiable documents such as sea waybills for ocean transportation. For ocean shipments, the buyer generally cannot take delivery of the shipment until he makes payment to the bank and collects the documents. However, for air shipments, which all move on waybills, and arrive and are released well before documents can move through the banking system, the only way the shipper can be assured of collecting is by making very sure that the documents conform in every particular. If documents do not conform, and the buyer/consignee does not accept the discrepancy, the shipper has no recourse against the bank if the buyer/consignee takes possession of the goods through a waybill without paying the bank.

3)     Before sellers ship, and preferably before they begin manufacture, if the product is not fungible, they should make sure that they ARE ABLE to comply with the letter of credit. Sellers should also review the letters of credit with their carriers or freight forwarders for problem requirements. For example, many letters of credit routinely prohibit transshipment. However, if no direct transport service is available from point of origin to point of destination, the seller should insist on an amendment from the buyer before acting on the letter of credit.

4)     Letters of credit are only as reliable as the banks that handle them. If a letter of credit is “confirmed”, the seller’s bank will pay even if the buyer’s bank does not perform. Sellers who receive a confirmed letter of credit from a known bank can ship without any anxiety about this point. However, if the letter of credit is unconfirmed, shippers must make their own judgment about the banking system in the buyer’s country. Is the basic rule of law enforced? Is the financial system stable? Most savvy shippers refuse to ship against letters of credit from financially unstable areas, such as Nigeria and Russia, and instead insist on dealing with buyers in those areas on a “cash-only” basis. It is also unusual, but not unheard of, for banks in more stable areas to be either unable or unwilling to pay when properly called upon to do so.


In order to make best use of letters of credit, buyers and sellers will benefit from a good working relationship with someone in a well established international department of a bank, and from fostering good communications with their transportation providers and their trading partners.




GSP: The Duty Free Opportunity


If you plan to begin importing a product from overseas, you will need to know the rate of duty that will apply to your product in order to know your landed cost. Many other costs apply as well, of course, but duty is often the one that will determine whether your product can be brought in competitively or not. If you are in the early stages of planning, it might be helpful to know that some products may be brought in from some countries duty free under the Generalized System of Preferences.


The GSP was established in Title V of the Trade Act of 1974 with the intent to promote economic growth in the developing world. 3400 products can be imported duty free from about 140 Beneficiary Developing Countries (BDCs), and an additional 1400 products may be imported duty free from those BDCs that are designated Least Developed Beneficiary Developing Countries (LDBDCs).


To take advantage of GSP status, in addition to meeting country of origin and product classification requirements, the product must meet rule of origin requirements. The cost or value of the materials from the qualified country of origin must be at least 35% of the price of the goods. In addition, the product must be imported directly to the U.S. This means the product cannot enter the commerce of another country. Also imports for that product from that country may not have exceeded the competitive need limitation. Once import of a product from a particular country exceeds 50% of the total imports of that product into the U.S., or once the imports exceed a determined dollar amount, GSP status is removed. Finally, the customs entry for the goods must correctly request GSP treatment.


An introduction to GSP, along with a list of qualified countries can be found at the U.S. Trade Representative’s web page, at the link at the end of this tip. To find out whether your product will qualify for GSP treatment, and if not, what duty rate will apply, visit the online Harmonized Tariff Schedule of the US, at the second link after this tip. Both are helpful for preliminary research.


However, before you actually place your order with your overseas supplier, speak with a licensed customs broker. Duty rates change, and products and countries are constantly being added to and removed from the list, and even the on-line information may not be up to date. (For example, the U.S. Trade Representative’s web page says that Bulgaria and Romania are qualified BDCs, but they were disqualified and removed from the list in January of 2007.) Customs brokers have access to the most current updates with regard to these ever shifting regulations and can provide reliable information. Particularly with the automated entry requirements now in place, most small businesses will find that relying on a customs broker to do their clearances is both the safest and the most cost effective way to clear cargo. Starting your business relationship with your broker before you order your shipment is a wise approach, and asking the broker about GSP treatment for your product is common practice.


GSP Information from the US Trade representative

US Harmonized Tariff

Complying with the government’s trade embargoes


Exporters and importers alike must be aware of what embargoes the U.S. government has in place. Failure to comply can result in formidable penalties being assessed. The Commerce Department’s Bureau of Industry and Security (BIS) and the Treasury Department’s Office of Foreign Assets Control (OFAC), the two agencies responsible for enforcement, do not accept ignorance as a mitigating factor. This is true not only with regard to ignorance of the law but also, in some cases, with regard to the intent of your overseas counterpart.


U.S. embargoes vary and each is a bit different. The most restrictive, those covering North Korea, Cuba, Iran, Syria and Sudan, prohibit trade in most everything except certain licensed humanitarian goods. However, many “mini-embargoes” restrict sale of only certain goods. For example, defense related materials may not be exported to Venezuela, but trade in commercial goods is permitted. Embargoes themselves, as well as the level of enforcement that is applied, can change rapidly with the political climate and shifts in foreign policy, and the burden is on the exporter (or importer) to keep abreast.


Even if the goods originate and terminate in foreign countries, and never touch U.S. soil, American trading companies may still be at risk for violating an embargo. If the goods were bought or sold by a branch office of an American company, if an American citizen or permanent resident was involved in the transaction, or if an American company “facilitated” the transaction, the company may be out of compliance. “Facilitation” has not been given a firm definition by the OFAC, and whether an activity is deemed to be facilitation is often more a function of the identity of the destination country than of the act itself.


Exporters should also be aware that U.S. citizens may not embargo countries against which the U.S. recognizes no embargo. U.S. exporters are, of course, under no obligation to conduct any overseas transaction. The problem arises when the government of the destination country requires that shipping documents acknowledge an embargo that the U.S. does not observe. Some Arab countries, for example, will not allow product to clear their customs without a statement that the goods will not transit Israel and that no part of the goods were manufactured in Israel. In order to pass muster here, shipping documents must not acknowledge the embargo but must simply state that goods comply with destination country’s requirements as to shipping and product origin.


These rules also apply to transactions that do not concern sale of goods. For example, travelers overseas who stay in hotels owned by embargoed countries have been fined by the U.S. government for non-compliance.


How can a well intentioned importer or exporter stay out of harm’s way? Several sources of help are available:


1)     Use the services of a competent freight forwarder (for exports) or customs broker (for imports). Part of the service a well informed forwarder or broker will offer is to advise the exporter or importer when the transaction they contemplate may not be in compliance.

2)     Regular seminars about compliance are available both from private providers and from the BIS and OFAC.

3)     Both the BIS and the OFAC are eager to assist U.S. companies to remain compliant. Updated information is available on their websites ( for BIS and for OFAC) BIS also offers a telephone hotline at 202-482-4811.

Law must be stable, and yet it cannot stand still.
Roscoe Pound

Serving the needs of families and small business