We get a lot of questions about exporting titanium products and other metals from the United States to a foreign country. It’s no simple process, and it’s easy to slip into a violation of U.S. export control regulations. Recently, I sat down with one of our clients – Performance Titanium Group (PTG) – to discuss some of the basic questions we receive, and to help educate them on the “do’s and dont’s” of exporting titanium.
PTG: What’s the reason for the Export Administration Regulations (EAR)?
Emmalie Armstrong: The EAR regulates the export of dual-use items. These regulations are implemented by the Bureau of Industry and Security (BIS) under the U.S. Department of Commerce. The regulations exist for three main reasons: national security, as an element of foreign policy and also to control the spread of nuclear proliferation and weapons of mass destruction. By having these regulations in place, the risk of diverting certain items to locations that are not in the best interest of the United States is minimized, and U.S. technology is protected.
PTG: Any time a titanium product is exported from the U.S., it’s important for the “USPPI” (U.S. Principal Party in Interest) to gather information about the purchaser, the final end user of the titanium, and the end use application of the titanium. Can you tell us why?
Emmalie Armstrong: U.S. export regulations are far-reaching. Once a controlled item leaves the United States, the responsibility doesn’t end there. The controls follow that item around the globe. Knowing the end-user is a key part of export compliance. As the exporter (or USPPI), you are responsible to know the item’s ultimate destination and end-use to ensure that the shipment is complying with export regulations, and that the item is not destined for a prohibited location or end-use.
PTG: OK, so once the USPPI has obtained the names and addresses of all of the parties related to the transaction, including the consignee, the end user, the freight forwarder, and any brokers, that information must be checked against the U.S. Government’s Restricted Parties Lists. How does Export Solutions do this?
Emmalie Armstrong: There are lots of tools to accomplish this. As you know, the U.S. government publishes lists of countries, companies, and individuals throughout the world who are not allowed to participate in the export of restricted items, and in some cases, any items at all. These entities are collectively referred to as “restricted parties.” Companies need to be aware of who they do business with in order to avoid violations. At Export Solutions, we use a restricted party screening tool. There are many vendors on the market who provide these tools. However, the lists can also be found free of charge at: http://2016.export.gov/ecr/eg_main_023148.asp. The key is to make sure that your item is not destined to an entity, person, or country that is restricted. Using a tool reduces the amount of time spent searching through the multiple lists that exist throughout different agencies.
PTG: What about end use? Do we really need to determine if the titanium will be used for civilian or military use?
Emmalie Armstrong: Yes. The two primary ways exports are controlled are through the Department of State and the Department of Commerce. Each department maintains its own set of regulations. At State, you have the International Traffic in Arms Regulations (ITAR), and at Commerce, there’s the Export Administration Regulations (EAR). The ITAR regulates items specially designed for military application and the EAR regulates dual-use and commercial items. So, it’s important to distinguish between these two because there are different licensing requirements and rules for items falling under the regulations. If you’re unsure whether your item is subject to the ITAR or EAR, then you cannot correctly determine whether or not a license is required to export it.
PTG: Can Export Solutions help companies determine what category of the Commerce Control List their titanium product falls under? And how do you determine if a license is required?
Emmalie Armstrong: Yes, this is something we help our clients with all the time. In order to determine if a license is required, exporters must determine the correct United States Munitions List (USML) category or Export Control Classification Number (ECCN) of their item. We sometimes refer to this as an export classification. Under the EAR, ECCNs are determined by reviewing the Commerce Control List and looking closely at the technical specifications of the item. Licensing is then determined by the ECCN and the destination country. Export Solutions has a team of experienced professionals who can help determine the classification of your item, as well as any licensing requirements that may exist. We’ve been doing this for a long time!
PTG: OK, time for some more acronyms. What is the relationship between EEI, ITN, and AES, and how are these related?
Emmalie Armstrong: Our industry is full of acronyms! The AES (Automated Export System) is the system that was used in the past to declare exports. There’s a new system in place now called ACE, which has replaced AES, however the old terminology is still used. The information submitted is referred to as the EEI (Electronic Export Information). An EEI is required for all shipments over $2500 going to any country other than Canada. An EEI may also be required for items with certain classifications. Once an export declaration is filed, the filer will receive an Internal Transaction Number (ITN). This number must be placed on the Commercial Invoice to show that the export declaration has been filed.
PTG: Often times, a Freight Forwarder will file the EEI on behalf of the USPPI. How important is it to receive a copy of this record and to review it for accuracy?
Emmalie Armstrong: It’s extremely important. This is a critical step that many exporters miss. The USPPI is responsible for the information filed on their behalf. If the information submitted by the Freight Forwarder is inaccurate, then the USPPI can be held liable. Common mistakes include incorrect valuation, reporting the incorrect ECCN, and missing licensing requirements. Another common mistake is not filing an export declaration at all. If a forwarder is filing on your behalf, it is your responsibility to obtain a copy of the EEI, review it, and request that the forwarder correct any mistakes. Using a Freight Forwarder does not relieve any of your liability as the USPPI.
PTG: Here’s another scenario. As you know, it’s common for a foreign buyer to contract with a Freight Forwarder in the United States. Sometimes these forwarders will make mistakes when completing the SLI or Air Waybill. This could include errors in the Harmonized Tariff Code, description of goods, declared value, and so on. The USPPI may think they’re not responsible for mistakes made by the forwarder, but this is not the case. Can these type of errors subject a USPPI to violations?
Emmalie Armstrong: Yes, depending on the arrangement made between the forwarder and the foreign consignee, the liability could vary. However, in the simplest form, if the correct documentation is not in place, then the USPPI can be subject to an export violation for errors made by a forwarder – even if the foreign consignee contracted them. That’s why it’s always important to receive a copy of the export declaration from the forwarder and review it for accuracy.
PTG: What’s the biggest mistake USPPIs make when exporting products like titanium?
Emmalie Armstrong: Hmmm, good question. This is tough given the broad range of activities encompassing export compliance. One of the biggest mistakes we see is not correctly determining the classification of the item. Many manufacturers and exporters make assumptions that metal would not be controlled for export. However, this is not true. There are many types of metal that are controlled. It’s crucial to correctly determine the classification of the item so you can be sure not to miss any licensing requirements. Many exporters leave this determination up to the Freight Forwarder, however, detailed specifications are often required to determine the classification. I always advise clients: “You know your item the best. Not your forwarder.” If the item is not classified properly and a license requirement is missed, then the USPPI will be responsible for the export violation … not the forwarder. So, take the time to properly classify your item and determine licensing requirements to avoid violations. Other mistakes we see often include not knowing the end-user or end-use, not screening against the restricted parties lists, and also failing to register with the Department of State for military items under the ITAR.
PTG: This is good information for anyone exporting metal outside of the U.S. Thanks Emmalie!
Emmalie Armstrong: You’re very welcome! Thank you.
About Performance Titanium Group
Performance Titanium Group is an AS9100/ISO 9001 Certified distributor of domestic and import titanium products, including round bar, flat bar, plate, and sheet. PTG is located in San Diego, CA and ships worldwide to customers in aerospace, defense, and medical industries, to name a few. PTG earns customer loyalty through prompt responses, quick lead times, and ongoing customer support for businesses small and large. To get a titanium quote or to learn more about their business, you can visit www.performancetitanium.com or email firstname.lastname@example.org.
Emmalie Armstrong is a Trade Compliance Consultant with Export Solutions – a firm specializing in U.S. import/export regulations.