[Federal Register Volume 68, Number 95 (Friday, May 16, 2003)]
[Notices]
[Pages 26567-26569]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-12265]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

[Docket No. 030505114-3114-01]


Best Practices for Exporters/Re-Exporters and Trade Facilitation/
Freight Forwarding Companies Regarding the Transit, Transshipment, and 
Reexport of Dual-Use Items

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Notice of Inquiry.

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SUMMARY: The Bureau of Industry and Security (BIS) is seeking public 
comments on the following proposed ``Best Practices for Exporters/Re-
exporters and Trade Facilitation/Freight Forwarding Companies Regarding 
the Transit, Transshipment, and Reexport of Dual-Use Items.'' BIS will 
consider all comments timely submitted before finalizing these Best 
Practices.

DATES: Comments must be received before June 16, 2003.

ADDRESSES: Comments may be submitted by e-mail to [email protected], 
by fax at (202) 482-2387, or on paper to Rick Cupitt, Office of the 
Under Secretary for Industry and Security, Bureau of Industry and 
Security, Room H3898, U.S. Department of Commerce, 14th Street and 
Pennsylvania Avenue, NW., Washington, DC 20230.

FOR FURTHER INFORMATION CONTACT: Rick Cupitt, Office of the Under 
Secretary for Industry and Security at [email protected] or (202) 
482-1459.

SUPPLEMENTARY INFORMATION:

Background

    This document sets forth ``best practices'' for exporters/re-
exporters and trade facilitation/freight forwarding companies regarding 
the transit, transshipment, and re-export of dual-use items. The best 
practices identified herein represent the types of practices that many 
companies already observe, which is consistent with the broader view of 
the Department of Commerce (DOC) that implementing effective export 
compliance programs is an important component of responsible corporate 
citizenship and good business practices generally.

Overview

    Dual-use export control laws are predicated on the security and 
reliability of supply chains. Both the licensing of export transactions 
in dual-use items and the allowance of license-excepted transactions in 
such items are premised on the assurance that such

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items: (i) Will not be used for a prohibited end-use, (ii) will be in 
the possession of the person or organization contemplated as the end-
user at the time of export, and (iii) will be utilized in the country 
contemplated as the country of end-use when the item is exported. The 
diversion of controlled goods or technologies--even inadvertently--from 
such contemplated end-use, end-user, or destination constitutes a 
serious threat to the efficacy of export control regimes. Such 
diversion undermines efforts to counter the proliferation of weapons of 
mass destruction, terrorism, and other threats to national and 
international security.
    Global ``transshipment hubs''--i.e., countries or areas that 
function as major hubs for the trading and shipment of cargo--pose 
special risks of diversion. The concentrated presence of commercial 
infrastructure (e.g., trading companies, brokerages, and free trade 
zones) that facilitates large volumes of transit, transshipment, import 
and re-export traffic through such points make transshipment hubs 
particularly vulnerable to the diversion of sensitive items to illicit 
purposes.
    To combat this risk, the United States Government has implemented a 
number of initiatives to work with industry and foreign governments. 
DOC, for example, has launched the Transshipment Country Export Control 
Initiative (TECI). TECI seeks to channel existing and new export 
control practices toward countering the diversion of controlled items 
through global transshipment hubs. TECI has two principal prongs. Under 
the first prong, DOC seeks to improve cooperation and communication 
with relevant agencies in key transshipment hubs charged with 
administering export and trade control laws.\1\ Such efforts are 
already underway with respect to a number of key transshipment 
countries and will be launched with respect to others in the near 
future.
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    \1\ A number of U.S. Government agencies, including the DOC, 
also work with the governments of those hubs to strengthen their 
indigenous export control regimes, including conducting technical 
assistance activities as part of the Export Control and Related 
Border Security Assistance (EXBS) Program managed by the U.S. 
Department of State.
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    Under TECI's second prong, DOC seeks to work with the private 
sector businesses and individuals involved in the transshipment of 
goods to enhance their ability to prevent the diversion of controlled 
items. In the course of this dialogue, a number of organizations have 
noted the absence of a clearly stated set of export control ``best 
practices'' tailored to the particular activities and circumstances of 
entities that facilitate the export or re-export of dual-use items to, 
from, or through transshipment hubs (such ``Trade Facilitators/Freight 
Forwarders'' include freight forwarders, brokers, air and marine cargo 
carriers, express shipment carriers, port operators, and port 
authorities) as well as entities that export dual-use items to 
transhipment hubs or that re-export such items from such hubs 
(``Exporters/Re-exporters''). The absence of a single organization or 
forum representing these many diverse businesses involved in 
transshipment makes it unlikely that such a set of best practices would 
be developed without DOC coordination.
    Set forth below, for public comment, is a draft set of best 
practices for use by Trade Facilitators/Freight Forwarders and 
Exporters/Re-Exporters in guiding the export control compliance 
activities of companies involved in the transshipment, transit, and re-
export of dual-use items. They are based on input provided at DOC-
sponsored export control compliance seminars and other events, and on 
the observations of best practices by DOC staff and export control 
practitioners involved in both the administration and enforcement of 
export controls.
    The publication of these best practices creates no legal obligation 
to comply with such practices on the part of any person. Compliance 
with these best practices creates no defense to liability for the 
violation of export control laws. However, demonstrated compliance with 
these best practices by a company will be considered an important 
mitigating factor in administrative prosecutions arising out of 
violations of the Export Administration Regulations by that company.

Best Practices for Exporters/Re-Exporters and Trade Facilitation/
Freight Forwarding Companies Regarding the Transit, Transshipment, and 
Reexport of Dual-Use Items

Purpose

    To help industry, and in particular Trade Facilitators/Freight 
Forwarders and Exporters/Re-Exporters, contribute to a reduction in the 
illicit transshipment, transit, or re-export of dual-use items subject 
to U.S. and foreign export controls, and to facilitate legitimate 
global commerce by improving the capacity to distinguish between licit 
and illicit transactions.

Principles

    1. Industry and government should work together to foster secure 
trade that reduces the risk of diversion of items subject to export 
controls.
    2. Secure trade will reduce the diversion of dual-use items to 
prohibited end-uses, end-users, and destinations.
    3. Secure trade will encourage the more expeditious movement of 
legitimate trade through borders and ports.
    4. Industry can achieve secure trade objectives through appropriate 
export management practices.

Scope

    The best practices identified herein:
    1. Are designed Trade Facilitators/Freight Forwarders and 
Exporters/Re-Exporters. The terms ``Company'' and ``Companies'', when 
used herein, refer to all of these types of entities;
    2. Are designed to apply to transactions subject to the 
jurisdiction of the Department of Commerce; and
    3. Complement the set of Best Practices for Exporters/Shippers 
found in the U.S. Department of Commerce Export Management System. 
Additional information on the Export Management System resides on the 
BIS Web site at http://www.bis.doc.gov/ExportManagementSystems/Default.htm.

Company Policy and Company Management

    1. Each Company should develop a written policy against allowing 
its exports or services to contribute to terrorism or programs of 
proliferation concern.
    2. Each Company should identify one person, who reports to the 
Company's Chief Executive Officer, General Counsel, or other senior 
management official (but not to a sales or marketing official), as the 
ultimate party responsible for oversight of the Company's export 
control compliance program.
    3. Each Company should create an export control compliance program. 
Companies should integrate this compliance program into its overall 
regulatory compliance, security, and ethics programs.
    4. Each Company should ensure that relevant Company personnel 
receive regular training in export control compliance responsibilities, 
and should consider offering to its employees incentives for compliance 
(and disincentives for noncompliance) with their export control 
responsibilities.
    5. Exporters/Re-Exporters should seek to utilize only those Trade 
Facilitators/Freight Forwarders that also observe these best practices.

Compliance Activities: General

    6. An Exporter/Re-Exporter should classify each of its products 
according

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the requirements of the Export Administration Regulations (EAR), 15 CFR 
Parts 730-774 (2003), and should communicate the appropriate Export 
Control Classification Number (ECCN) or other classification 
information for each export to the Trade Facilitator/Freight Forwarder 
and the end-user involved in that export (even if the shipment is made 
under an EAR License Exception). Each Company involved in the 
transaction should also maintain a record of such classification for 
every export.
    7. A Company should screen all parties to the transaction against 
all relevant lists (such as the Denied Persons List, Unverified List, 
Entities List, and lists of U.S. Government-sanctioned parties), and 
should maintain a record of such screening.
    8. A Company should screen all exports/re-exports against a list of 
embargoed destinations, and should maintain a record of such screening.

Compliance Activities: Transshipment Hub \2\-Specific
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    \2\ DOC's TECI has focused its efforts on the following 
transshipment hubs: Cyprus, Hong Kong, Malaysia, Malta, Panama, 
Singapore, Taiwan, Thailand, and the United Arab Emirates.
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    9. With respect to transactions to, from, or through transshipment 
hubs, Exporters/Re-Exporters should take appropriate steps to know who 
the end-user is and to determine whether the item will be re-exported 
or incorporated in an item to be re-exported. An Exporter/Re-Exporter 
of a dual-use item under license should inform the end-user, 
distributor, or other appropriate recipient of the item of the license 
terms and conditions for such export.
    10. With respect to transactions to, from, or through transshipment 
hubs, Companies should have in place compliance and/or business 
procedures to be immediately responsive to theft or unauthorized 
delivery. This include procedures--including documented confirmation--
to ensure that the item exported has reached the proper end-user.
    11. With respect to transactions to, from, or through transshipment 
hubs, Companies should pay heightened attention to the Red Flag 
Indicators on the BIS Web site (see http://www.bis.doc.gov/Enforcement/redflags.htm) and in the ``Know Your Customer Guidance'' set forth in 
Supplement 3 to part 732 of the EAR.

Responding to Suspicious Transactions

    12. When a Company encounters a suspicious transaction, it should 
halt the shipment and consult with its export control compliance 
specialist. If the transaction is determined to involve a potential or 
actual violation of the EAR, the Company should contact BIS or another 
U.S. law enforcement agency immediately and maintain all relevant 
records.

Request for Comments

    Parties submitting comments are asked to be as specific as 
possible. BIS encourages interested persons who wish to comment to do 
so at the earliest possible time. The period for submission of comments 
will close June 16, 2003. BIS will consider comments on any aspect or 
consequence of any part or all of this proposal. Comments received 
after the end of the comment period will be considered if possible, but 
their consideration cannot be assured. BIS will not accept comments 
accompanied by a request that a part or all of the material be treated 
confidentially because of its business proprietary nature or for any 
other reason. BIS will return such comments and materials to the 
persons submitting them and will not consider them in developing any 
final ``Best Practices'' document that it may publish. All comments on 
this proposal will be a matter of public record and will be available 
for public inspection and copying. All comments must be submitted in 
writing (including facsimile or e-mail).
    The public record concerning these comments will be maintained in 
the Bureau of Industry and Security, Office of Administration, U.S. 
Department of Commerce, Room 6883, 14th and Constitution Avenue, NW., 
Washington, DC 20230; (202) 482-0637. This component does not maintain 
a separate public inspection facility. Requesters should first view 
BIS's FOIA website (which can be reached through http://www.bis.doc.gov/foia). If the records sought cannot be located at this 
site, or if the requester does not have access to a computer, please 
call the phone number above for assistance.

Kenneth I. Juster,
Under Secretary for Industry and Security.
[FR Doc. 03-12265 Filed 5-15-03; 8:45 am]
BILLING CODE 3510-33-P