[Federal Register Volume 75, Number 169 (Wednesday, September 1, 2010)]
[Pages 53639-53640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-21843]

[[Page 53639]]



Bureau of Industry and Security

[Docket No. 100812348-0366-01]

Best Practices for Transit, Transshipment, and Reexport of Items 
Subject to the Export Administration Regulations

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Notice of Inquiry.


SUMMARY: The Department of Commerce's Bureau of Industry and Security 
(BIS) seeks public comments on a set of proposed ``Best Practices for 
Transit, Transshipment, and Reexport of Items Subject to the Export 
Administration Regulations.'' BIS is particularly interested in 
engaging in a dialogue with industry regarding new transshipment 
principles and best practices that complement those already identified 
by BIS in its Web guidance (http://www.bis.doc.gov/complianceandenforcement/emcp.htm), and industry outreach regarding 
export management and compliance. BIS will consider all comments timely 
submitted before finalizing these best practices and publishing them in 
the Federal Register and on the BIS Web site. This document will 
include a discussion of those comments.

DATES: Comments must be received before October 18, 2010.

ADDRESSES: Comments may be submitted by e-mail to [email protected], by fax at (202) 482-5361, or on paper to Gerard 
Horner, Office of Technology Evaluation, Bureau of Industry and 
Security, Room 1093, U.S. Department of Commerce, 14th Street and 
Pennsylvania Avenue, NW., Washington, DC 20230.

How To Comment

    All comments must be in writing and submitted to the address 
indicated above or via e-mail. Comments must be received by BIS no 
later than October 18, 2010. BIS may consider comments received after 
that date if feasible to do so, but such consideration cannot be 
assured. All comments submitted in response to this notice will be made 
a matter of public record, and will be available for public inspection 
and copying. Anyone submitting business confidential information should 
clearly identify the business confidential portion of the submission 
and also provide a non-confidential submission that can be placed in 
the public record. BIS will seek to protect business confidential 
information from public disclosure to the extent permitted by law.

FOR FURTHER INFORMATION CONTACT: Office of Technology Evaluation, 
Gerard Horner at [email protected] or (202) 482-2078, or Donald Creed 
at [email protected] or (202) 482-8341.



    In this notice of inquiry, BIS is seeking public comment on a 
proposed updated list of a set of ``best practices'' for industry 
regarding the transit, transshipment, and reexport of dual-use items. 
The previous list, which was developed following the solicitation of 
public comments (68 FR 26567, May 16, 2003), was posted on BIS's Web 
site on November 24, 2003. BIS is updating the list in light of the 
U.S. Government's current export control reform efforts and the 
increased attention that reexport, transit, and transshipment trade has 
generated in recent years, both within the U.S. and globally. BIS will 
publish an updated list of best practices in the Federal Register that 
will include a discussion of those comments. BIS will also post the 
final list on the BIS Web site.
    The best practices identified herein include the types of practices 
that industry has adopted to guard against diversion risk. Both 
government and industry recognize that implementing effective export 
compliance programs is an important component of responsible corporate 
citizenship and good business practices.
    BIS seeks information to refine and revise this proposed list of 
best practices to help ensure that industry and the government continue 
to prevent diversion of controlled items subject to the Export 
Administration Regulations (EAR) through transshipment points. The 
success of export control laws in the context of transit, 
transshipment, and reexport transactions rests on well-managed and 
comprehensive export compliance programs. The diversion of controlled 
and unlisted U.S. origin items from authorized to unauthorized end-
uses, end-users, or destinations, even inadvertently, 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 
due to their large volumes of transit, transshipment, and import and 
reexport traffic. Such hubs make transshipment trade particularly 
vulnerable to the diversion of sensitive items to illicit purposes.
    To combat diversion risk, BIS seeks to strengthen its partnership 
with industry (including exporters, freight forwarders, carriers, 
consolidators, express couriers, and others that are parties to dual-
use export transactions) involved in the transshipment of items subject 
to the EAR by consolidating existing best practices and establishing 
new and emerging ones to prevent diversion. BIS recognizes the 
importance of soliciting input from industry to define a set of best 
practices tailored to the particular activities and circumstances of 
transshipment trade.
    The publication of these best practices creates no legal obligation 
to comply with such practices on the part of any person, absent a legal 
requirement that is set forth elsewhere in the EAR. 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 
provisions of the EAR that apply to transit, transshipment or reexport 
    Although BIS intends to issue this guidance on industry best 
practices as it applies to items and transactions that are subject to 
the EAR, the guidance clearly has broader potential application. BIS 
envisions this guidance as a step toward a strengthened dialogue with 
industry, other agencies that administer export controls, and foreign 
governments in a manner that may make the guidance pertinent beyond its 
application to the EAR.


    These best practices are based on the following four principles:
     Industry and government should work together in a 
cooperative partnership on a domestic and global basis to foster secure 
     Secure trade will reduce the incidence of diversion of 
dual-use items to prohibited end-uses and end-users.
     Effective export management and compliance programs will 
encourage expeditious movement of legitimate trade.
     Industry can achieve secure trade objectives through 
quality-driven export management and compliance practices.


    The following reflect existing and emerging transshipment best 
practices that guard against diversion risk. BIS seeks comment on these 
and additional

[[Page 53640]]

practices from the public based on experience.
    Best Practice #1. Pay heightened attention to the Red Flag 
Indicators on the BIS Web site (see http://www.bis.doc.gov/Enforcement/redflags.htm) with respect to transactions to, from, or through 
transshipment hubs. When a company encounters a suspicious transaction, 
such as those outlined in the ``Know Your Customer'' Guidance and Red 
Flags (Supplement No. 3 to Part 732 of the EAR), it should inquire 
further and attempt to resolve any questions raised by the transaction.
    Best Practice #2. An Exporter/Reexporter should seek to utilize 
only those Trade Facilitators/Freight Forwarders that also observe 
these best practices and possess their own export management and 
compliance program.
    Best Practice #3. Exporters/Reexporters should have information 
regarding their foreign customers. In particular, a company should know 
if the customer is a trading company or distributor, and inquire 
whether the customer resells to or has guidelines to resell to third 
    Best Practice #4. With respect to transactions to, from, or through 
transshipment hubs, Exporters/Reexporters should take appropriate steps 
to inquire about the end-user and to determine whether the item will be 
reexported or incorporated in an item to be reexported.
    Best Practice #5. Freight Forwarders should inquire about the 
details of a routed transaction when asked by a foreign principal party 
in interest to ship to a country or countries of destination or 
ultimate consignees that are different from those provided by the U.S. 
principal party in interest.
    Best Practice #6. An Exporter/Reexporter should communicate the 
appropriate Export Control Classification Number (ECCN) or other 
classification information (EAR99) for each export/reexport to the end-
user and, where relevant, to the ultimate consignee.
    Best Practice #7. An Exporter/Reexporter should report such ECCN or 
the EAR99 classifications for all export transactions, including ``No 
License Required'' designations to the Trade Facilitator/Freight 
Forwarder or enter them in the Automated Export System (AES).

    Dated: August 27, 2010.
Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 2010-21843 Filed 8-31-10; 8:45 am]