International Law Advisory - Filing Export Documentation Through AES

February 3, 2006

As most of you may know, the rules for filing Shipper’s Export Declarations (“SEDs”) have been undergoing serial changes in order to move toward complete electronic filing of export information through the Automated Export System (“AES”).  AES is the electronic method for filing paper SED information with Customs and Border Protection and the Census Bureau.  Information reported through AES is referred to as Electronic Export Information (“EEI”) and is generally equivalent to information filed through the SED.

The most recent regulatory action on this subject was last year, on February 17, 2005, in the form of a proposed rule, which is expected to become effective in the first quarter of this year.  While this proposed rule is old news, we believe it is important to summarize the regulatory changes that have occurred to date and preview the upcoming final stages of mandatory AES filing, given that these changes are anticipated to come into effect in the first quarter of this year.

AES Requirements Currently In Effect
The Foreign Trade Statistics Regulations (“FTSR”), which are found at 15 C.F.R., Part 30, set out the general requirements to file export information with Customs and Census.1 The FTSR also contain a number of exemptions to such filing.2

Current rules mandate that exporters use AES to file export information on shipments of items that are identified on the Commerce Department’s Commerce Control List (CCL)3 and the State Department's U.S. Munitions List (USML)4 where filing of a Shipper’s Export Declaration (SED) was previously required.5   In addition, AES filing is currently mandatory for all exports of rough diamonds.6   Exporters should already be using AES to file export information for items in these categories unless a filing exemption applies.

Upcoming AES Requirements
The final rule on mandatory AES filing, which will again amend the FTSR, is anticipated to be issued some time in the first quarter of this year.  The amendment will mandate the use of AES to report export information in all cases where an SED was previously required and the option of filing a paper SED will no longer be available.7   In effect, the final rule will require mandatory AES filings for all exports valued over $2,500 unless a filing exemption applies. 

Increased Penalties and Enforcement
Importantly, the FTSR changes also will provide for significant increases in penalties for late filing, failure to file, and false filing.  Civil penalties will increase from $100 per day to $1,000 per day, with a maximum of $10,000 per violation.  In addition, the civil penalty provision provide that property involved in a violation will be subject to forfeiture.  The proposed revision provides for criminal penalties of up to $10,000 per violation and up to 5 years in jail.

In addition to the proposed increases in penalties, enforcement capacity is also planned to increase.  Under the anticipated rule, both the Bureau of Industry and Security’s Office of Export Enforcement (“OEE”) in the Department of Commerce and Customs and Border Protection Office of Immigration and Customs Enforcement (“ICE”) in the Department of Homeland Security will be authorized to investigate and enforce the reporting requirements in the FTSR.  One important consideration for exporters is that with the additional resources of OEE and ICE, there will be significantly more opportunities for the government to enforce its export reporting requirements irrespective of the means of filing.  Thus, exporting companies would be well-advised to review their existing export reporting compliance, in advance of the upcoming regulatory changes, to ensure compliance with the FTSR.   

Practical Considerations
There are several ways for companies to comply with mandatory electronic filing.  One method is to use AES Direct, the U.S. Census Bureau’s free, internet-based system, which can be used in conjunction with AES PcLink, a software component of AES Direct that lets companies manage AES filings locally from in-house computers and automatically links to a company’s AES Direct filing account on the internet.  It is also possible to employ AES-certified software purchased from a vendor.  A list of AES certified software vendors can be found on the Census Bureau’s website.  Some companies may opt to create their own AES program to meet specifications provided in the Department of Customs and Border Protection’s AES Trade Interface Requirements (AESTIR).   AESTIR requirements may be accessed on the Custom and Border Protection Office website.  Finally, it is possible to contract an AES service center, port authority, or freight forwarder to act as the company’s agent. 

A good reference and starting point for AES compliance can be found on the Census Bureau website. We will continue to monitor developments regarding mandatory electronic filing and increased penalties.  In the meantime, please contact Ed Krauland (202-429-8083) or Julia Court Ryan (202-429-6418) if you have any questions.

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1See FTSR, Subpart A.
 2See FTSR, Subpart B.
 3The CCL may be found in the Export Administration Regulations (“EAR”).
 4The USML may be found in the International Traffic in Arms Regulations (“ITAR”).  New AES/EEI requirements for USML shipments will include eight new data elements.
 5 Click here.  This requirement became effective in July of 2003.
 6 Click here.  This requirement became effective in October of 2003.
 7 Click here.