On November 15th, the regulations mandating destination control statements (DCS) changed and now include several modifications to existing rules that shippers must follow when exporting goods from the U.S. A legal statement required by the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR), the DCS states that the goods being exported are destined to the country indicated in all the shipping documents. Put simply, the statement clarifies that the buyer of the goods won’t take them and forward them to another country.
There are two different sets of rules governing DCSs, neither of which has been changed or updated in many years. The purpose of the DCS has historically been to alert parties outside the U.S. that receive the item that it was subject to the EAR or ITAR, the item was exported in accordance with the EAR or ITAR, and that diversion contrary to U.S. law was prohibited.
Two Areas of Interest for Shippers
The updates to DCS were introduced in May of 2015 in a proposed rule entitled Revisions to the EAR, Harmonization of the Destination Control Statements. Effective November 15th, the EAR (§ 758.6—Destination control statement and other information furnished to consignees) no longer includes a requirement to add the DCS on the air waybill, bill of lading, or other export control documents. Instead, it limits the requirement of the new version of the DCS to the commercial invoice.
The two primary changes that shippers should be aware of include:
§ 758.6 – Destination control statement & other information furnished to consignees.
The exporter must incorporate the following information as an integral part of the commercial invoice whenever items on the Commerce Control List (all ECCN’s except EAR99) are shipped, unless the shipment may be made under License Exception BAG or GFT or the item is designated as EAR99:
(1) The following statement: “These items are controlled by the U.S. Government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations” and
Include when applicable:
(2) The ECCN(s) for any 9×515 or “600 series” “items” being shipped (i.e., exported in tangible form).
§ 123.9 Country of ultimate destination and approval of re-exports or retransfers.
(1) The exporter must incorporate the following information as an integral part of the commercial invoice, whenever defense articles are to be shipped, retransferred, or re-exported pursuant to a license or other approval under this subchapter:
(i) The country of ultimate destination;
(ii) The end-user;
(iii) The license or other approval number or exemption citation; and
(iv) The following statement: ”These items are controlled by the U.S. government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations.”
(2) When exporting items subject to the EAR pursuant to a Department of State license or other approval, the U.S. exporter must also provide the end-user and consignees with the appropriate EAR classification information for each item. This includes the ECCN or EAR99.
The only exception of when the DCS is required on the air waybill, bill of lading, or other export control documents (i.e. manifest) relates specifically to ITAR (International Traffic in Arms) goods that falls under the 22 CFR ITAR Exemptions Pursuant to §126.16 (j) Defense Trade Cooperation Treaty between U.S & AU, §126.17 (j) Defense Trade Cooperation Treaty between US & UK or §126.6 Foreign-owned military aircraft and naval vessels, and the Foreign Military Sales Program. These ITAR DCS statements must continue to be printed on the on the transport document when applicable.
Measuring the Impacts
The new DCS rules will have an impact on all exporters that are required to file this documentation when shipping goods overseas. The responsibility falls on the part of the commercial invoice preparer or the exporter to comply with the rules, as it is solely their responsibility to place the DCS on the commercial invoice.
In essence, the new rules grant more responsibility to the shipper to provide the end users and the consignee with more detailed information. “They have to provide the EAR with the correct classification information and ensure that the recipients of the commercial invoice are aware of the DCS,” says Ivelisse James, DB Schenker’s Senior Regional Manager, Americas of Trade Advisory Services & Trade Compliance.
Shippers should have documented written proof that they’ve notified both the end user and the ultimate consignee (the two may not be the same entity/person) when there is a DCS for the specified commodity being shipped.
“The real change in the rules is that not only does the information have to be present on the DCS,” Ivelisse explains, “but the shipper has to make sure the end user and the ultimate consignee as noted in the document process also have been informed”
As a party in the international transportation global supply chain, there is assistance available to you so that you can remain in compliance while maneuvering through the complex regulatory requirements. DB Schenker Trade Advisory Services is -here to guide your company through the new DCS changes and other upcoming regulatory requirements anticipated throughout 2017. Please contact us or visit our website today to learn more about our various efficient and effective Trade Advisory Solutions Tools available.
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