Freight Forwarders Now Liable for Export Control Violations as US Tightens Shipping Security
The US government has tightened its shipping security requirements, making freight forwarders liable for export control violations. This is a significant change, as freight forwarders were previously not held directly responsible for the actions of their customers.
Non-vessel-operating common carriers (NVOs) and forwarders could find themselves facing hundreds of thousands of dollars in fines levied by the US government — and even criminal prosecution — if they fail to report customers exporting illegal components to the likes of Russia and China.
The US Department of Commerce is urging NVOs and forwarders to “know their customer,” a steep challenge for co-loaders who bundle multiple shipments for multiple customers into a single container. The Commerce Department’s publication of a policy clarification in April on reporting potentially suspicious dual-use components widens that responsibility beyond electronics manufacturers and other shippers.
The new regulations are designed to prevent the export of sensitive goods and technologies to countries of concern, such as Russia and China. Freight forwarders will now be required to screen their customers and shipments for potential violations. They will also be required to report any suspicious activity to the US government.
The new regulations have been welcomed by many in the industry, who see them as a necessary step to protect national security. However, some freight forwarders have expressed concern about the increased burden and costs associated with compliance.
Global Liability for Freight Forwarders
The new US regulations are not the only ones that hold freight forwarders liable for export control violations. Many other countries have similar regulations in place. This means that freight forwarders operating globally need to be aware of the export control requirements of all of the countries they ship to and from.
Failure to comply with export control regulations can result in severe penalties, including fines, imprisonment, and denial of export privileges. Freight forwarders should therefore have a robust compliance program in place to ensure that they are meeting all of their legal obligations.
Tips for Freight Forwarders to Comply with Export Control Regulations
Here are some tips for freight forwarders to comply with export control regulations:
- Implement a risk-based approach to compliance. This means focusing your efforts on the customers and shipments that are most likely to be involved in export control violations.
- Conduct due diligence on your customers. This includes screening them against government watchlists and verifying their end-user information.
- Screen your shipments for potential violations. This includes checking the commodity codes and end-user destinations of your shipments.
- Train your employees on export control regulations. This will help them to identify and report potential violations.
Have a system in place for reporting suspicious activity to the government.
By following these tips, freight forwarders can reduce their risk of export control violations and protect their business.
In addition to the above tips, freight forwarders should also consider implementing the following measures to comply with export control regulations globally:
- Develop a global compliance program that is tailored to the specific requirements of each country in which you operate.
- Work with a qualified export control attorney to ensure that your compliance program is up to date and meets all applicable requirements.
- Join a trade association that provides resources and support on export control compliance.
- By taking these steps, freight forwarders can minimize their risk of export control violations and protect their business reputation.
By taking these steps, Freight forwarders can minimize their risk of export control violations and protect their business reputation.
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