Export Record Retention Changes from Five to Ten Years

September 11, 2024 by Leave a comment

The Office of Foreign Asset Control (OFAC) plans to issue a new rule that will extend the record retention requirements for export records from five years to ten years (this is found in 31 C.F.R. § 501.601).

The OFAC rule change will likely be published as an interim final rule. This means that it will be published as a direct-final rule without a notice of proposed rulemaking. The OFAC rule is expected to be published on Friday (September 13, 2024) and is expected to be effective 180 days later (probably March 12, 2025).

One of the reasons for this interim-final process is because this record keeping obligation is described by OFAC as a foreign affairs function. Foreign affairs functions are excepted from the requirements of the Administrative Procedures Act (5 U.S.C. § 553(a)(1)), including the requirement for prior notice on a published rule.

The reason for these record keeping extensions is because a law issued earlier this year (Public Law No. 118-50, section 3111) established a ten year statute of limitations for sanctions violations (codified at 50 U.S.C. § 1705(d)). Please note that the statute did not mandate a ten year record retention – this choice was made by OFAC; but commercial record retention decisions are often made based around statutes of limitations.

One of the changes to the rules will extend the penalty for late-filed reports (found in the enforcement guidelines). Now the penalty will continue to increase monthly for ten years.

OFAC plans to collect comments on the interim-final rule. OFAC is expected to specifically request comments on the following topics:

  • Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information has practical utility;
  • The accuracy of the agency’s estimate of the burden of the collection of information;
  • Ways to enhance the quality, utility, and clarity of the information to be collected;
  • Ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and
  • Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services required to provide information

We expect there to be a 30 day comment period that will begin when the rule is published. ASA members who are interested in being involved in the Association’s information-gathering and response process should contact ASA Counsel Jason Dickstein immediately. This change in the record retention period may also influence a change in ASA-100 record retention practices.

BIS may also choose to extend its record retention period consistent with the sanctions statute of limitations; however they have not yet chosen to do so. At present, the BIS record retention period rule remains five years. The OFAC record retention requirement, though, should effectively apply to most U.S. exports handled by the aircraft parts community.

Filed under Uncategorized Tagged with , , , ,

Recordkeeping for Aviation Exports – What Do You Need to Retain?

November 12, 2017 by Leave a comment

Exporters must maintain records as proof of compliance with U.S. government regulations for a minimum of 5 years.  During this retention period, these retained records may be requested by Customs and Border Protection (CBP), or the Bureau of Industry and Security (BIS), Census, or any other U.S. Government Agency that has jurisdiction over your export.  This can be a daunting task and I have seen businesses that failed to retain such records.  This article seeks to provide some guidance on the scope and length of your recordkeeping obligations as an exporter.

What records should be kept, you ask? The Export Administration Regulations (EAR) provides a list of records that must be retained.

  1. Export control documents.  Examples include license and license application, AES record, dock receipt, 7512 forms, and antiboycott reports. The only exception is a party that submits documents electronically to BIS via the SNAP-R system; these parties are not required to retain copies of submitted documents. Note:  I would not count on this and I would be sure to keep all copies for reference purposes.
  2. Memoranda.  Examples include written records of business communications, reminders, agreements, and contracts.
  3. Notes.
  4. Correspondences.  Chances are, there are emails concerning your transaction.  These are supposed to be retained.
  5. Contracts.  A series of communications that result in an agreement may be considered a contract.
  6. Invitations to bid.  This could include any RFP/RFQ.
  7. Books of account.  This means accounting records, which may be used to defend against an audit.
  8. Financial records.  All formal records of the financial activities of a business or person.
  9. Restrictive trade practice or boycott documents and reports.
  10. Notifications from BIS.  This includes notification from BIS of an application being returned without action, of an application being denied, of the results of a commodity classification or encryption review request conducted by BIS.
  11. Other records pertaining to any other transaction subject to BIS regulations (pursuant to 15 C.F.R. § 762.1).
  12. Any other record that is required to be retained under other BIS regulations.  There is a partial list of these regulations in 15 C.F.R. § 762.2(b).

I said that you have to retain these documents for at least five years.  What does this mean?  Export Regulations state 5 years from the latest of the following times:

  1. The date of export from the U.S.
  2. The date of any known re-export, transshipment, or diversion. If you are shipping to a overseas broker, then you may need to start the clock when the broker re-exports the articles.
  3. The date of the termination of the transaction, whether formally in writing or by any other means. If the articles are returned under an RMA, then you still need to keep the records for five years from the return.
  4. In the case of records of pertaining to transactions involving restrictive trade practices or boycotts, the date the regulated person receives the boycott-related request or requirement.

Another caveat: if any U.S. government agency makes a formal (or informal) request for records before that 5 year period is up, or give you any reason to believe that the record may be relevant to a court action, then that record may not be destroyed or disposed-of.  If this happens, make sure you get legal advice about the disposition of the records, in order to avoid an allegation of spoliation.

There is a list of records that are exempt from the recordkeeping requirements; however  some of these records may need to be retained because of other reasons (including other regulatory systems and your own quality assurance system).  These include:

  • Inspection certificate (but some documents like a raw materials certification may need to be retained under other provisions like your written quality system);
  • Warranty certificate (but if it is part of the contract then it may need to be retained);
  • Packing material certificate (but certificates like a shipper’s declaration of dangerous goods may be required to retained under other laws);
  • Goods quality certificate (but some documents like 8130-3 tags may need to be retained under other provisions like your written quality system);

Don’t forget that other agencies may have other overlapping retention requirements and you must comply with all such requirements.  For example, under the State Department regulations, 22 C.F.R. § 123.22 of the International Traffic in Arms Regulations (ITAR) explains that the exporter of ITAR-controlled defense articles must file information prior to export and then under 22 C.F.R. § 122.5 must retain records for a period of five years from the expiration of the license or other approval.

As always, if you need help, contact us and we can work with you on developing the right systems for compliance!

Filed under Uncategorized Tagged with , , ,