Supporting Non-US Buyers (Routed Exports)

If you are a U.S. company and you sell goods in the U.S. to a foreign buyer, then there are often export compliance obligations that follow that transaction even if you are shipping to a domestic location or selling for pick-up at your own location. If the goods will eventually be exported, then you may have a routed export transaction that imposes certain compliance obligations.

One common fact pattern where this arises is where a foreign buyer purchases parts from a U.S. distributor, and then asks for the parts to be shipped to a freight forwarder in the United States. If there is a reason to believe that the result of this transaction will be an export, then you may have a routed export transaction.

What is a Routed Export?

A routed export transaction is defined in the U.S. regulations as “A transaction in which the FPPI authorizes a U.S. agent to facilitate export of items from the United States on its behalf and prepare and file the EEI.” This definition may leave many of our readers wondering, “What?”

More generally, if a U.S. distributor sells aircraft parts to a non-US buyer, for either pick-up at the distributor’s facility or for delivery to a U.S. location, but the seller knows or reasonably should know that the parts are going to be subsequently exported to the ultimate consignee, then it is likely that this is a “routed export transaction.”

In fact, any fact pattern that suggests that the sale will eventually lead to an export is likely to imposed compliance obligations on the seller.

It may appear at first glance that the transaction is a domestic one, but if the seller knows that the parts are going to get exported, then the seller still has some responsibilities under the regulations. The seller in such a case will typically be defined as the United States Principal Party In Interest (“USPPI”). The USPPI is typically the U.S. party that receives the money (the benefit) from the transaction. Normally, the USPPI is responsible for filing the Electronic Export Information (“EEI”), but routed exports have special rules.

In a routed export transaction, the buyer or other party that will get the benefit of the purchase transaction is the Foreign Principal Party In Interest (“FPPI”). The FPPI may select an authorized agent in the United States to (1) serve as the exporter and (2) file the EEI.

Routed Export Process for the U.S. Domestic Company

First confirm that you have a transaction that qualifies. If your commercial invoice lists a final destination outside of the United States then YOU are probably the exporter, which means that you probably retain the obligations for export compliance (including filing the EEI). If you sold to a non-US customer, but your final destination in your transactional documents is in the United States, then your transaction is more likely to qualify as a routed export. Ultimately, a key question is whether there is an expectation that the FPPI will select an authorized agent to file the EEI.

Second, clarify to the other parties that your expectation is that this is a routed export transaction. One way to do this is to declare the transaction as a routed export transaction in the relevant documentation that ships with the aircraft parts (such as the commercial invoice). Effective communication can help make sure that everyone remains in compliance. If it is not clear who the authorized agent is going to be, then you may want to ask the foreign buyer to identify the authorized agent. This will become important for the fourth step.

Third, you may want to make sure that there is a clear written understanding that the FPPI (through its authorized agent) is responsible for export compliance, including any export licensing that may be necessary. As the USPPI you retain the responsibility for determining licensing requirements and obtaining license authority unless you obtain from the FPPI a written statement that the FPPI is expressly assuming responsibility for determining licensing requirements and obtaining license authority, making the FPPI’s authorized agent the exporter for regulatory purposes. This written statement can cover multiple shipments. This written statement may be part of an end use / end user statement that you ask the FPPI to sign as part of the transaction (we recommend such a statement to clarify compliance with the foreign aircraft rules, as well).

Fourth, as the USPPI, you will have a regulatory obligation to communicate certain information to the FPPI’s “authorized agent.” This is often communicated in a document that accompanies the transaction, and the document may be called a “shipper’s letter of instruction” or SLI. The information can also be communicated to the authorized agent in other ways, such as by email. The USPPI must communicate the following information to the authorized agent:

• Name and address of the USPPI (you).
• USPPI Identification Number (typically your company’s EIN, but your company can apply for and receive a separate identification number).
• State of origin (this is the U.S. State from which the transaction started).
• Foreign Trade Zone identification, if applicable.
• Commercial description of commodities.
• Origin of goods indicator: Domestic (D) or Foreign (F).
• Schedule B or HTSUSA, Classification Commodity Code.
• Quantities/units of measure.
• Value.
• Export Control Classification Number (ECCN) or sufficient technical information to determine the ECCN.
• All licensing information necessary to file the EEI for commodities where any U.S. government agency issues an export license for the commodities. This must also include any license exemption or license exception that will be used for the transaction.
• Any other information that you know will affect the determination of license authorization.

One problem we’ve seen is ‘form-SLIs’ that you get from third parties that do not include all of the above data elements. Even if you are completing someone else’s form, if you are the USPPI then you still have an obligation to provide all of the above information to the authorized agent.

Finally, you should follow-up with the authorized agent to make sure that everything happened correctly. As the USPPI you do not have a regulatory obligation to do this, but if you are the USPPI and you ask the authorized agent, then the authorized agent is required to provide you with (a) the 12 data elements (above) that it actually filed (so you can tell if it made changes), (b) the date of export as submitted through the AES, (c) the filer name, and (d) the international transaction number (“ITN”). Confirming that everything went as expected can help to ensure continued compliance (or it can help to identify unexpected non-compliances early enough to allow correction or voluntary self-disclosure).

You should be able to verify this information in ACE system to the extent your company was listed as the USPPI. Try using one of the standard reports, such as the AES-202 report which shows the transactions where your company has been listed as a USPPI, or the AES-203 report which shows the routed transactions that named your company as the USPPI, to help audit your routed export transactions.