BIS Publishes New "Best Practices" for Industry to Guard Against Unlawful Diversion by Transshipments

On August 31, 2011, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) published a new "best practices" guide for to help guard against the diversion of dual-use items shipped to a transshipment "hub," or to any intermediate country before being shipped to the country of ultimate destination. BIS states that these best practices were developed in conjunction with U.S. industry. 

In the announcement, BIS stated:

Transshipment is a routine and growing part of legitimate world trade with logistical benefits, but also can be used illegally to disguise the actual country of ultimate destination. Transshipment practices may also create a risk that items are diverted to unauthorized end-users or end-uses.

"These new best practices provide a formidable tool to help secure trade through transshipment hubs," said Assistant Secretary for Export Administration Kevin J. Wolf. "BIS is committed to working with industry to adopt best practices critical to safeguarding U.S. national security interests."

The following new best practices will help exporters, re-exporters, freight forwarders and other parties to comply with US export control regulations and laws and augment BIS's Export Management and Compliance Guidelines. BIS is encouraging industry to:

  • Pay heightened attention to BIS's Red Flag Indicators and communicate red flag concerns internally.
  • Seek to utilize only those trade facilitators and freight forwarders that administer sound export control management and compliance programs that include transshipment trade best practices.
  • Obtain detailed information on the credentials of foreign customers to assess diversion risk.
  • For routed transactions, establish and maintain a trusted relationship with parties to mitigate risks.
  • Communicate export control classification and destination information to end-users and consignees on government and commercial export documentation.
  • Provide the ECCN or the EAR99 classification to freight forwarders for all export transactions and report the classifications in the Automated Export System (AES), if applicable.
  • Use information technology to the maximum extent feasible to augment "know your customer" and other due-diligence measures in combating the threats of diversion and increase confidence that shipments will reach authorized end-users for authorized end-uses.

This set of best practices, aimed at U.S industry, supports one of ten best practices suggested by the State Department's Bureau of International Security and Nonproliferation to foreign governments at the Global Transshipment Seminar in Dubai, United Arab Emirates, in March 2011. That best practice suggestion encouraged industry to develop stronger internal compliance programs, conduct focused outreach, and raise awareness of export control obligations.

The 2011 "Best Practices for Preventing Unlawful Diversion of U.S. Dual-Use Items Subject to the Export Administration Regulations, Particularly through Transshipment Trade" are posted on the BISwebsite.