To say that import and export regulations are complicated is a lot like saying the sky is blue. It is obvious to anyone involved in international trade. Unfortunately, the law offers so many intricate and nuanced details that it is easy to get into trouble despite trying to do everything right. Take the Destination Control Statement (DSC).
The DSC is a classic example of something that causes importers and exporters a lot of trouble. It is required on the invoices of almost all goods regulated under the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR). The statement is intended to prevent controlled goods from ultimately being exported to destinations not reported in export documents.
The Harmonized DSC
Ohio-Based Vigilant Global Trade Services says that different DSCs were required for EAR and ITAR prior to 2016. However, the Bureau of Industry and Security (BIS) got together with the State Department to create a harmonized DSC. It replaced the separate statements previously utilized.
Their cooperation also led to changes in how the DSC was practically applied. Prior to harmonization, a DSC had to be included in all export documents. Now, it only has to be printed on the invoice of the products in question. That being said, ITAR requires that a reference to the new harmonized DSC be included in distribution, licensing, and manufacturing agreements as well.
Exemptions and Liability
A limited number of goods regulated by EAR are exempt from the DSC under EAR99 rules. However, it is still a good idea to include the statement when shipping such goods. Likewise, any controlled goods sold domestically should have the DSC included. It is all about liability.
A manufacturer might sell controlled goods domestically with the understanding that such goods will remain in the U.S. But if they end up being exported anyway, the manufacturer’s failure to include a statement constitutes a violation of law, even though said violation is one of ignorance.
Another potential violation involves exporting to one country, only to have the importer turnaround and export to a sanctioned country, entity, or person. Manufacturers are ultimately held liable if goods were originally shipped without the DSC.
Due Diligence Is a Must
Including a DSC on all controlled goods is the first step in avoiding liability and criminality. But it may not be enough in some cases. That is why due diligence is a must whenever manufacturers are exporting EAR- or ITAR-controlled goods. It is a matter of common sense to:
- know and understand all applicable regulations
- know and understand rules specific to a company’s exported goods
- know and understand how importers will use exported goods
- know and understand the penalties imposed for EAR and ITAR violations.
If a manufacturer’s controlled goods require the DSC on export, failing to include the statement is automatically a violation of law. At the very least, civil penalties would apply. A given case may turn criminal if authorities believe that a manufacturer purposely and willfully failed to include the DSC.
All Your Ducks in a Row
As a manufacturer, it is up to your company to make sure all its ducks are in a row. It is not good enough to claim ignorance in the event of trade compliance violations. Regulating bodies and courts put the responsibility of compliance wholly on those parties that import and export.
The DSC is just one example of a trade compliance regulation that is too easy to violate. Be sure your company fully understands its responsibilities in this regard. If your goods require DSCs, make sure you are including them.
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