There are a number of government programs and initiatives to facilitate trade. The following overviews are of those in place in the United States, Canada, and the European Union.
The International Traffic in Arms Regulations (ITAR)
Rather than a program to facilitate trade, the Department of State, Directorate of Defense Trade Controls (DDTC) registration is a requirement to conduct trade.
DDTC is responsibility for the control of the permanent and temporary export and temporary import of defense articles and services is governed primarily by 22 U.S.C. 2778 of the Arms Export Control Act ("AECA") and Executive Order 11958, as amended. The AECA, among these other requirements and authorities, provides for the promulgation of implementing regulations, the International Traffic in Arms Regulations (ITAR).
- Businesses required to register
All manufacturers, exporters, and brokers of defense articles, related technical data and defense services as defined on the United States Munitions List (USML) are required to register with the Directorate of Defense Trade Controls (DDTC). more +
Registration does not confer any export rights or privileges, but is a precondition for the issuance of any license or other approval for export.
The period of validity for new and renewal registrations is twelve months from the date of issuance. The average review time for a registration request is 30 calendar days.
DS-2032 Statement of Registration provides that company entities (e.g., subsidiaries, affiliates or joint ventures, etc.) may not register separately.
Per ITAR §122.1, any person who engages in the United States in the business of either manufacturing or exporting defense articles or furnishing defense services is required to register with DDTC. Manufacturers who do not engage in exporting must nevertheless register.
U.S. Distributors and other U.S. persons exporting parts and components and other defense articles and services outside of the United States are considered to be exporters. U.S. and Foreign (i.e., non-U.S.) Distributors and other U.S. and non-U.S. persons that broker defense articles or defense services must register as a broker.
Per ITAR §129.3, any U.S. person, wherever located, and any foreign person located in the United States or otherwise subject to the jurisdiction of the United States who engages in the business of brokering activities with respect to the manufacture, export, import, or transfer of any defense article or defense service subject to the controls of ITAR §121 or any "foreign defense article or defense service" (as defined in §129.2) is required to register with DDTC.
Note: Brokers may not obtain export licenses. U.S. Brokers that need to obtain export licenses must also submit a separate registration as an exporter.
- Foreign Military Sales (FMS) Freight Forwarders
Per ITAR §126.6(c)(6)(i), a U.S. freight forwarder under the Foreign Military Sales (FMS) program must register with DDTC as an exporter. The applicable embassy must designate a registered U.S. freight forwarder for their FMS transactions by sending a letter on embassy letterhead signed by a senior embassy official to the Office of Defense Trade Controls Compliance. If the designated U.S. freight forwarder is not the U.S. registrant but rather a U.S. affiliate listed in the registration, then the embassy must specify the designated U.S. freight forwarder.
- Registration Fees
The Department adopted a three-tier registration fee schedule in September 2008. Fees for registrants exempt from income taxation, including universities, may be reduced to the first-tier registration fee. more +
- The first tier is an annual flat fee of $2,250.00. The first tier fee is applicable to:
- First time registrants (Manufacturer, Exporters and Brokers);
- Annual registration renewals for Brokers (U.S. and foreign);
- Registrants who did not submit any license applications or request for authorization during the twelve month period, ending 90 days prior to the expiration of the current registration.
- The second tier is a set fee of $2,750 for registrants renewing their registration who have submitted and received a favorable authorization on ten or fewer license applications or request for authorization during a twelve month period, ending 90 days prior to the expiration of their current registration.
- The third tier is a calculated fee for registrants renewing their registration who have submitted and received favorable authorization on more than ten license applications or request for authorization during the twelve month period, ending 90 days prior to the expiration of the current registration. The fee calculation is $2,750 plus $250 times the total number of applications over ten. There is a provision for a reduced fee if the fee calculated above is greater than 3 percent of the total value of all applications. In such cases, the fee will be 3 percent of the total value of all applications or $2,750, whichever is greater.
- The first tier is an annual flat fee of $2,250.00. The first tier fee is applicable to:
- Registration Renewal
In the event a registrant allows their registration to expire, the registrant is solely responsible for ensuring exports or temporary imports do not occur until the registration is reinstated by DDTC. Registrations must be current to apply for licenses, other approvals, or to use ITAR exemptions.
- When Registration is No Longer Required
When a company is no longer in the business of manufacturing, exporting or brokering defense articles or defense services, the company must notify DDTC in writing at least 30 days prior to the expiration of registration.
- Changes in Registration Information
A material change is a change in information contained in the DS-2032 Statement of Registration. Examples of material changes include, but are not limited to, ineligibility changes, changes to name, address, or senior officers; the establishment, acquisition or divestment of a U.S. or foreign parent, subsidiary, or affiliate; a merger; or, the addition or deletion of USML categories. more +
- Material Changes—5-day Notification (Per ITAR §122.4(a))
All material change notifications must be reported to DDTC by the registrant within five days of the effective date.
- Sale or Transfer to Foreign (i.e., non-U.S.) Person—60-day Pre-Notification (per ITAR §122.4(b))
A registrant must notify DDTC 60 days in advance of an intended sale or transfer to a foreign person of ownership or control of the registrant or any entity thereof. Note that Committee on Foreign Investment in the United States (CFIUS) filings do not satisfy the ITAR 60-day pre-notification requirement.
- Ineligibility Change (Per ITAR §122.4(a)(1))
Within 5 days of the change, registrants must submit an ineligibility change if the registrant, a senior officer (as referred to in ITAR §122.2(b)(1)), or any member of the board of directors is indicted or convicted of violating any of the U.S. criminal statutes in ITAR §120.27, or is ineligible to contract with, or to receive a license or other approval to export or temporarily import defense articles or defense services from, any agency of the U.S. government.
- Registrant Name Change (Per ITAR §122.4(a)(2))
Registrant name change must be submitted within 5 days of the change.
- Registrant Address Change (Per ITAR §122.4(a)(2))
Registrant address change must be submitted within 5 days of the change.
- Registrant Senior Officer or Member of the Board Change (Per ITAR §122.4(a)(1)and(2))
Registrant senior officer or member of the board change must be submitted within 5 days of the change.
- United States Munitions List (USML) Category Change (Per ITAR §122.4(a)(2))
USML Category changes must be submitted within 5 days of the effective date.
- Changes to Ultimate Parent or Subsidiaries/Affiliates (Involved in ITAR-Related Activity) (Per ITAR §122.4(a)(2))
Changes to previously submitted information regarding the registrant’s ultimate parent, intermediate owners, subsidiaries, or affiliates involved in ITAR-related activity must be submitted within 5 days of the effective date.
- Mergers, Acquisitions, or Divestitures
60-day Pre-Notification (Per ITAR §122.4(b)): Registered entities involved in mergers, acquisitions or divestitures which result in a foreign (i.e., non-U.S.) person owning or controlling a registrant "or any entity thereof" are required to notify DDTC 60-days in advance of any intended sale or transfer. Note that Committee on Foreign Investment in the United States (CFIUS) filings do not satisfy the ITAR 60-day pre-notification requirement.
5-day Notification (Per ITAR §122.4(a)): Following merger, acquisition or divestiture, all material changes must be submitted to DDTC within five days of the effective date by registered parties.
- Liquidation and Bankruptcy (Per ITAR §122.4(a)(2))
Changes due to liquidations or bankruptcies regarding the ultimate parent, intermediate owners, subsidiaries, or affiliates involved in ITAR-related activity must be submitted within 5 days of the effective date.
- Material Changes—5-day Notification (Per ITAR §122.4(a))
Customs Trade Partnership Against Terrorism (C-TPAT)—U.S.
The U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) is the counterpart of the Canadian Partners in Protection (PIP). It was designed to enhance border security, combat organized crime and terrorism, increase awareness of customs compliance issues, and help detect and prevent contraband smuggling. C-TPAT is a voluntary program that requires participants to improve security of their supply chain and internal compliance standards to meet U.S. Customs security guidelines.
C-TPAT membership is a prerequisite for the FAST border program.
To maintain membership in C-TPAT, U.S. Customs and Border Protection mandates that member importers ensure that their business partners are actively analyzing their personnel, supply chain, and production and distribution facilities and that these facilities and internal processes are meeting or exceeding U.S. Customs' C-TPAT security requirements. Satisfying this mandate requires an on-going process to obtain, store, and validate data about suppliers' membership in C-TPAT, PIP and other security accreditation programs. This can prove to be a labor intensive administrative burden.
Partners in Protection Program (PIP)—Canada
Partners in Protection (PIP) is a Canadian government compliance and security certification. PIP is the counterpart of C-TPAT, the U.S. Customs-Trade Partnership Against Terrorism program. The program goals are similar—they seek to enlist private industry to help enhance border and trade chain security, combat terrorism, and detect and prevent smuggling.
PIP is one of the prerequisites for participation in Free and Secure Trade (FAST), the expedited border clearance program. Beyond access to the highly valued FAST program, PIP benefits include preferential treatment by other PIP members, enhanced supply chain security and corporate compliance.
To gain certification companies must meet government-set compliance and supply chain security standards.
Free and Secure Trade (FAST)—U.S. and Canada
The Free and Secure Trade (FAST) program is a joint initiative between the Canada Border Services Agency (CBSA) and U.S. Customs and Border Protection (CPB). It enhances border and trade chain security by ensuring compliance through certification and, in return, makes cross-border commercial shipments simpler and subject to fewer delays.
Eligible goods arriving for certified companies and transported by approved carriers using registered drivers are cleared into Canada or the United States with greater speed and certainty, resulting in reduced costs. Dedicated FAST lanes mean shorter waits. This is particularly important at the busiest crossings. Where there are no dedicated lanes, and in times of increased security alert, FAST shipments also jump queue, moving ahead of other shipments waiting to cross the border.
Authorised Economic Operator (AEO)—EU
An AEO is a business involved in the international supply chain which has proved themselves to be compliant and trustworthy, and where applicable, safe and secure. AEOs benefit from facilitations for customs controls or simplifications for customs rules or both, depending on the type of AEO certificate. There are three certificate types:
- Customs Simplifications. AEOs are entitled to benefit from simplifications provided for under the customs rules. more +
From 1 January 2009 businesses holding, or wishing to apply for, Customs Simplifications (for example CFSP, LCP or Simplified Export) are required to either hold AEOC/F status or meet the AEOC criteria. However the main benefits of AEO status are linked to changes in the Modernised Customs Code which is expected to be implemented June 2013. Examples of the proposed changes in the MCC include:
- Guarantee waivers—All businesses wishing to hold or apply for a customs special procedure (Inward Processing, Customs Warehouse, Temporary Storage etc.) will be required to have in place a guarantee. Holders of AEOC/F status will be entitled to a full waiver. Businesses meeting the AEOC criteria will also be entitled to the waiver.
- Single authorizations—all businesses wishing to hold or apply for a single authorization across more than one member state will be required to either hold AEOC/F status or meet the AEOC criteria.
- Self assessment and centralized clearance—similarly all business wishing to use these simplifications will be required to either hold AEOC/F status or meet the AEOC criteria.
- Security and Safety. AEOs are entitled to benefit from facilitations of customs controls relating to security and safety at the entry of the goods into the customs territory of the Community, or when the goods leave the customs territory of the Community.
Recognition enable businesses to have their consignments fast-tracked through customs controls. If a consignment is selected for examination they will receive priority over non-AEOs.
Businesses holding AEOS or AEOF status may opt to use a reduced data set when lodging entry or exit summary declarations. Carriers, freight forwarders or customs agents (who also hold AEOS or AEOF) and are acting on behalf of a customer holding the AEOS or F may also lodge entry or exit summary declarations with reduced data sets.
Mutual Recognition Agreements with third countries recognize the AEOS or F status and offer the relevant benefits to those businesses at their frontier.
- Customs Simplifications/Security and Safety. AEOs are entitled to benefit from both simplifications provided for under the customs rules and from facilitations of customs controls relating to security and safety (a combination of the above).
The introduction of AEO status is the EU response to the need to secure international supply chains and the introduction of Customs-Trade Partnership Against Terrorism (C-TPAT) in the USA. AEO is based on, and is compatible with, the World Customs Organization’s SAFE Framework of Standards which is being implemented by Customs authorities across the globe.
The criteria for a Customs simplification AEO also provide a common and harmonized set of criteria for granting customs simplifications across the EU. That is, once a Member State has granted a trader (economic operator) AEO status, this status is recognised across all Member States. more +
AEO was introduced by an amendment to the Community Customs Code in April 2005 - Council Regulation 648/2005, The Security Amendment. The detailed implementing provisions are contained in Commission Regulation 1875/2006 which was published in December 2006. AEO status entered into force on 1 January 2008 across the EU.
- Who can apply? more +
A legal entity established in the EU, whatever the size of their business, involved in activities covered by customs legislation and forming part of the international (trade outside of the EU) supply chain can apply for AEO status. This could include logistics operators, carriers, freight forwarders, customs agents, importers, exporters, manufacturers, ports and others. Unless a business is an airline or shipping company authorized to use simplified transit, legal entities established outside the EU are ineligible. A VAT group registration is not a legal entity.
Before completing the AEO application pack companies must hold an Economic Operator Registration and Identification Number (EORI). This number allows businesses to import or export goods into or out of the EU.
- UK Specifics more +
A group may apply for a UK AEO as long as all the legal entities are based in the UK. Any legal entity based in another Member State must apply in that country. Each legal entity must complete the C117 (one page application form) but need only supply one completed C118 (questionnaire). However, the systems, records and methods of assurance must all be similar. If the business is made up of a mix of operations, for example warehousing, manufacture and distribution if may be simpler to complete a questionnaire for each operation.
UK groups with businesses in other Member States should submit applications to the UK unless main accounts related to the customs arrangements, and part of the operations to be covered by the AEO status, are held in a different Member State.
Operators intending to apply must be:
- financially solvent (have the ability to pay their legal debts)
- compliant with customs requirements
- able to demonstrate satisfactory management systems
and, if applying for the security status:
- compliant in respect of security and safety standards
- Conditions and criteria for granting a certificate more +
Criteria include an appropriate record of customs compliance, satisfactory management systems that allow appropriate customs controls and proven solvency. Additionally for Security and Safety, it includes details of the security and safety standards to be met.
- UK Specifics more +
Customs Self-Assessment (CSA)—Canada
The Canada Border Services Agency (CBSA) launched the Customs Self-Assessment (CSA) program in December 2001. The program was developed to enhance the Agency's effectiveness in processing an increasing volume of goods crossing the border. The program provides low-risk, pre-approved companies, which have a history of good compliance, with an expedited border clearance process (FAST) and a streamlined accounting and payment process for imported goods. CSA improves the CBSA's understanding of its commercial clients and eliminates many of the traditional import impediments which means processing low-risk shipments from the U.S. and Mexico more quickly. Importers approved to participate in the CSA program also enjoy the benefits of:
- a streamlined accounting and payment process for all imported goods; and,
- a streamlined clearance process for eligible goods when an approved carrier and driver registered with the Commercial Driver Registration Program (CDRP) are involved.
CSA also means that businesses can take better advantage of their own business systems. The streamlined accounting and payment process gives importers the ability to use their own business systems and processes to trigger trade data and revenue reporting. For Canadian companies whose main concern is expediting shipments into the U.S., the benefit of the Canadian Customs Self-Assessment (CSA) program is access to the joint U.S. Canada FAST border clearance program. Faster clearance means faster delivery at a lower cost. more +
The CSA border clearance option is available only to imported goods arriving from the United States. The number of CSA participants, the number of CSA releases and the proportion of the total dollar value of imports represented by CSA clients continue to grow.
For goods entering Canada by highway mode, CSA-approved importers and carriers must use drivers who are registered under the Commercial Driver Registration Program (CDRP) or the Free and Secure Trade (FAST) Commercial Driver Program. The FAST Commercial Driver Program is available to drivers who are citizens or permanent residents of Canada and to citizens or legal aliens of the U.S. who meet specified requirements. FAST/CDRP drivers have access to designated FAST express lanes upon arrival at the border and to the dedicated FAST primary inspection line (PIL). At all automated ports of entry (POEs), FAST/CDRP drivers hauling CSA-approved goods can benefit from the CSA expedited release process in any lane (FAST and non-FAST).
When a driver arrives at the PIL, border services officers (BSOs) scan the driver’s FAST/CDRP card and other bar codes into the Accelerated Commercial Release Operations Support System (ACROSS) to validate the status of the CSA-approved importer, the CSA-approved carrier and the FAST/CDRP registered driver. The shipment is then designated as “authorized to deliver” (i.e. cleared). Shipments cleared through the CSA process, like all other shipments, may be subject to examination; although, in principle, CSA shipments are subject to fewer examinations than non-CSA shipments. CSA clients found to be in contravention of any acts or regulations are subject to penalties under the Administrative Monetary Penalty System (AMPS).
Once the goods are cleared for entry, the driver delivers the goods to the importer, who provides proof of transfer via a delivery receipt to the carrier. Upon receipt of the goods, the importer assumes liability for the shipment. At this point, the goods are considered released and the time frame for accounting to the CBSA commences. As part of the CBSA’s efforts to streamline customs reporting, importers pay duties and taxes using a monthly revenue summary form to summarize adjustment amounts and interest owing. After the amounts owing (debits) and amounts refunded (credits) are calculated, the importer will send the net amount to the Receiver General for Canada through a financial institution on the last day of each month.
- CSA application process
During the application process, the CBSA conducts checks to ensure that applicants are low risk (i.e. have a good compliance history) and completes a review of their accounting and payment systems to ensure that applicants meet program requirements. If they do not, the CBSA identifies necessary system modifications. The approval process includes: more +
- Part I, companies must undergo a risk assessment to demonstrate that they have a history of compliance;
- Part II, applicants must show that their business processes as well as books and records have the necessary linkages, controls, and audit trails to support CSA requirements; and
- Part III requires the signing of a Summary of Program Requirements which outlines specific requirements, once the application is approved.
Importer Self-Assessment (ISA)—U.S.
ISA is a voluntary approach to trade compliance. Developed by Customs and Border Protection (CPB) in 2002 the Importer Self-Assessment (ISA) program provides the opportunity for importers who have made a commitment of resources to assume responsibility for monitoring their own compliance with CBP laws and regulations in exchange for benefits. more +
ISA PROGRAM BENEFITS
- Guidance as Requested
Upon request, CBP will provide guidance in various areas such as compliance issues, data analysis, risk assessment, self-testing and internal controls. The appropriate CBP discipline will be assigned to provide the proper guidance.
- Coverage of Multiple Business Units
CBP will provide program benefits for multiple business units as defined by importer of record numbers shown on the MOU. The participant will be required to submit a revised MOU which should list the existing and the newly added business units. If the added business unit entails Drawback and/or FTZ operations, additional information will be required, i.e., modified ISA questionnaire and CBP procedures/internal controls manual which cover those processes.
- Removal from Comprehensive Audit Pools
The importer will be removed from Regulatory Audit's audit pool established for focused assessments. Importers will be removed from the RA’s audit pools for Drawback and Foreign Trade Zones if they request to have these programs included in the ISA program.
- Access to Key Liaison Officials
Participants will have access to key liaison officials to discuss any concerns relative to the ISA program.
- Designated National Account Manager
All ISA participants will be assigned a national account manager (NAM). The NAM is the official CBP point of contact for all trade related matters and maintains on-going communication with the ISA participant. The NAM coordinates the ISA participant’s activities to promote uniformity when needed and works with the participant to resolve issues that may arise. The NAM has the primary responsibility for oversight of the ISA account, which includes monitoring, consulting, identifying and analyzing potential trade compliance risks. The NAM looks for systemic/repetitive issues and for ways to increase efficiencies for the account and CBP. The NAM shares its findings with the account and addresses issues as needed.
- Access to the Participant’s Entry Summary Trade Data
All ISA participants will be provided, on a quarterly basis, a copy of the Importer Trade Activity (ITRAC) data free of charge. The data will only include the import transactions related to the IOR number(s) that is listed on the MOU. The data can be used to review and analyze import activity, as well as, identify areas of risk, etc.
- Expanded Benefits of Prior Disclosure
With regard to prior disclosures, if CBP becomes aware of an error in which there is an indication of a violation of 19 U.S.C. 1592 or 1593a, CBP will provide a written notice to the importer of such error and allow 30 days from the date of the notification for the importer to file a prior disclosure pursuant to 19 CFR 162.74. This benefit does not apply if the matter is already the subject of an ongoing CBP investigation or fraud is involved.
- Mitigated Penalties and Liquidated Damages
By fulfilling responsibilities under the ISA program, the participant will be taking actions, which may be considered as mitigating factors for possible penalties or liquidated damages.
- Greater Business Certainty
Participation in the ISA program provides greater business certainty because a reliable system of internal controls ensures compliant transactions. Based on CBP experience, importers who implement effective internal controls are able to provide more accurate and reliable entry data and a better utilization of resources.
To be eligible for ISA, the importer must be a known business to CBP and a resident party of the United States. To be a known business means that the importer has imported goods into the United States during the two years prior to the date the application is submitted.
The business entity must be physically established, located, and managed within the United States. It carries on business and has the general authority to do so without the approval of another person outside the United States. The importer must maintain separate books and records for its U.S. operations, prepare separate financial statements, maintain accounts for the imported goods, and is responsible for payment of import duties and taxes. In addition, an importer must: more +
- Be a member of C-TPAT;
- Complete an ISA Memorandum of Understanding (MOU) and Questionnaire;
- Agree to comply with all applicable CBP laws and regulations;
- Maintain an internal control system that is designed to provide reasonable assurance of compliance with CBP laws and regulations:
- Perform annual risk assessments to identify risks to compliance with CBP laws and regulations.
- Design and execute annual self-testing plan in response to identified risks.
- Implement corrective action in response to errors and internal control weaknesses disclosed by self-testing
- Maintain results of testing for three years and make test information available to CBP upon request;
- Make appropriate adjustments to internal control;
- Maintain an audit trail from financial records to CBP declarations, or an alternate system that ensures accurate values are reported to CBP.
- Make appropriate disclosures.
- Submit an annual notification letter to CBP in accordance with the requirements.
- Notify CBP of major organizational changes as soon as possible
The importer may meet the requirements of the ISA program by using internal resources or using an objective third party exercising due diligence and reasonable care. The ISA program is primarily based on the development and use of established business practices and internal control designed specifically for an importer's CBP operations. The importer may structure internal controls and procedures to meet its individual needs.