Think Before You Ship: Who, What, and Where?

Congratulations! You received your first order from a foreign customer. You want to fulfill and deliver it as soon as possible to encourage repeat business. But before you package and slap on the shipping label, you might want to consider exactly what you are shipping, what its possible uses are, and which countries it will travel through en-route to its final destination.

Recently, a small U.S. manufacturer and exporter of metal alloys posed the question: “Are there any specific re-export controls of a U.S. sourced zirconium alloy used as a component in a finished product manufactured in Canada which in turn is exported to its ultimate destination in China?” If your jaw hit the floor as mine did, you might be thinking they would only be asking such a specific question for one reason. It already happened.

The root problem in the above scenario is the U.S. supplier was asking the wrong questions at the wrong time. Before fulfilling the order, they should have asked whether zirconium is controlled by any U.S. export regulations.  They would have discovered that zirconium is controlled by the International Trafficking in Arms Regulations (ITAR) as a Category V item (Explosives & Propellants) and by the Missile Technology Control Regime (MTCR) Annex to the ITAR as a Category II item when it is granulized to a certain size. They also would have discovered that zirconium is controlled by the Export Administration Regulations (EAR) when it is in a form that can be used as a component in a nuclear reactor.

As for the question about re-export controls, that should have been asked before shipping too. The U.S. supplier would have learned that their export license should contain the following statement as outlined under ITAR section 123.9 paragraph b:

‘‘These commodities are authorized by the U.S. Government for export only to [country of ultimate destination] for use by [end user].  They may not be transferred, transshipped on a non-continuous voyage, or otherwise be disposed of, to any other country or end-user, either in their original form or after being incorporated into other end items, without the prior written approval of the U.S. Department of State.’’

Translated, that means an ITAR controlled item without Department of State approval cannot be shipped to a Canadian customer who intends to use it as a component in a manufactured product which will then be exported to China.

Companies who export products overseas must be aware of the ITAR, MTCR, and the EAR and know how they relate to their exports.  As a rule of thumb, companies should consider the following before fulfilling a new overseas order:

1.  Is the product you’re shipping a possible dual-use item that can be used for both civilian as well as military purposes?  If so, is the possible military application related to missile, nuclear, or unmanned aerial vehicle technology? This is not always clear. For example, the same microchips used in a video game console could be considered dual-use if encased in a hardened exterior.

2.  What is the specific classification (Commodity Jurisdiction) of the item on the Commerce Control List (CCL) of the EAR, and does the item appear in the United States Munitions List (USML) of the ITAR or in the MTCR Annex?  A quick check of the following lists might help to quickly identify items that are clearly covered:

If still unsure about the classification of a specific item, exporters can submit a Commodity Jurisdiction (CJ) request to the State Department. Information about CJ requests is available on the State Department’s Directorate of Defense Trade Controls (DDTC) web page.

3.  Where is the final destination of the export and who is the end-user? Compliance is not just about the initial transaction between the U.S. supplier and their immediate customers. Due diligence on the ultimate destination and possible intermediaries is vital. Some countries, entities, and individuals are off-limits for doing business with U.S. companies, and some of those entities may also have available exemptions.

So before you say bon voyage to your next overseas shipment, it might be a good idea to think about how your product fits into the big picture of the supply chain beyond the transaction between just you and your immediate foreign customer.  The above suggestions are not meant to substitute for legal advice, but rather they are meant to highlight the importance of considering export compliance before shipping seemingly benign products overseas. Please share your thoughts on this topic below.

Sources for Planning Business Operations in Africa

Every country and region has unique challenges and risks that can significantly impact business operations. Africa is arguably the most complex continent with at least 1,000 different languages, 400 major ethnic groups, 54 countries, and nearly all the major world religions represented within. It has the greatest disparities in income between demographic groups and countries, and it is also the poorest continent in the world as measured by per capita GDP. Doing business in Africa can be challenging to say the least, but for those already operating in the country or planning to do so, this week’s lessons learned provides some sources of information that business planners, traveling teams, and logisticians may want to consult for information about Africa.

As mentioned above, African countries have complexities that other countries do not. When preparing to do business on the continent, planning and research must be more extensive than if doing business in more developed countries in Europe and Asia. Not only should planning be more extensive, but your plans will also likely be significantly different compared to non-African countries.

How will environmental conditions, low literacy rates, lack of infrastructure, human health problems, and widespread disease impact your business plans in Africa? For example, if your company will be operating manufacturing equipment or diesel machinery in the dusty conditions of the Harmattan-affected countries in West Africa, maintenance costs and downtime will be significantly higher than almost anywhere else. Also, literacy rates below 50% in most sub-Saharan countries will require user manuals and training materials that include more graphics and pictures when the audience is local.

The factors mentioned above may also affect business in non-African countries too and sources of information listed below can be helpful outside of the continent.  For simplicity sake and to offer sympathy for those confronted with planning a new venture in Africa, the sources below will direct readers to information specifically on Africa when possible.

Resources for general country information:

Library of Congress –
The Library of Congress website provides access to video, sound recordings, maps, manuscripts, newspaper articles, and other publications that can provide a genuine understanding of African art, culture, geography, politics, and other information.

U.S. Department of State’s Bureau of African Affairs –
The State Department’s website provides general country information that you can search by topic or bureau.  It includes information from the Overseas Security Advisory Council (OSAC) on crime, safety, and current travel warnings.  It also provides historical information and fact sheets for specific countries.

Central Intelligence Agency’s World Factbook –
The Factbook is very user-friendly, and its database allows for instant cross-comparison of statistics by country.  It is an excellent source for general information regarding the history, society, government, economies, infrastructure, militaries, and transnational issues of individual countries.

U.S. Department of Commerce website –
The U.S. Department of Commerce provides economic data on their website, and they post information on existing and pending foreign trade agreements, guides on how to conduct business transactions in various countries, and economic statistics and forecasts on both countries and regions.

Country and Regional Travel and Logistical Information:

Lonely Planet Guides –
The Lonely Planet Guides are usually updated every few years and are available for the entire African continent, specific sub-regions (i.e., the East Africa Guide), and some individual countries; these feature cultural and language tips, information on local and seasonal weather patterns, brief country histories, hotel recommendations, country and city maps, and a wide range of other information.

Michelin Series Maps –
Michelin Maps often provide the most detailed information on African road networks for many countries.

Socio-economic, health, disease, and country assistance program information:

U.S. Agency for International Development (USAID) –
USAID provides country program data linked to particular assistance programs, and it has wealth of information about socio-economic issues impacting specific countries.

United Nations –
The UN provides mission reports and statistics on past and ongoing peace support operations in Africa.

African Union –
The African Union provides mission reports and statistics on past and ongoing peace support operations in Africa.

Joint United Nations Program on HIV/AIDS –
The Joint UN Program on HIV/AIDS publishes statistics, descriptions, and other data concerning the effects of endemic African diseases that may be useful for developing or justifying humanitarian assistance programs or Defense Health Program efforts.

Centers for Disease Control and Prevention (CDC) –
The CDC provides detailed information on various types of African diseases such as Trypanosomaisis and Ebola, and they provide information on countermeasures used to treat and prevent such diseases.


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