Three steps

The US Departments of State and Commerce have recently revised their requirements for Destination Control Statements (“DCS”) that must accompany exports and re-exports of US-controlled items. This change reflects the increasing frequency of shipments being made containing items controlled under both the US International Traffic in Arms Regulations (“ITAR”) and Export Administration Regulations (“EAR”), particularly as a result of the US’ ongoing Export Control Reform (“ECR”) initiative.

DCS requirements have been harmonised…

Both the ITAR and EAR require a DCS to be included on export documents accompanying shipments that include items controlled under these regulations. The purpose of the DCS is to alert recipients of US-controlled items that ITAR and/or EAR controls apply to those items and that diversion of the items to unauthorised destination and/or end users is forbidden.

The new harmonised DCS, which will become effective as of November 15, 2016, is as follows:

“These items are controlled by the US government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s) either in their original form or after being incorporated into other items, without first obtaining approval from the US government or as otherwise authorized by US law and regulations.”

Under both sets of regulations, the DCS should be included on the commercial invoice but no longer needs to be stated on the bill of lading, air waybill, or any other shipping documents.

…But important differences remain

Despite the harmonised language, there are several differences in the ITAR and EAR requirements relating to the use of these statements and other information that would be required on the commercial invoice. Key differences include the following:

ITAR requirements

EAR requirements

The commercial invoice of items pursuant to an ITAR licence must contain the following information:

1.       Destination Control Statement

2.       Country of ultimate destination

3.       Name of end-user

4.       Licence/ other approval number or applicable licence exemption

Exports of EAR99 items or items exported under licence exceptions BAG or GFT do not require a DCS on their commercial invoice.

However, all other tangible exports (including items requiring no licence) need the following information on the commercial invoice:

1.       Destination Control Statement

2.       Country of ultimate destination

3.       Name of end-user

4.       Licence/other approval number or applicable licence exemption

5.       Export Control Classification Number (ECCN)

6.       ECCNs for each 9X515 item and 600 series item

Planning ahead
US and non-US businesses involved in shipments of US-controlled items should make sure that internal processes and systems are updated to address this small but important change. Specific areas to consider include: revising internal processes and documented procedures for shipment documents; updating IT systems and templates used to generate paperwork and manage shipments; and training relevant personnel in logistics and supply chain functions on the new requirements.

Stacey Toder Feldman is a Director in Deloitte's Global Export Controls and Sanctions team.
Jennifer McMillan is a Senior Associate in Deloitte's Global Export Controls and Sanctions team.