The Destination Control Statement is a legal statement required by the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR) stating that the goods you are exporting are destined to the country indicated in all the shipping documents. It is a necessary legal boundary clarifying what happens to shipments, and it essentially states that the buyer isn’t going to take the goods and forward them to another country.
Until recently, the statement required by the Bureau of Industry and Security (BIS) under the EAR was different than the statement required by the State Department under the ITAR. That changed in November 2016 after both agencies published notices in the Federal Register of a single, harmonized statement that can be used by exporters regardless if their goods fall under the jurisdiction of BIS or State.
Not everyone appears to have gotten the message. Just this week a subscriber to the International Trade Blog sent me a copy of the Shipper's Letter of Instruction (SLI) that a large freight forwarder asked her to complete. On this SLI, the shipper was asked to choose between the old EAR and ITAR versions of the Destination Control Statement.
Both sets of regulations were also adjusted to require that the Destination Control Statement need only appear on the commercial invoice and not on other export documents that accompany the merchandise from the U.S. to its ultimate destination abroad. However, the new ITAR regulations also requires that this new statement, or a reference to this statement, be included within licensing, manufacturing and distribution agreements.
When Is the Destination Control Statement Required?
According to BIS, all exported items listed on the Commerce Control List that are not classified as EAR99 or are eligible for license exception BAG or GFT require a Destination Control Statement. Exceptions to the Destination Control Statement are listed in Part 758.6 of the EAR, and you can contact the U.S. Department of Commerce, an attorney, or your freight forwarder to learn more.
While it’s not a requirement for all transactions, including a Destination Control Statement on every transaction is a good precaution in order to protect yourself in the event that merchandise you sold to a domestic purchaser is unexpectedly exported from the United States.
The new, harmonized Destination Control Statement must include the following statements at absolute minimum:
These items are controlled by the U.S. 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 U.S. government or as otherwise authorized by U.S. law and regulations.
Change to Standard Language on BIS Licenses
On December 15, 2016, BIS implemented a change to the language that appears on export licenses. According to the BIS website:
The Export Administration Regulations require you to take the following actions when exporting under the authority of this license.
A. Record the Export Control Classification Number in the block provided in the Automated Export System (AES).
B. Record your validated license number in the block provided in AES.
C. Place a Destination Control Statement on all commercial invoices for shipments of items on the Commerce Control List.
Preventing Potential Export Violations
Imagine you’re exporting controlled goods to the UAE. From there, without your knowledge, the goods are forwarded to Iran. There are no restrictions between those countries, and the Iranian company has a division in the UAE. In this case, you are breaking the law (whether you mean to or not).
It’s up to you to do your due diligence so a situation like this doesn’t occur. If a buyer is telling you they won’t transfer, but you have reason to believe the goods will get forwarded, you have to act accordingly.
- Be aware of compliance regulations.
- Familiarize yourself with laws and regulations that may impact your area of exporting.
- Know your customers.
- Know what penalties you face for breaking the law.
What happens if you don’t include a Destination Control Statement when required?
Quite simply, you’re breaking the law. You could face civil and criminal fines and penalties, including denial of export privileges, exclusion from practice, and even jail time. It’s not worth it to risk it, especially when it’s relatively simple to get help with your exports.