What You Should Know About Dealing With Routed Export Transactions
Many industries enable organizations to enjoy cross-border, international relationships, but not everybody understands the work that goes into creating successful import and export transactions. While compliance is difficult with any routed export transaction, companies that aren't prepared for proper regulatory checks will likely endure an unpleasant encounter with the government that can be costly in terms of time and money.
What Is a Routed Export Transaction?
In short, a routed transaction occurs when the Foreign Principal Party in Interest (FPPI) initiates goods to be moved from the United States to a foreign country while dedicating a U.S. agent to oversee the transaction and guarantee proper FPPI export compliance on its behalf. This often occurs in a “Drop Ship” environment, in which” company A” does not have stock and sends the order to “company B” for fulfillment. It is important to note that the USPPI, or the person or party receiving the financial benefit from the transaction always files the EEI. More on this later.
This isn't something that should be done by inexperienced companies or individuals. The laws that govern international trade are strict and cumbersome. The penalties associated with non-compliance can be incredibly expensive. Before you have someone else file an Electronic Export Information (EEI) form on behalf of your company, it's imperative to ensure the person responsible for this filing is looking out for the best interest of your company, as minor mistakes could lead to costly situations.
Who Oversees Routed Export Transactions?
Each routed export transaction is overseen by the Foreign Trade Regulations of the U.S. Census Bureau. Here are some definitions you should understand if your organization undertakes overseas purchases or sales of goods:
- U.S. Principal Party in Interest (USPPI): A USPPI is the person or organization tasked with providing the selling agent the important details he or she will need to assure a legally binding transaction across international borders. This person or entity must maintain supporting documents for at least five years from the date of export to guarantee proper compliance.
- Authorized Agent: An authorized agent acts on behalf of the buyer or seller to confirm all legal documents are completed, filed and maintained appropriately.
- Foreign Principal Party in Interest (FPPI): An FPPI provides the agent who's authorized with the Electronic Export Information (EEI) with the details he or she needs to complete power of attorney or written authorization to make certain the transaction is able to be completed.
How Do You Help Guarantee Routed Export Transaction Compliance?
Rely on professionals. The last thing you want is to discover your foreign trade transactions don't line up with federal compliance standards. You could be hit with substantial penalties and fines. Regulations change constantly. It's best to outsource your compliance needs to experts who keep up on international trade transaction standards as part of their day-to-day tasks.
Is your organization set up to fulfill international trade transaction requirements? If not — or if you have no idea — reach out to Vigilant today. We're ready to help you understand how to maintain compliance with each of your foreign trade transactions.