© [2019], NCBFAA, Washington D.C. Monday Morning eBriefing. Originally published [07/29/2019]. www.ncbfaa.org. Reprinted by permission.

On July 22, the NCBFAA filed comments on the Department of the Treasury’s Office of Foreign Assets Control (OFAC) interim final rule that makes changes to the agency’s Reporting, Procedures and Penalties Regulations. In our submitted comments, the NCBFAA argues that these new changes will impose considerable reporting burdens on our members, as well as additional paperwork burdens on OFAC. The comments focus on four major aspects in the proposed 501.604 section changes regarding “Reports on Rejected Transactions.” The four aspects are as follows: 

  1. The lack of a clear definition for the term “rejected transaction” and the uncertainty facing forwarders who need to determine how to comply with the ambiguous rules for rejected transactions;
  2. Forwarders’ inability to report all of the required information for some rejected transactions, as forwarders may not always be aware of the nature of the cargo or its value at the time of rejection; and
  3. The hourly reporting burdens on forwarders and the volume of reports that OFAC may receive on a weekly basis; and
  4. The unnecessary nature of these new reporting requirements given that forwarders already work closely with U.S. government agencies and commonly refer inappropriate requests to the appropriate enforcement agencies.

 In regard to our first point, the NCBFAA believes that new rules and existing guidelines do not provide sufficient guidelines for forwarders to determine when the reporting requirement is triggered for a rejected transaction. This would be remedied if OFAC were to define the “transaction” more clearly and that the agency amends the regulations or provide substantive guidance with appropriate definitions and guidelines for determining when a reportable, rejected transaction has occurred. In many cases, forwarders’ may not be able to provide OFAC with all of their required information regarding rejected transactions, as information detailing the nature or value of goods is only received after the forwarder has agreed to move the client’s cargo. The NCBFAA is suggesting that 501.604(a) be amended to say that a reportable event is only triggered if a U.S. company receives all of the “required information to be reported” or that §501.604(b) be amended so that U.S. companies are only required to report informational items that are in their possession. Without a proper clarification of what a reportable rejected transaction looks like, the NCBFAA believes OFAC may receive thousands of rejection filings from forwarders every week. This would become a logistical nightmare for both forwarders and OFAC, which is why the NCBFAA suggests OFAC revise 501.604 to narrow the scope of reportable rejected transactions, clarify the definitions, or, preferably, to provide an exemption for freight forwarders. To the last point, the NCBFAA believes that because of the already close relationship between forwarders and U.S. government agencies such as the Census Bureau, BIS, the Office of Antiboycott Compliance (“OAC”), Customs and Border Protection, Directorate of Defense Trade Controls (“DDTC”), Federal Aviation Administration, Food and Drug Administration, Federal Maritime Commission, and OFAC as well as  the volume of shipments handled by forwarders, it would be beneficial if OFAC was to adopt an exemption for forwarders similar to DDTC’s forwarder exemption to broker reporting obligations in the International Traffic of Arms Regulations (ITAR). For the reasons stated above, the NCBFAA urges OFAC to address these concerns when drafting its final rule.