A term that might be unfamiliar to those who are new to exporting is the U.S. Principal Party in Interest (USPPI). The U.S. Census Foreign Trade Division (FTD) regulations defines it as “the person in the United States that receives the primary benefit, monetary or otherwise, of the transaction.”
If a U.S. seller is invoicing a foreign buyer, the seller is the USPPI according to FTD regulations. But if the U.S. seller were to invoice their products to a U.S. trading company instead, the U.S. trading company then becomes the USPPI.
Why does it matter who the USPPI is? The USPPI is the term used on a shipper’s export declaration, which is completed for nearly every U.S. export. The USPPI is subject to the Bureau of Industry and Security’s Export Administration Regulations (EAR) and therefore it is in the interest of the USPPI to ensure that filing is done correctly or be subject to penalties.
Most newer exporters are happy to allow the foreign buyer to arrange the movement of the cargo and typically agree to “Ex-Works” (EXW INCOTERMS). This INCOTERM governs not only who moves the freight, but also who does the export declaration filing. During the exporting process, data points from the Shipper’s Letter of Instructions (SLI) are transmitted to regulatory agencies.
EXW INCOTERMS may appear attractive to U.S. exporters but liability issues should be considered. If the foreign buyer’s freight forwarder were to handle the shipment from a U.S. seller (EXW INCOTERMS), then their forwarder would file the export declaration. However, if the foreign buyer’s forwarder makes a filing mistake, the U.S. exporter is the one who would face penalties because they are the USPPI. As an alternative, “Free Carrier” (FCA INCOTERMS) allows the U.S. exporter’s own freight forwarder to file the export declaration and provide the filing back to the U.S. exporter to ensure it was done currently.
While aspects of exporting can involve a steep learning curve, U.S. exporters can benefit by increasing their revenue streams and broadening their customer base. EXIM’s financing support can minimize risk and level the playing field for U.S. exporters. To learn more, click here to schedule a free consultation with an EXIM trade finance specialist.
