As eCommerce grows and international travel becomes more accessible, companies are increasingly expanding their reach overseas, establishing partnerships with global suppliers, and reaching new customers worldwide. This global expansion allows businesses to reduce manufacturing costs and access a broader range of resources and products.
However, selling and shipping internationally brings new regulatory requirements. Unfortunately, these regulations can be unclear, complex, and constantly changing, making it difficult for businesses to comply with all the necessary licensing, classifications, and documentation requirements.
To avoid penalties and delays, it’s crucial to fully understand and control the export process from when an order is placed until it reaches its destination.
Most export transactions require an export license, a government document that authorizes the export of a specific product. To obtain this license, you must first determine which type of export license applies to your product and then apply for it through the appropriate agency. The agency will review your application to determine whether your product meets their criteria before issuing a license.
Whether an export license is required depends on the product classification, identified by the Export Control Classification Number (ECCN). The ECCN code defines the technical characteristics and intended use of the exported item, which could be technology, software, or hardware.
ECCN codes are based on three main factors:
Your product's ECCN code will determine whether you need an export license. Once your export license determination is submitted, it will be reviewed by U.S. Law Enforcement Agencies, Intelligence Communities, and the Bureau of Industry and Security (BIS). This review process helps the BIS decide if the item is on the Commerce Control List, the reasons for export controls, and any possible exceptions.
The ECCN code of a product indicates whether an export license is necessary, why it's needed, and why the product is controlled. Different countries may regulate products differently, so understanding these classifications is essential to determine if an export license is required for your product.
Before exporting, you need to know the ECCN and the destination country. This information helps determine the need for an export license. You can access this information using a printed Commerce Country Chart or export screening software to check which products and materials require licenses for specific countries.
Global Trade Services (GTS) regulates export license determination. Without the correct export license or proper documentation, your product could be detained until all necessary licenses and codes are provided.
To determine if you need an export license, consider the following questions:
You can find ECCN codes on the Commerce Control List from the Department of Commerce's Export Administration Regulations. Having the correct ECCN code indicates you understand the technical aspects of your product.
While 95% of products exported from the U.S. do not require an export license, it's essential to ensure that your business does not fall into the 5% that do. Failing to comply could lead to shipment delays, hefty fines, or even an audit.
Additionally, just because your product is part of the 95% exempt goods doesn't mean it can be sold to any country or individual. Specific regulations prohibit transactions with particular countries or individuals identified as threats to U.S. security.
Different federal agencies may issue export licenses based on the nature of your product. For instance, you might need to apply through the Bureau of Industry and Security or the U.S. Department of State's Directorate of Defense Trade Controls. It is the exporter's responsibility to determine which agency has jurisdiction over the product.
Ultimately, it is up to you as the business owner to ensure that your goods are exported with the correct ECCN and export license. You will be held liable for any discrepancies due to negligence in due diligence.
You can save time and money if your product is exempt from export licensing or qualifies for certain exceptions. However, understanding when these exceptions apply and whether your company, product, or destination qualifies can be challenging.
The most accurate and efficient way to determine the applicable export licenses and potential exceptions is to use export license screening software.
Export licensing screening can help you:
Our export licensing screening software allows you to quickly determine whether you need an export license, identify any exemptions, understand who you can legally do business with, and comply with the necessary documentation and record-keeping requirements.
Explore how OCR+Descartes Global Trade Management can simplify your international trade processes with a free demo of our software.
