If you are considering taking your small or mid-sized business global, then you already know that international trade is on the move, and that exporting can create new opportunities while increasing revenue. You likely also know that trade creates new challenges, while potentially increasing administrative headaches. That’s especially true for exporters, because complying with the complex rules and regulations that govern the movement of goods across borders takes time, expertise and effort. For smaller companies that lack the in-house operational resources, the challenges are magnified.
Fortunately, there are resources available to help you. International logistics and shipping specialists, such as DHL, offer many online tools and automation options. The International Trade Administration’s Export.gov portal also provides critical information, along with the U.S. Census Bureau and the Small Business Administration.
As exporters build their knowledge and understanding of compliance and the rules that govern trade, they will need to pay close attention to Export Administration Regulations (EAR), administered by the Department of Commerce’s Bureau of Industry and Security (BIS). These regulations apply to “dual-use” goods and items that are not regulated by other agencies. Dual-use goods include commodities, technology and software that are designed for commercial purposes but may have military applications as well. In some limited cases, depending upon the item, export destination, intended end use and end user, an export license may be required. If your company is selling abroad, it is critical that you are in full compliance with EAR, and that you understand when an export license is required and how to obtain it. Even if a license is not required, you may have to satisfy other requirements regarding end use and end user verification.
Here are some critical components of the export control process under EAR:
Understand Your Product’s Classification
To determine whether a dual-use item requires a license, you will need to verify the product’s Export Control Classification Number (ECCN) on the Commerce Control List (CCL). The ECCN indicates reasons for control and licensing requirements for certain destinations. To help determine classification, it is essential that you understand the technical characteristics of the item in question; if you are not the manufacturer, check with the fabricator and consult with a company engineer. You will also need to follow the CCL Order of Review, which requires that you first confirm that your product is not controlled under the International Traffic in Arms Regulations (ITAR). If you are unable to determine a product’s classification, you can submit a formal classification request to BIS electronically.
Examine Your Destination
License requirements are also guided by the destination of your shipment. In the “License Requirements” section of your ECCN, you can check your “reasons for control” information in combination with the Country Chart here to find if a license is required. Locate the Country Chart column(s) for the applicable reason(s) for control on the horizontal axis, and determine if there is an “X” in the cell on the line for your country of ultimate destination. An “X” in the box indicates a license requirement based on the ECCN and destination. The Commerce Country Chart does not show the license requirements for sanctioned or embargoed destinations, which you will need to examine via BIS.
Know Your Customer
The end user and end use of your product is critical to the determination of license requirements. As a result, you will need to screen your international customers. Check the “Know Your Customer” Guidance and Red Flags supplement that BIS provides, as well as resources and guidelines here. Export.gov also offers a Consolidated Screening List here. In addition, you must understand the end use of the goods you are sending abroad.
Understand License Exceptions
A license exception is an authorization that allows you to export, reexport or transfer (in-country) under stated conditions items subject to EAR that would otherwise require a license. Exceptions are available across a range of categories, such as those for certain items of limited value. Once you know the ECCN of your product, its destination and end use, you can check to see what available license exceptions may exist by examining EAR Part 740.
While export compliance is challenging, remember that assistance is available, and be sure to make the most of it. Not only do you need to comply with license requirements; you also need to ensure your documentation is correct to demonstrate that you have done so. The penalties for noncompliance and improper documentation can be steep, so make sure your export plans fully account for the effort that is required.
Does your business need help with understanding and complying with the EAR? Let us know on Twitter @DHLUS and our #ExportExperts can help.