Trade knowledge / No, You Probably Don´t Need an Export License, But...
Date: 2016-10-15
No, You Probably Don´t Need an Export License, But...
I talk to a lot of people who ask me, “How do I get a license to become an exporter?” That makes me nervous for them, because it shows a general lack of knowledge about what’s involved with exporting.
Obviously, not everyone who exports needs an export license. But some exports do, and knowing the difference is an important part of export compliance.
Most goods exported from the United States don’t require an export license; they’re permitted to be exported under the designation NLR—no license required. However, there are some select classes of merchandise that do require an export license. That’s where export compliance comes in.
Stop Guessing: How to Determine If You Need an Export License
How do you determine whether or not your items require an export license?
Never assume your product doesn’t need an export license. An export license requirement isn’t just about the product’s technical characteristics; it’s also about the destination, end use, and end user.
Determine the correct classification (Export Control Classification Number) of your item.
Of course, the first step is to make sure there are no technical characteristics that would require your goods to have a license. There are three ways to classify your products for export controls: You can self-classify your products, submit a SNAP-R request for a ruling, or rely on the product vendor. You can learn more about this step in our article 3 Ways to Classify Your Products for Export Controls.
However, you also have to consider the following:
End use: Find out how customers are going to use the product.
Your goal in understanding end use is to make sure the customer won’t use your good for purposes deemed illegal. An example of a prohibited end use would be if the items that were shipped were ultimately used to further the proliferation of chemical, biological or nuclear weapons.
End user: Make sure it’s not going to be diverted to another country.
In addition to finding out what countries you can’t export to (embargoed countries), you must make sure the buyer is the final recipient of exported materials and does not intend to re-export materials to anyone else—specifically to another country that may be embargoed. These countries are Cuba, Iran, North Korea, Sudan and Syria. Part 746 of the EAR describes embargoed destinations and refers to certain additional controls imposed by the Office of Foreign Assets Control (OFAC) of the Treasury Department. You can find out more about embargoed countries and export regulations in our article, The Three R’s of Export Compliance: FTR, EAR and ITAR.
What You Should Do
Do a restricted party screening.
Several U.S. departments and other government agencies publish restricted party lists (also known as denied parties) with whom you can't do business. Restricted parties are individuals, businesses and other organizations that have been identified as engaging in activities related to the proliferation of weapons of mass destruction, known to be involved in terrorism or drug trafficking, or having had their export privileges suspended.
Exporters should check all the parties in every export transaction against the various restricted party lists to prevent penalties. The restricted parties lists are all updated at random times on their individual websites, and the only place to guarantee you’re identifying every restricted party on the more than 125 lists is on the Federal Register. You—or your export compliance software provider—should check the Federal Register every single day.
Want to make it easier? Use Shipping Solutions export documentation software.
You can quickly check multiple lists at once.
You get all the latest names and addresses, because Shipping Solutions Professional's Export Compliance Module continuously monitors the Federal Register.
You can check all the required government lists with the click of a button, so you have (at least!) 125 fewer things to worry about.
You get a more comprehensive review of each list and an indication of the likelihood of a potential match. The Export Compliance Module relies on sophisticated algorithms that identify the close matches in your screening process, including misspellings, alternate spellings, and different formats for addresses and company names.
You know if there’s a 100% match on a name or address; more importantly, it tells you if a contact is a 95% match, a 72% match, or some other potential match. With that information, you can make more informed decisions about your potential international business partners.
Consequences
If you or your company fails to obtain a required export license, you put yourself at risk for significant fines, restrictions on future exports, and—in the most egregious cases—jail time. You can read about real-life investigations and consequences in Don’t Let This Happen to You.
Need Help?
If you still have questions, the BIS website is a great place to start. In addition to articles, you can access webinars and register for seminars in your area.
You should also take a look through our export compliance archive of nearly 100 articles that can help you get a better understanding of regulations and compliance.
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