With the increase in eCommerce and accessibility to international travel, companies continue to grow and expand overseas, finding new business partners, suppliers, and consumers worldwide. This global approach to business allows companies and consumers to save money on manufacturing and access various resources and products.
As these companies start selling and shipping internationally, new government regulations apply. Unfortunately, these regulations are not always clear, and their complexity and ever-evolving systems make it difficult for businesses to ensure that they are complying with all the applicable licensing, classifications, and documentation.
To avoid penalties and delays, you must fully understand and control the export process from when an order is made until the product finally reaches its destination.
Determining what licenses apply to your products and what exemptions you qualify for will ensure a smooth, profitable transition to international sales.
What is License Determination?
Most export transactions require an export license, a government document that permits you to export that specific product. To obtain an export license, you first have to determine which license applies to you and then apply for it through the appropriate licensing agency. The agency will review whether or not your product falls under their guidelines before issuing a license.
Whether or not a license is needed is determined by the product classification. All products have an Export Control Classification Number (ECCN) assigned to identify the level of restrictions on exported products. ECCN codes reflect the technical parameters and intended use of the exported technology, software, and hardware.
Export Control Classifications Numbers reflect three main aspects of a product.
- Product category
- Product group
- Reason for control
Your product’s ECCN code will determine whether or not you need a license.
Once the license determinations are submitted, they are reviewed by U.S. Law Enforcement Agencies, Intelligence Communities, and the Bureau of Industry and Security (BIS). The license determination allows the BIS to determine if the item is on the Commerce Control List, why control or export requirements are necessary, and possible exceptions to the license.
Why License Determination is Needed
Each ECCN code reflects whether or not a license is needed, why the license is needed, or why the product would be controlled. Some items or materials may be controlled in one country but not another. Each country also has its reasons for regulating those products, which determines whether or not you need an export license.
Before exporting a product, you need to know the ECCN and the destination country. This information will help you determine whether or not you need an export license. You can then find that information by looking at a printed Commerce Country Chart or by using software to help you screen for what products and raw materials require licenses and in which countries.
Whether or not your products require a valid export license is decided by Global Trade Services. The GTS regulates license determination. If you do not have the appropriate licensing or if proper documentation is missing, your product will be detained until the needed licensing and coding are obtained.
Do I Need a License?
Before you can determine if you need an export license for your products, you will need to ask yourself the following questions:
- Do I have the product’s correct Export Control Classification Number (ECCN), and if so, what is it?
- What is the final destination country?
- What is the intended use of my product?
You can find ECCN codes on the Commerce Control List provided by the Department of Commerce’s Export Administration Regulations. The right ECCN reflects that you understand the technical aspects of your product.
Again, you can comb through this list manually or use software like our License Screening tool to make the process thorough and efficient.
The good news is that the majority of products and goods exported from the United States, around 95%, don’t need an export license. However, there is always a chance that your business will fall into that 5% that requires an export license. It’s always best to play it safe and not take a chance on shipment delays, heavy fines, or worse, an audit of your business.
Another thing to keep in mind is that just because your product falls under that 95% of exempt goods, it doesn’t mean that you can sell to any country or any individual. Other stipulations forbid transactions with specific countries and even individuals labeled dangerous to US security.
To make the situation slightly more complex, different federal agencies will issue your export license depending on the nature of your product. For example, you may need to apply for a license through the Bureau of Industry and Security or, in many cases, through the U.S. Department of State’s Directorate of Defense Trade Controls. It is the exporter’s responsibility to research which agency has jurisdiction over the product they want to export.
Regardless, it is up to you as the company owner to export your goods with the proper ECCN and export license. You will be liable if there are any discrepancies as a result of not doing your due diligence.
License Exception Management
You can save a lot of time and money if your product is exempt from licensing or if there are surrounding circumstances in which exceptions can be made. The tricky part is knowing when these exceptions apply and if your company, products, or country destination qualifies for exemptions.
The most accurate and time-saving way to determine which licenses apply to your products (if any) and whether or not you qualify for exceptions is to use licensing screening software.
Licensing screening enables you to:
- Identify licensing requirements
- Identify export restrictions
- Report exports accurately
- Comply with record-keeping requirements
- Identify exceptions or exemptions available to you when exports are associated with specific purposes.
Getting The Most Out of International Trade
Our licensing screening software helps see quickly whether or not you need an export license, what, if any, exemptions you qualify for, who you can legally do business with, and how to comply with necessary documentation and records.
Learn how easy OCR Global Trade Management can make international trade with a free demo of our software.