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If you have a business that involves sending products abroad, you must comply with specific export regulations no matter what the scale. Failing to do so could result in substantial penalties that small businesses cannot afford to face.
There are many elements to export compliance. If your company does not have a dedicated export control officer, it is easy for things to slip through the cracks. It is crucial to know the law and understand your obligations, from labeling shipping barrels to screening customers to see if they are on a restricted list. Here are some key takeaways.
Summary:
- Check if shipping your product requires an export license.
- Factors such as the destination and intended product use can affect whether or not you can export your product and whether you need an export license.
- Dangerous and hazardous goods must meet all requirements before exportation, such as proper labeling.
1. Product Classification
The Department of Commerce or the Department of State’s Bureau of Industry and Security (BIS) controls the majority of commercial product exportation. Most exports under BIS’s jurisdiction do not need an export license. Of those that do, the reasons for the requirement include the:
- Destination country
- Product’s technical characteristics
- Product’s end-use and user
To determine if your products need an export license, you should consult the U.S. Export Administration Regulations (EAR) to determine if the product has an Export Control Classification Number (ECCN). You can find a digital copy of the EAR at the BIS website.
If your product has an ECCN, you will also find out the reason for its restrictions on the EAR. Your company will need this code to check if applying for an export license is necessary. If your products do not have an ECCN code, they will be classified as EAR99 and generally do not require an export license. There are some exceptions to this, such as EAR99 products destined for countries that the United States has embargoed.
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2. Export Country Requirements
Whether or not you need an export license to send your products abroad may depend on the country of destination. There are some countries to which the United States government prevents exports without an export license while, in other cases, they heavily restrict the exportation of certain products to specific countries. There are several different reasons for this, such as the U.S. enforced embargoes on nations such as Syria, Cuba, North Korea, Iran and Sudan for supporting terrorist activities.
To determine whether or not the products you export are restricted in any countries you wish to ship to, refer to the relevant ECCN codes and the Commerce Country Chart in the Export Administration Regulations (EAR). Doing so will establish if you require an export license.
3. Screen Your Customers
In addition to countries, there are some parties to which you cannot export goods, even EAR99 products. These parties include businesses, organizations and individuals that the United Nations, United States government, the European Union or similar groups have identified as being involved with activities terrorism, drug trafficking or the proliferation of weapons of mass destruction. These organizations can be both abroad or in the U.S.
Although checking the relevant lists can be laborious, particularly for small companies with limited staff, it is crucial to ensure that you are not inadvertently exporting goods to a restricted party because this is a violation of export regulations and could lead to significant penalties.
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4. How Your Product Will Be Used
Unfortunately, many products can be used for dangerous activities, such as the proliferation of weapons of mass destruction. Exporters have a responsibility not to sell their products to parties they suspect will use them for such purposes.
If you are unsure how to know if a customer has nefarious plans for your goods, you should consult BIS, which publishes a list of red flags indicators and suspicious behaviors to look out for. If in doubt, do not complete an order until you have applied for and been issued an export license.
5. Exporting Dangerous or Hazardous Goods
As an exporter, it’s essential to know if your goods — in full or in part — are considered hazardous or dangerous. Some products, such as adhesives, fuels and alcohols, are easily identifiable as unsafe, but others, such as cell phones, may seem innocuous without deeper investigation. You must ensure you are aware of the requirements before exportation.
Restrictions may require you to package your goods a certain way — ensure you have the proper shipping materials ahead of time, obtain the correct certification and apply the appropriate hazardous material label. You should do all of this to the necessary standard before shipping any products.
Plan Ahead for Export Compliance
When it comes to avoiding penalties for lack of export compliance, it’s best to do your research and plan the shipment in advance. Although some of the steps that protect you from penalties, such as checking the list of restricted parties, takes time and human resources, you don’t want to skip over these practices. Adhering to the stringent requirements for export compliance saves you a lot of money and hassle in the long run.
