International Trade Blog

How many ways are there to classify things? When my kids were little my mother bought them way too many Beanie Babies, but sometimes it was fun (and kind of educational) to classify them. The Beanie Babies could be organized by type of animal or by color or by what they ate or type of habitat.

You could say that governments do the same thing with goods. Sometimes goods are classified on the basis of their objective characteristics. Sometimes they are classified based on their use. Today I’m going to compare two types of classifications, the Harmonized System (HS) codes and the Export Control Classification Numbers (ECCN).

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Export compliance regulations don't just apply to the big guys. Even the smallest U.S. businesses that send their products to customers outside the country are subject to a variety of export regulations and could face substantial penalties for violating these rules.

Unfortunately for many small and medium-sized businesses, company personnel may not know these requirements until it's too late.

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Where should you place your international trade compliance office within your importing or exporting organization? Should it be part of sales, accounting, shipping, legal, purchasing or supply chain?

My answer may seem flippant, and among readers of this blog, it may even seem controversial.

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When I first talk to exporters frustrated by the amount of time it takes to complete their export documentation, they often tell me they can spend two hours or more on every single shipment. If they have multiple export orders to ship, the time they have left to do any other part of their job is virtually nil.

A typical export shipment can require five or more documents including a commercial invoice, a packing list, a shipper’s letter of instruction, a bill of lading, and a certificate of origin. On top of that, a shipment valued at more than $2,500 per Schedule B code needs to be filed electronically through the Automated Export System (AES). And, of course, every shipment, regardless of value, needs to be screened against U.S. export regulations.

It’s easy to see why it can take so long!

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You’ve just found a buyer in a foreign country and you’re preparing to close the sale—great! But there’s one thing you should keep in mind that is easy to overlook: the end use and end users.

You will need to determine the end-use (how will the product ultimately be used) and the end-user (who will ultimately use the product). To ensure that you are compliant with the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR) of the United States, you must be sure that you are not shipping goods to a prohibited end-user or for a prohibited end-use.

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The Bureau of Industry and Security (BIS), which is part of the U.S. Commerce Department, is responsible for implementing and enforcing the law that "regulates the export, reexport and certain transfers of most commercial items as well as some less-sensitive military items" that are subject to the Export Administration Regulations (EAR).

While there are many other agencies in other departments that regulate certain items, BIS has jurisdiction over most items—commodities, software and technology—created for commercial use.

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Firms of all sizes are being encouraged to export their goods and services. If you’re new to the global marketplace or your firm is expanding into new markets, then it’s time to establish best practices in your organization.

The following is a list of best practices that exporters should follow for each export transaction:

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There are many reasons the U.S. government has decided some goods should require a second look before they can be exported to certain countries.

In my previous article I explained what these various reasons for control are as they appear in the Commerce Department’s Export Administration Regulations (EAR). And I explained why exporters would need to apply for an export license from the U.S. government based on the particular Reason for Control and the destination country.

Even if one or more reasons might apply to a product going to a specific country, the EAR also provides exceptions to the export license requirement.

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Far too often we hear from exporters who say they’re not worried about export compliance because their company is “too small to be noticed” or they “don’t ship items that will get them in trouble.”

This is a huge—and potentially costly—mistake.

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Most of us wouldn't take a long road trip without directions, so why would a company embark on an export journey without one?

Exporting is a complicated process. You are navigating different cultures, customs, currencies and regulations. In order to be consistently successful, you need directions that guide you past all these hurdles, both known and unexpected.

That's where an Export Compliance Program (ECP) comes in.

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