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With 95 percent of the world’s population living outside the United States, it’s no wonder that thousands of small- and medium-size businesses selling online choose to go global.
But entering the global market brings challenges—like properly classifying your product for export, complying with regulations and export controls, offering convenient ordering and payment options and establishing effective shipping and return practices. The following information and ideas will help you address the first two of these challenges.
Every imported or exported item must be assigned a classification code that corresponds to its product type. Virtually all countries use these numerical codes to determine which tariffs, if any, apply to imported items (making it easier to conduct international trade). Exporters are legally required to include the correct classification code on export documentation.
All import and export codes are based on a 6-digit Harmonized Commodity Description and Coding System (HS). Countries adopting the HS can create longer codes to further classify their products. The U.S. uses a 10-digit code (a Schedule B code): The first six digits are the HS number; the last four are unique to the U.S. This Schedule B code provides more detailed product classification and taxation information.
Tips for your business
- Train a few capable, long-term employees to assign HS and Schedule B numbers.
- Ask your suppliers to provide HS and/or Schedule B numbers to save you time.
- Improve your efficiency by only assigning Schedule B codes to the items you will actually export.
- If you sell products you didn’t manufacture, be sure your distribution agreements allow you to resell the products internationally.
- Learn more on the U.S. Census Bureau’s Foreign Trade site, where you can get Schedule B codes and information and watch export training videos.
Countries form free-trade agreements to lower or eliminate tariffs on items produced in those countries. Because of this benefit, manufacturers must certify that the products originated in these countries through country-of-origin documents. However, discerning a product’s origin can be difficult: If you import raw plastic pellets but manufacture them into five-gallon buckets in a U.S. facility, are the buckets of U.S. origin? There are many ways to determine your product’s country of origin, but this process requires special training. Apply these general tips.
- If you’re a retailer (not the manufacturer), ask the manufacturer to provide you with country-of-origin information.
- If your purchased inventory is imported and shipped directly to you, the country of origin should appear on import/shipping documentation (the Commercial Invoice and Certificate of Origin).
- If you manufacture your products, you must identify, assign a value to and determine the country of origin for every component of your product.
- Calculate the value of foreign parts used in your product as a percentage of the total costs of all components to determine from which country your product originates.
- If you send goods to Mexico or Canada, familiarize yourself with NAFTA requirements, which call for a special Certificate of Origin (get details at Export.gov).
Complying with export controls
To protect national security, foreign policy and economic interests, the U.S. has established regulations that prohibit or limit certain exports. Known as export controls, these regulations also limit transactions with certain individuals, organizations and countries. The penalties for noncompliance are severe. Specialized training in each area is highly recommended.
Items with commercial and military or nuclear proliferation applications are known as “dual-use products” and are licensed by the Bureau of Industry and Security of the U.S. Department of Commerce. The International Traffic in Arms Regulations controls the sale of items used for military purposes. If you produce or sell these products, you must know the ITAR.
Tips for your business
- Find regulations governing dual-use types of products via the U.S. Department of Commerce Bureau of Industry and Security.
- Find ITAR regulations on the U.S. Department of State website.
- Always closely check these regulations before completing any international order.
- Remember that you’re responsible for ensuring your company complies with these regulations.
For more information about taking your online business global, visit the FedEx Online Retail Solutions website and access a wealth of online-retail-industry knowledge and best practices, including the complete white paper, “Preparing Your Business for Global E-Commerce.”
Debbie Kuehn is a Twin Cities-based freelance writer covering a wide range of topics in a variety of industries, including retail, financial services, home improvement and many more.
The opinions expressed in this article are those of the author and do not necessarily reflect the views of FedEx.
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