United StatesChange Country

When Do Small Businesses Need an Import-Export Trade License?

By Megan Doyle

Small U.S. businesses looking to grow via international trade may wish to better understand the import-export regulations that govern trade to determine whether they must be licensed.

While only a low percentage of small- and medium-sized enterprises (SMEs) need an import-export trade license or permit, all may benefit from understanding the legal requirements and knowing the agencies involved and steps necessary to obtain appropriate trade licenses. The small percentage of SMEs who need an import-export license but don’t realize it may face fines and other penalties.

 

Here’s a brief primer on trade-license requirements for import-export businesses.

 

Why Are Trade Licenses Necessary?

 

The import and export of certain classes of goods might be restricted or prohibited for a number of reasons, including national security, protecting vital or vulnerable segments of the economy, enhancing the country’s ability to mitigate risks and counter threats, conserving domestic animal and plant life, and protecting consumer well-being and health. Some commodities may also require licenses due to import quotas or bilateral trade agreement restrictions.1,2

 

Most items that require trade licenses could be used for nefarious purposes or pose threats to national security. Trade licenses can help the government know who is shipping goods, when, to where, and why.3 Although seemingly innocent, import and export goods like certain agricultural products, food and beverages, and personal electronics may still have stipulations regarding their trade. Agricultural products, for example, could potentially introduce pests or invasive species, whereas electronics are subject to specific radiation and safety standards.4

 

Import-Export Licenses and the Agencies Involved

 

When it comes to imports, U.S. Customs and Border Protection (CBP) does not provide import-export licenses and permits. Instead, importers must acquire approval for goods from U.S. regulatory agencies such as the Department of Agriculture (USDA), Food and Drug Administration (FDA), Environmental Protection Agency (EPA), or Department of Transportation (DOT).5 These agencies set specific regulations on goods like agricultural products, food, medicine, firearms, tobacco products, and more. In addition, electronic products must often meet specific radiation standards.

 

To import or export goods that require trade licenses, businesses must contact the U.S. government agency associated with those particular goods and comply with relevant regulations. These regulations may include restrictions on routing, storage, and use, special labeling or processing of goods, or whether or not entry is limited to specific ports. For example, if a U.S.-based business is looking to import dairy products from France, the business must comply with the FDA’s and USDA’s regulations. Only then can CBP clear the products for import.6

 

Essentially, import goods must be proven to not introduce pests, invasive species, or present any other potential danger to U.S. territory.7 Once goods are approved, CBP then screens imports for entry. If importers are unsure whether or not goods need a permit, CBP provides guidelines to describe restricted items along with contact information for the applicable agency.8

 

As for exports, if a trade license is required the item will have an Export Control Classification Number (ECCN). The ECCN is an alphanumeric code that lists controls or restrictions placed on the export item. If the item does not have an ECCN – typically commodities like “low-technology and consumer goods” – it likely does not require a license.9 The U.S. Bureau of Industry and Security (BIS) maintains a Commerce Control List of all ECCNs and items that require trade licenses.10 According to BIS, some export items that require licenses include: electronics and computers, nuclear materials and equipment, sensors and lasers, navigation equipment, and chemicals and microorganisms.11

 

Export.gov offers a list of common federal departments and agencies to provide a general overview of which export goods need licenses and whom to contact.12 For example, if a U.S. business plans to export nuclear materials, they must obtain a license from the U.S. Nuclear Regulatory Commission (NRC). If exporters are unsure about details regarding trade licenses, USA.gov recommends contacting the agency that regulates the type of item to be exported.13

 

Getting the Facts Straight for an Import-Export License

 

It may be worth noting that CBP states “one of the responsibilities of the trade community is to exercise reasonable care when conducting business with the CBP.”14 If and when errors occur, ports are directed to pursue penalty actions against importers or exporters “who fail to use reasonable care.”15 Since it’s the responsibility of the importer and exporter to know whether the goods require a trade license, businesses may wish to do their due diligence before trading.16

 

Similarly, CBP recommends that foreign exporters make sure their U.S. importer has the proper information so the importer can make necessary arrangements for the goods’ admission to the U.S.17 CBP does recognize it may be impractical to list each specific article being imported or exported, but recommends consulting with the relevant government agency for further information and guidance as needed.18

 

According to USA.gov, as long as import-export businesses check federal agency requirements like CBP guidelines and contact the local ports of entry that will be used for trade to learn about any specific requirements or information regarding their goods, they should avoid problems.19 It may also be worth noting that even if an importer does not need a trade license, they must still fill out a CBP entry form within 15 calendar days after the shipment arrives at a U.S. port.20

 

The

Takeaway:

The factors that determine whether or not an item requires an import-export trade license has to do with the materials the product is made of, its source or destination, who will receive the product, and how it will be used. As long as all goods comply with the requirements of relevant U.S. federal agencies and all necessary permits and/or licenses are obtained, international import-export businesses are unlikely have to face issues when their goods are screened by CBP.

Megan Doyle - The Author

The Author

Megan Doyle

Megan Doyle is a business technology writer and researcher based in Wantagh, NY, whose work focuses primarily on financial services technology.

Sources

1. “Export Licenses,” Export.gov; https://www.export.gov/article?id=Export-Licenses
2. Importing into the United States, U.S. Customs and Border Protection; https://www.cbp.gov/sites/default/files/documents/Importing%20into%20the%20U.S.pdf
3. “Want to export or import these products? You’re going to need a license,” TradeReady; http://www.tradeready.ca/2017/topics/import-export-trade-management/want-export-import-products-youre-going-need-license/
4. “Staying out of Trouble with Customs and Border Protection,” Ship Lilly; https://www.shiplilly.com/blog/staying-out-of-trouble-with-customs-and-border-patrol/
5. Ibid.
6. Importing into the United States, U.S. Customs and Border Protection; https://www.cbp.gov/sites/default/files/documents/Importing%20into%20the%20U.S.pdf
7. “Staying out of Trouble with Customs and Border Protection,” Ship Lilly; https://www.shiplilly.com/blog/staying-out-of-trouble-with-customs-and-border-patrol/
8. “Importing and Exporting,” USA.gov; https://www.usa.gov/import-export
9. How to Determine if You Need an Export License, Shipping Solutions; https://cdn2.hubspot.net/hub/361415/file-934165579-pdf/download-assets/How_to_Determine_if_You_Need_an_Export_License.pdf
10. “Want to export or import these products? You’re going to need a license,” TradeReady; http://www.tradeready.ca/2017/topics/import-export-trade-management/want-export-import-products-youre-going-need-license/
11. Ibid.
12. “Export Licenses,” Export.gov; https://www.export.gov/article?id=Export-Licenses
13. “Importing and Exporting,” USA.gov; https://www.usa.gov/import-export
14. “Do I need a license to import something?,” U.S. Customs and Border Protection; https://help.cbp.gov/app/answers/detail/a_id/197/noIntercept/1
15. Ibid.
16. “Export Licenses,” Export.gov; https://www.export.gov/article?id=Export-Licenses
17. Importing into the United States, U.S. Customs and Border Protection; https://www.cbp.gov/sites/default/files/documents/Importing%20into%20the%20U.S.pdf
18. Ibid.
19. “Importing and Exporting,” USA.gov; https://www.usa.gov/import-export
20. Ibid.

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