Exporting — The First Step
- Published: Tuesday, May 25, 2021
Earlier in this series we looked at some of the benefits and basics of exporting. In this article, we will review an important first step, how to determine if there are no export control restrictions on your product or service. Unless there is a potential military or dual military-civilian use, it is likely there will not be export restrictions on your product or service. However, verifying this is the case is important, and thus, this step represents a good place to start when considering exporting. As summarized in the following story, violation of export restrictions can have serious consequences.
Perhaps one of the most serious export violations occurred in the 1980’s when companies in Japan and Norway illegally exported machining equipment to the Soviet Union that allowed that nation to manufacture propellers for their submarines that were significantly quieter. Antisubmarine warfare specialists noted their ability to detect Soviet submarines decreased from 200 to 10 miles, making the defense of the U.S. homeland, Japan and other NATO allies much more challenging.
Restricted products and services are governed through the Department of Commerce and its International Trade Administration unit. Export Administration Regulations (EAR), managed by the Bureau of Industry and Security, govern the export or re-export of some commodities, software, and technology. You will need to determine if your product or service is on the restricted list and have familiarity with U.S. export regulations. Our counselors are happy to help walk you through this process, although you can do so yourself at the U.S. Export Regulations site.
The factors you need to be aware of are the product, buyer, and end use/location. You will need to verify that your product is not on the Commerce Control List and that it does not have an export control classification number (ECCN). You can find the list at: www.bis.doc.gov or by clicking here for the electronic BIS/EAR files. The second step of the process is to review the Commerce Country Chart (Supplement No. 1 to part 738) and determine the level of control required for the country you are considering for export. If your product is not on the commerce control list, and the country does not appear as flagged on the Country List, your product or service is classified as EAR99, meaning an export license or exception is most likely not required. The BIS also uses a “red flag” system that can be helpful and you will want to verify that there are no red flags present for your product and destination. A brief example is given below for a business that is interested in exporting low horsepower (200 BHP) tractor engines to Mexico.
Tractor Engine Part Manufacturing — Export to Mexico
- After clicking on the BIS/EAR site, go to the alphabetical CCL Index, look up tractors and parts and determine the ECCN, which is 9A990. This is typical BIS nomenclature – one number followed by a letter and three additional numbers. The first “9” represents Category 9, Aerospace and Propulsion.
- Go back to the EAR and click on that category, and go to section A (which denotes Equipment, Assemblies and Components), then to 990 to determine the reason for and level of control, which will be found underneath the 9A990 heading.
- The reason for control is noted as AT – Anti Terrorism; 9A990.a is AT 2 and all other 9A990 products are AT 1.
- List-based license exceptions are noted as LVS (Shipments of Limited Value): N/A Not Applicable; GBS (Country Group B shipments): N/A; Related Controls: N/A and Related Definitions: N/A.
- You will also see here the list of controlled items, which in this case are diesel engines of continuous brake horsepower of 400 or greater. Because your engine is only 200 BHP, it does not appear of the list of controlled items.
- Because of the AT1 and AT2 designations for this category of products, you decide to still check the Commerce Country List and look up Mexico. By scrolling down to Mexico, you see that neither AT1 or AT2 are checked, indicating there is not an export restriction for your product to Mexico because of Anti Terrorism concerns.
- From either the perspective of engine size or the lack of AT control for Mexico, no license is required to export your product to Mexico.
As mentioned at the beginning of this article, verifying there are no export control restrictions on the product you desire to export is a good place to start before you make the decision to have your company become an exporter. You are now prepared to consider other aspects of exporting and preparing an export plan, and these next steps will be the topics of our next article.
Check out other articles in this export series: Should I Export My Business's Goods and Services?, The Export Plan: Marketing Research, Export Planning Streamlined, and The Export Plan: Pricing Strategy
The Missouri SBDC is funded in part through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.
Writer: Robert Schwartz