Previously, we discussed what the exporter of record is, their responsibilities, and why you need them. The discussion spanned the entire cross-border supply chain processes, from declaring an export transaction to transportation to the end user.
In another article, we covered the significant difference between the IOR and EOR, their responsibilities and who can be an IOR or EOR. Still, these roles focused on all the possible ways an IOR and EOR can help when importing and exporting.
Ensuring compliance was one of the roles discussed in the two articles. Yet you may wonder, how the IOR or EOR can help with compliance when shipping goods that require an import or export license?
This article focuses on the role of an importer of record or exporter of record for goods demanding an import or export license.
You will learn how to utilise an IOR or EOR to ensure you remain compliant, despite the fast-changing import and export controls.
What is Import/Export Licensing?
Import/Export licensing is a document that authorises the importation or exportation of a restricted product or service. The restrictions aim to safeguard national and international security and promote fair trade.
The export licence is issued in the country of origin for goods meant for export. At the destination country, the exporter may be required to provide an import licence, showing they have been authorised to ship the goods into the country.
Shipping a product or service may require one or more licences depending on:
- The nature of the goods
- The country of origin and destination country
- The quantity of the goods
- Intended end user and end use of the goods
- The importer or exporter
The controls guiding the need for an import/export licence vary from country to country and keep changing to accommodate emerging security threats.
Hence, it’s essential to determine whether your shipment is subject to any licensing requirement before initiating a cross-border transaction.
Note: For a better understanding of the criteria for assessing licensing requirements, you can check an earlier article on exporting dual-use IT equipment from the EU for the criteria.
How to Obtain an Import or Export Licence
Obtaining an import or export licence is a 3-step process in almost every country:
- Applying for the permit: Once you have determined that your shipment requires a licence, you can apply for the licence via the relevant authority.
- Fulfilling the licensing requirements: Licensing requirements vary from country to country. But generally, you are required to provide information concerning your business, the end use, end user and the goods you intend to ship.
- Pay the required processing fee: You may be required to pay a fee like document processing before receiving the permit.
Import/Export Licensing Challenges
While the 3-step guide may seem straightforward, the procedures involved in fulfilling the requirements and processing the licence can be costly and time-consuming. Here are the three significant challenges you can face during the acquisition of permits.
1. Lengthy Licensing Procedures
The licensing process can be time consuming, taking 30-60 days from the date of application. And if you have less or no experience in shipping restricted goods, you can potentially experience countless back and forth.
For instance, in the US, your business must be registered under the Bureau of Industry and Security (BIS) to obtain a company identification number (CIN). You can then use the number to access the BIS-SNAP-R system to apply for an export licence.
Hence, it’s important to determine the prerequisites for applying for a licence before initiating the transaction to avoid back and forth.
2. Complex and Costly Licensing Requirements
A single licence can cover multiple types of shipments. But a single shipment can also demand multiple licences. That calls for importers and exporters to understand the export and import requirements.
Understanding the types of licences and where they apply can be complex as it requires an accurate interpretation of the export or import control rules and regulations.
It also requires the understanding of HS codes for accurately classifying your shipment. This is because HS classification lays the basis for determining the licensing requirements based on the nature and category of your goods.
Without a clear understanding, it’s easy to obtain an unnecessary licence or miss out on a significant licence.
3. Changing Licensing Control Rules
Due to emerging security threats, the export and import licensing authorities must keep updating the licensing requirements to safeguard national security. This is especially on dual use goods such as electronics and IT equipment.
With the unpredictable changes, a product shipped without a licence a month ago may demand a licence to operate in the destination country today. And if you are unable to track the records of your transactions, it can be challenging to ensure compliance.
Role of the IOR/EOR in Import/Export Licensing
Undoubtedly, shipping goods that require an import or export licence can be a complex process. However, it doesn’t have to be that complex with an importer of record or an exporter of record.
Here are the five roles an IOR or EOR can play to overcome the licensing hassle.
1. Assessing Import/Export Licensing Requirements
One of the common errors you can make when assessing licensing requirements is inaccurate classification of your shipment. This is because determining the accurate classification code for your goods can be complex, especially for IT equipment.
An experienced importer of record or exporter of record with the technical expertise of your industry can help with assigning accurate codes to your goods.
By accurately classifying your goods, you can easily determine the licence requirements of the country of origin and the destination country.
2. Obtaining the Relevant Licence/Permit
After determining the licensing requirements, the exporter of record applies for the relevant licences, providing the necessary documentation. The IOR or EOR settles associated fees to facilitate the processing of the licence(s).
Additionally, an EOR can use their business credentials to meet the prerequisites of meeting some licensing requirements. For instance, if your shipment requires a quality certification, an EOR can use their quality credentials to represent your business.
3. Eliminating unnecessary Licensing Costs
Suppliers may fail to alert you of any licensing requirements before supplying your products. And learning of some of these licences after customs declaration can delay your shipment, as some licences take too long to process.
An EOR or IOR assesses the import/export requirements prior to requesting the supply of your goods. As such, they can reduce the turnaround time of processing the permits.
Besides, established EORs/IORs have partnered with certified manufacturers in your industry, which can help eliminate some of the requirements.
Providing proof of origin can be a hard nut to crack, causing unperceived back and forth. Instead, an EOR can utilise suppliers with the least requirements, facilitating timely processing of your licences.
4. Attending to Licensing Issues at the Border
At the port of entry of some countries, inspection of your shipment may raise the need for additional documentation. Failure to provide the required documentation or information may lead to abortion or detainment of your shipment.
An EOR/IOR can represent your business and respond to any issues at the border, facilitating timely clearance of your goods.
Besides, experienced EORs have established long-term relations with customs authorities. Hence, it’s easier to attend to transaction issues with the help of the customs authorities than it would be for an importer or exporter with no experience.
5. Managing the Licence for Compliance
Licences expire. And sometimes, goods imported without the need for a licence may demand a licence, following a government update on the control rules.
Renewing licences and applying for new licences after the importation of your goods refers to the record of your transactions for ease of processing.
Failure to track the records can easily land you into compliance issues.
An EOR/IOR keeps track of all your export/import transactions for the minimum required period, ensuring you remain compliant amidst the changing licensing requirements.
Ace Import/Export Licensing Hassle with Blackthorne
Ensuring compliance has been one of the hardest nuts to crack when shipping goods that require an export/import licence. This is because there’s no one size fits all when determining the import/export requirements for your shipment.
However, with import/export best practice for goods requiring licensing, you can make sustainable profits from your cross-border trade. These best practices include:
- Keeping your import/export data up to date
- Understanding import/export licensing requirements before initiating a transaction
- Accurate classification and valuation of your goods
- Utilising technology to track your expenses and status of your goods in transit
- Leveraging the expertise and experience of an IOR/EOR in your industry
With over 25 years of prioritising and ensuring import/export compliance for IT equipment, Blackthorne is always ready to jump into action.
Whether you are facing issues with your licensing requirements and would like to adopt import/export best practices, you can call us or send us a message and we will lift the burden off your shoulders.
