Given the global nature of commerce today, getting into the product export business is one of the best ways to grow a business. But exporting does not come without its challenges. You have regulations in your own country, as well as those in the countries where your products will be going.
You cannot afford to be ignorant or to ignore laws and regulations regarding exporting/importing. Here are the steps you will need to take to be certain that you are in compliance.
1. Your Product Classification
Products are classified, and how you are able to sell them overseas depends on that classification.
In the U.S., exports are regulated either by the Department of State of the Department of Commerce. The department that is in control is based upon the classification of your product.
Most commercial products, in fact, fall under the regulations of the Commerce Department, especially if they are consumer goods. The agency under that department is known as the Bureau of Industry and Security (BIS).
If your product is in any way related to what could be considered “defense,” then you will fall under State Department regulations.
The classification system is known as the Harmonized System (HS) because many countries use the same one. Products are assigned a 6-digit classification code, based upon the category.
In some cases, products are given an Export Control Classification Number which means you will need a license to export them. These are assigned based upon technical characteristics of the product as well as the destination country. Uranium, for example, would obviously require a license.
To be on the safe side, do the right research and make sure that you follow the regs in both the U.S. and the destination country. Not following the rules can have some serious consequences.
2. Screen any Third-Parties Involved in Your Export Activity
Your product may pass through more hands than yours as it moves from your door to the receiver. If you use any third-party, you need to ensure that there are no restrictions to their use either (e.g., shippers).
There are also restrictions on who may receive your products. These individuals, companies, or countries are all on a list published by the U.S. government as well as governments in receiving countries and international organizations. There is a master list, and you should check it before you agree to do business with any foreign entity.
In general, the list will include entities or governments involved in terrorism, drug trafficking, money laundering, etc. Just be certain to check the list.
3. Know Your Destination Country
There are countries that are currently under U.S. embargoes or sanctions, and you may not do business with them or any company within them. And there are other restrictions, such as product type, both within the U.S. government regulations and in the regulations of the country to which your product is going.
You’ll need to do this research yourself or hire a writer from Online Writers Rating who can conduct the research and prepare a full report for you.
Following these rules is absolutely critical if you intend to stay in business. Violating any regulation, failing to get a required license, or shipping a product that is prohibited in the destination country can result in significant legal consequences and even a shutdown of your business altogether. Just don’t take any risks.
4. Look for Potential Red Flags
You may be selling what you consider to be an essentially harmless product to a company overseas – let’s say pet supplies and medications, fertilizers, or plastics. And let’s say that overseas buyer is actually using those pet medications or fertilizers for nefarious purposes – to poison people or to make bombs.
It’s important that you research who you are selling to and how the products you sell are being used. Check out the reputation of these companies within their home countries and ensure that they are on the “up and up.” And if any of them ask you questions about your product that seem suspicious, the better course of action is not to sell them to that individual/company.
Sometimes, a product that has been considered harmless will all of a sudden show up on a “restricted” list that moves it from the Department of Commerce to the Department of State. It is your responsibility to keep aware of these types of changes.
5. Keep Those Documents
Many small businesses do not want the hassle involved in complying with export regulations and documentation. To get around this, they outsource foreign sales to third-parties. While this in itself is certainly not illegal, you need to be aware that you are still “on the hook” legally if that third-party is not in compliance.
The short solution is to make sure that any third-party you are using for the export process is reputable and in compliance. It should be willing to send you documentation on the exports of your products. Every shipment should have the sales documentation. And you should keep all documentation for a minimum of five years. This will absolve you of some, although not all, liability if regulations are being ignored or broken by that party.
6. Be Mindful of Supposed Exports that are Actually Not
This may seem a bit strange, but here is a simple scenario. Suppose you sell a product to another company in the U.S. And suppose that company is actually owned by a foreign enterprise. Even though your product never left the boundaries of the U.S., it is still considered an export, and there may be restrictions on its sale (e.g., certain technologies).
Be certain to do your due diligence with companies that might be foreign-owned, especially if your product is anything other than retail consumer goods that you know are harmless (e.g., clothing). If you have any questions, check with the Commerce Department.
In the End…
Getting into the global economy can be lucrative and certainly a great way to expand your market base. But you are entering an area of sales that is far more complex and filled with regulations and restrictions. These six tips for dealing in foreign markets will get you started, but you must do your own research to ensure that you are following all of the “rules.”
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