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By Richard Vitas Palaikis II email
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Since the terrorist attacks on the United States in September
of 2001, the federal government has placed an even heavier emphasis
on regulating exports. In this highly regulated international
trade environment, corporations and individuals do not want to
be caught in a position of non-compliance with U.S. Export Controls.
The Bureau
of Industry and Security (BIS) is the governmental agency
that is responsible for implementing and enforcing the Export
Administration Regulations (EAR), which control most exports
and potential re-exports of commercial merchandise. BIS does not
regulate every classification of commercial merchandise to be
exported; other government agencies have specific regulations
that apply to various classes of commercial and non-commercial
merchandise depending upon the nature of the merchandise in question.
Most merchandise that is exported from the United States does
not require an export license and is permitted to be exported
under the designation NLR—no license required. However,
there are some select classes of merchandise that do require an
export license.
Export License Determination
How can you determine if you need an export license? Look at
the technical characteristics of the merchandise in question,
the destination of the merchandise, the end user, and the intended
end use of the merchandise being exported.
What are the characteristics of the merchandise?
You should be certain to classify the merchandise being exported
in accordance with the Commerce Control List utilizing the Export
Control Classification Number. In most instances, it is this first
step that will determine if an export license is required.
Where is the merchandise being exported?
You should be certain that the merchandise is being exported
to a foreign nation that is not currently under a trade embargo
or considered a state sponsor of terrorism, e.g. Cuba, Iran and
North Korea.
Who will receive the merchandise?
You should be certain that the merchandise is being exported
to corporations or individuals who are not prohibited from receiving
exports from the United States. In addition, certain corporations
and individuals may require you to obtain an export permit even
if an export permit is not normally required.
Consult the following resources in order to help make a determination:
- Debarred List—Corporations and individuals who have
been denied privileges to participate directly or indirectly
in the exportation of merchandise related to defense in which
a license is required under the International Traffic in Arms
Regulations (ITAR).
- Denied Persons List—Corporations and individuals who
have been denied export privileges.
- Specially Designated Nationals List—Corporations and
individuals appearing on this listing may be denied export privileges
under the direction of the Department of Treasury, Office of
Foreign Assets Control (OFAC).
- Unverified List—Corporations and individuals may appear
on this list if BIS is unable to verify the end use of the merchandise
as indicated by the exporter.
What is the intended end use of the merchandise?
You should be certain of the intended end use of the exported
merchandise by the corporation or individuals to whom the merchandise
was exported. The intended end use may require that an export
permit be obtained prior to exportation.
Export License Applications
If you have determined that you need an export license, you may
submit an application for a license through the online Simplified
Network Application Process Redesign (SNAP-R), or by completing
and submitting a paper application, Form BIS-748P, Multipurpose
Application Form, which you can order
from the BIS website.
To prevent lengthy delays in obtaining approval of your export
license, you must completely fill out the application with the
following information:
- Details related to the character of the merchandise being
exported,
- Details related to the recipient foreign nation,
- Details related to the end user to whom the merchandise is
being exported, and
- Details related to the intended end use of the merchandise
being exported.
You should avoid providing incomplete or vague answers on the
application or your export license will be delayed or rejected.
Export License Assistance
You will find help with the export licensing process by contacting
a BIS export counselor at (202) 482-4811 in Washington, D.C.,
or (949) 660-0144 on the West Coast. In addition to providing
export counselors, BIS also hosts informational seminars in various
cities across the nation. You’ll find an updated
list of seminars at the BIS website.
In addition to maintaining compliance with U.S. export licensing
requirements, you should continually consult the EAR for the most
up-to-date information pertaining to U.S. Export Controls and
other applicable export licensing requirements since they can
and do change.
By Catherine J. Petersen email
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You and your customer will assess many factors as you negotiate
the payment term that will be used for your international
transaction. They include, but are not limited to:
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Value of the transaction;
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Your relationship with your customer,
new or long-standing;
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The country where the goods are destined;
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The buyer’s country’s rules
about how money will be released to you, the seller; and
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Whether the product being shipped is customized,
built to specification, or off the shelf.
The global economy is fluid; firms will benefit from regularly
examining its own customer base and assessing political,
credit and foreign-exchange risks to determine which payment
term best suits the situation. There are several sources
that provide background information on the buyer’s
country and their economy. Options that are available on
the internet include:
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U.S.
State Department—click on Country Commercial
Guides, which are managed by the U.S. International Trade
Commission.
Frequently used Payment Terms for International
Trade
It is important to understand the risk and exposure you
will encounter if you agree to a payment term with your
customer. In some cases the risks are readily apparent to
the parties; in others the risks are obscured by banking
protocol in the buyer’s country or laws in the buyer’s
country. As a result, it is important to be as explicit
as possible in the offer or quotation, the contract and
any other payment document.
The following list includes commonly used payment options
by exporters and importers around the globe along with synopsis
of risks, benefits and costs:
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Open Account with a specified
term such as 30 days from international bill of lading
date.
Risk: Non-payment since the buyer has the goods prior
to making payment.
Benefit: Low-cost transaction for the seller and
buyer; the costs are limited to the wire transfer fee
and foreign exchange costs.
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Open Account with a specified
term such as 30 days from international bill of lading
date, backed by a buyer’s bank issued Standby
Letter of Credit in lieu of a Bank Guarantee.
Bank Guarantees may not be issued in the U.S.
Risk: Buyer has goods prior to payment since it is
open account. Delay of payment due to submission of documentation
that supplements the letter of credit only after non-payment
by the buyer after a specified waiting period.
Benefit: Bank issues the Standby Letter of Credit
and it is subject to independent banking rules International
Standby Practices (ISP) 98, Publication No. 590 of the
International Chamber of Commerce when referenced in the
letter of credit.
Costs: There will be banking fees deducted from the
payment; the buyer will pay interest for the duration
of validity of the Standby Letter of Credit.
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Time draft such as ‘30
DAYS FROM INTERNATIONAL BILL OF LADING DATE’; also
known as a documentary collection under a time draft.
Risk: Buyer has goods prior to payment. Reliance
on buyer to come forward with payment.
Benefit: Buyer promises their bank that they will
honor their commitment to make payment prior to receiving
documentation that allows them to claim the goods from
the international carrier. Bankers handle drafts under
a set rules issued by the International Chamber of Commerce
known as URC 522 and titled ICC Uniform Rules for Collections.
Costs: Generally low; approximately $250 per transaction.
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Sight draft also known
as a documentary collection under a sight draft.
Risk: Reliance on buyer to come forward with payment.
Benefit: Buyer pays their bank prior to receiving
documentation that allows them to claim the goods from
the international carrier. Bankers handle drafts under
rules issued by the International Chamber of Commerce
known as URC 522 and titled ICC Uniform Rules for Collections.
Costs: Generally low; approximately $250 per transaction.
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Documentary Letters of Credit
either Unconfirmed or Confirmed.
Risk: High percentage of documents submitted to the
bank in the seller’s and/or buyer’s country
do not comply with the requirements of the letter of credit.
This exposes the seller to the risk of non-payment.
Benefit: Most risks are mitigated through bank promise
of payment under the terms and conditions written into
the letter of credit. Bankers handle letters of credit
under rules issued by the International Chamber of Commerce
known as UCP 500, soon to be UCP 600 and titled ICC Uniform
Customs and Practice for Documentary Credits (UCP 600).
Costs: Dependent on the value of the letter of credit.
The banks will generally not negotiate the fees for the
seller. In addition, the seller will incur administrative
fees that they must pay to the freight forwarder or incur
in-house.
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Risk: Loss of orders to the competition who is willing
to accept other forms of payment.
Benefit: Payment prior to shipping the order.
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A combination of two or more of
these payment options.
Remember, the payment term that works for another firm
may not work for yours; choose the term that lets you sleep
at night. Part of your assessment will be a review of the
various payment options within your firm and the payment
terms the competition is offering your customer base.
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