How Compliance Software Optimizes Export License and Permit Acquisition 

In the rapidly evolving landscape of global trade, businesses face increasing difficulty in complying with export controls and obtaining the necessary export licenses and permits. Ensuring compliance with these export regulations is not just a legal requirement but a critical component of maintaining efficient global operations. Recently, several entities, including a packaging forwarding company, faced penalties from the Department of Commerce's Bureau of Industry and Security (BIS) for operating without the required export licenses, resulting in revoked export privileges.   

Companies relying on manual export compliance process often struggle with accurately identifying and tracking goods that require export authorization thus exposing their operations to high legal and financial risks. Thankfully, export compliance software solutions continue to emerge to help organizations enhance the license acquisition process, reduce risks, and improve overall compliance.   

Is your organization effectively leveraging automated solutions to optimize this process and prevent export violations? This article will cover how businesses like yours can harness the capabilities of export compliance software to more effectively classify products, determine licensing needs, apply for the correct export licenses, acquire the required licenses and permits, and maintain ongoing trade compliance.  

Do I need an export license? The answer to this question is usually no, as only about 5% of U.S. exports need specific licenses. However, it is important to note that all goods intended to be exported are subject to export control rules. Identifying whether your product or technology requires a license is a critical first step in ensuring that your global trade transactions are complying with export regulations.  

The export rules and regulations are designed to determine:  

1. If the product or technology can be exported  

2. Where it is being exported to  

3. Who is receiving the goods  

4. What the end use of the product or technology is  

Here’s a quick guide on the steps to take to obtain an export license or permit.  

• Find out if your export requires a license or permit – Start by determining if the nature of the item you intend to export requires a license. Depending on your country, you should typically find this information from the regulatory body administering export controls. For example, if you are exporting from the U.S., start by finding the Export Control Classification Number (ECCN) of the item and check if any export controls are in place. ECCNs are maintained on the Commerce Control List (CCL) which is governed by the Export Administration Regulations (EAR). The CCL also includes export licensing information for other agencies like the State Department and the Treasury Department. You’ll also need to determine if the buyer, the destination country, and the intended end-use of the product necessitate the application for a license. Screen each party involved in the transaction to ensure there are no sanctioned, denied, or restricted parties.  

• Apply for any necessary export licenses or permits – If a license or permit is necessary, apply for it with the appropriate regulatory agency, such as the U.S. Department of Commerce or the Department of State. Most regulatory agencies have online portals where you can submit your applications.  

• Abide by the terms of the authorization – Once the license or permit is issued, adhere closely to its terms. Also have a process in place to manage the usage and validity of the license.   

The steps outlined above may sound simple, but they need to be executed with care to avoid mistakes. The penalties for exporting without the right license or permit is too great to ignore.  

Let’s explore common challenges and compliance risks that exist with this process.  

Here are just a handful of common pitfalls that businesses may face when managing export licenses and permits:  

1. Inaccurate Product Classification – Determining the correct ECCN code for a product is essential for submitting the right license application. Errors with product classification can incur delays, fines, and other penalties.  

2. Complying with Deemed Exports – To prevent the risk and consequences of unintended export violations, businesses need to be aware of “deemed” export licensing requirements. The transfer of controlled technology to a foreign person even while they are in the U.S. is deemed an export and if the person is from a sanctioned country, then that export is prohibited.  

3. Lacking Complete Records – Demonstrating due diligence, responding to regulatory requests, mitigating compliance risks, and applying for license renewals are some scenarios that make it vital for businesses to keep auditable records of every step of the export licensing process.   

4. Failing to Understand Export Control Regulations and Global Trade Laws – Export license management often requires specialized knowledge of increasingly complex trade laws and export controls. Organizations are responsible for determining, understanding, and complying with all export license regulations relevant to their transactions.    

5. Properly Screening for Denied Parties – Companies must screen against multiple constantly changing lists and given the current regulatory climate, this must be done accurately and in near real time. Even minor mistakes in the screening process can result in significant penalties.  

6. Increasing Risk of Human Errors – The application process often involves complex document requirements and lengthy review / approval periods. Manually compiling this information and tracking of application status can increase the risk of human errors and delay or invalidate the application process.  

Many businesses utilize export license management solutions to automate key steps in the licensing process. Here’s how automating export licensing can help your organization:  

• Simplify the export licensing process – Robust export compliance software makes it easy to manage applications and monitor changes in real-time. With standardized workflows in one simple electronic portal for application preparation, internal review, submission management, tracking, and reporting.   

• Minimize Errors – An automated solution eliminates error-prone manual processes ensuring the accuracy of product classification and other information gathering activities.  

• Record Storage and Accessibility – Create and deploy uniform and consistent corporate policies and procedures for compliant export license management.  

• Enhanced Due Diligence – Automated screening features continuously monitor and cross-check entities against updated denied party lists, reducing the risk of conducting business with restricted individuals, organizations, and countries.  

• Ensure regulatory compliance – Create and deploy uniform and consistent corporate policies and procedures for compliant export license management.   

Descartes offers a comprehensive solution designed to simplify and streamline the export license and permit acquisition process. With an easy to access web-based platform, flexible denied party screening options, and seamless integration with ERP and CRM systems like Oracle and SAP, Descartes ensures that your business stays compliant with minimal disruption.  

Descartes Export Compliance solutions includes Descartes OCR Export Licenses and Permit Module which provides a clear overview of the export process to help mitigate risks, prevent oversights, promote compliance, and enable businesses confidently manage their export license applications from start to finish. Book a demo today to learn more about how Descartes optimizes export compliance.