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Obtaining Licenses to Export to Sanctioned Regions
Exporting goods and services to other countries can be a great way to grow your business, but it also comes with some complex legal requirements. If you want to export to a country facing economic sanctions or trade embargoes from the U.S. government, it is possible to legally do so – you just have to navigate the licensing process. This article will walk you through the key steps and considerations for obtaining an export license to ship your product to sanctioned regions.
Contents
What are Economic Sanctions?
Let’s start with some background on economic sanctions. The U.S. government imposes sanctions or trade embargoes against certain countries and regions to achieve national security and foreign policy goals. For example, comprehensive sanctions prohibit virtually all trade with countries like Cuba, Iran, North Korea, and Syria. The U.S. also has more targeted sanctions in place against sectors of the Russian economy as a response to the conflict in Ukraine [5].
These sanctions restrict what American companies can export to sanctioned regions. The restrictions depend on the specific sanctions program, but they usually cover exports of goods, services, software, and technology. Sanctions also prohibit investments and financial transactions with sanctioned regions and entities. Violating U.S. sanctions can lead to severe civil and criminal penalties.
Determining If You Need an Export License
The first step is figuring out if your product requires an export license to ship to the sanctioned country. There are a few key factors to consider:
- What specifically are you exporting? The Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR) lists control exports for national security reasons.
- Where are you exporting? The level of sanctions differs across countries and regions.
- Who will receive your item? The end user and end use of the export matters.
It’s complex to navigate on your own, so your best bet is to request a classification ruling from the relevant agency. This will tell you if a license is needed based on your product, destination, and end use [3].
Applying for an Export License
If an export license is required, you’ll need to submit a license application with the appropriate agency. Here are some key facts about the licensing process:
- Different agencies handle licensing depending on your product. For example, the Commerce Department’s Bureau of Industry and Security (BIS) handles exports under the EAR. The State Department oversees munitions covered by ITAR [6].
- The application undergoes an interagency review, including by the Departments of Defense, Energy, and State. They evaluate the national security and foreign policy risks [6].
- Factors like the item, end use, and end user determine approval. Applications for comprehensive sanctions are rarely approved.
- Processing export license applications takes time. Plan for a few months to receive a decision.
Work closely with an experienced export compliance attorney when applying for a license. They can help make sure you provide all required information and give you the best chance for approval.
Alternatives to Export Licensing
Given the low approval rates for sanctioned regions, you may want to consider alternatives that don’t require a license:
- Sell a less restricted product – Review the classification to see if a slightly different product would not require a license.
- Export to a non-sanctioned country – Expand your business to countries not facing comprehensive U.S. sanctions.
- Build partnerships locally – You may be able to license your IP or partner with local companies within the sanctioned country.
These options come with their own drawbacks and legal considerations, but may be faster and have higher chances of success.
Maintaining Compliance After Export Licensing
Getting the license is just the first step – you’ll need to maintain compliance with its terms and conditions. Here are some best practices to avoid violations:
- Carefully vet partners and end users to avoid diversion risks.
- Follow all restrictions on end use and re-export in the license.
- Keep and maintain records related to the transaction.
- Report any changes in information provided in the application.
- Get specialized training on sanctions compliance.
Stay up to date on any changes to sanctions, which may impose new restrictions or requirements. An experienced trade compliance attorney can help you develop an internal sanctions compliance program.
In Summary
Exporting to sanctioned regions like Cuba, Iran, and North Korea is possible but challenging. From classification rules to licensing agencies to end-use monitoring, you’ll need to navigate complex regulations and restrictions. Partnering with an attorney can help reduce risks and show regulators you are committed to compliance. With persistence and the right expertise, it is possible to successfully obtain licenses to expand your business globally.