What’s scarier than Halloween Kills and Nightmare on Elm Street? What might send shivers down your spine faster than a ghoulish costume? If your answer wasn’t “submitting a license”, then we might have something to learn from you! But if the idea of submitting an export license is as scary as getting caught taking candy from your kid’s Halloween bucket, then we might have a solution. There could be license exceptions that you might be able to take advantage of.
Many exporters are still getting unnecessary licenses for their items when license exceptions exist. Often this is either because the exporter isn’t aware of an exception or they’re just too nervous to use it. Many submit a license “just in case” so they are covered, however, recently we’ve seen BIS pushing back and suggesting the use of an exception instead. The truth is, a license exception, when used correctly, can be a great tool for exporters.
We operate under the motto that if compliance is made easy, more people will follow it. While exporters certainly aren’t required to use license exceptions, it does make shipping quicker and more efficient. And what Trade Compliance Officer doesn’t want their shipments off the dock as quickly as possible?
The key to successfully using a license exception is to know ALL of the requirements associated with it and to keep good records on eligibility and use. In this blog, we’re going to focus on a few license exceptions available for Country Group B countries, however, there are many more license exceptions that might be available to you.
We hope having this info will be like finding a Reese’s Peanut Butter Cup in your kid’s Halloween stash.
LVS: Shipment of Limited Value
LVS is a list-based exception. In short, this means that within each ECCN entry, there will be a list of exceptions one can use. If LVS is listed with a value beside it, this means that it is eligible to use for that ECCN, WITHIN specified parameters. While LVS is listed within the ECCN category, the requirements for its use are found in 740.3 of the EAR so remember to review both places. Also, don’t forget the general requirements for using license exceptions in 740.2.
What should you look for when determining if you can use LVS for your export?
- Value: When reviewing the ECCN, do you see LVS with a value listed under List-Based Exceptions? Is the amount of the shipment of that ECCN under the amount shown? If so, then your export might be eligible for LVS and you can proceed to 740.3 to review the remaining parameters. Note that the total value of the shipment cannot exceed the amount listed per ECCN entry. This means that if you have $2,000 worth of 9A610 x. items, you cannot use LVS because you’ve exceeded the $1,500 limit. However, if you have $500 worth of items classified as 9A610 x. and $2,000 of EAR99 items, you may use LVS as long as the other parameters apply. It is also important to note that an exporter cannot structure shipments to stay under the LVS value in order to avoid submitting a license. One last thing on value: you cannot exceed 12 times the LVS listed limit per ECCN. There are no restrictions on the number of shipments, just the value. Let’s look again at 9A610 x. whose LVS limit is $1,500. The annual limit for 9A610 shipments would be $18,000 (or 12 times $1,500). This means that exporters need to be diligent in keeping good records to avoid over-use of the license exception and a violation.
- Destination: If you have determined that you meet the value requirements, the next thing to do is to review the final destination of the export. LVS can only be used in those countries listed in Country Group B (Supplement 1 to Part 740). This is no small list. More than 170 countries are designated in this Country Group. For LVS, value and destination go hand-in-hand and the export MUST meet the parameters of both to be eligible for the license exception. If the ECCN lists LVS as an option, but you don’t see your country of destination in the Country Group B list, you cannot use LVS.
Another thing to keep in mind is that you can also use LVS for re-exports provided that the items being re-exported would be eligible for LVS if they were shipping from the United States. This means the items must still meet the value and destination requirements.
Shipments to Country Group B Countries (GBS)
So, your shipment is over $1,500 or not eligible for LVS? Perhaps GBS might be the way to go. GBS is available for shipments marked “Yes” under the List-Based license exceptions. If your ECCN has a “Yes” AND is in Country Group B AND meets the 740.2 general requirements, you might be able use this license exception in place of a license. Review these prior to using GBS:
- Destination: Once you’ve determined that the ECCN of the product allows for use of GBS, the next step is to check the ultimate destination. The country of destination must be in Country Group B. Additionally, Sudan and Ukraine are excluded from using this exception.
- Reason for Control: GBS can only be used for those countries where the control is for National Security (NS) reasons only. This requires exporters to not only review the ECCN and the Country Groups, but also the Country Chart. If a box is checked for any reason other than National Security, you may not use GBS (this deems all 600-series ECCNs ineligible for GBS).
As with LVS, GBS is also available to use for re-exports as long as all of the requirements are met.
Technology and Software under Restriction (TSR)
Another license exception for Group B countries is TSR. This exception permits exports and reexports of technology and software that are indicated by a “Yes” under the List-Based Exceptions area below the ECCN. In order to meet the requirements, the item must be headed to a Country Group B country AND must be software or technology. Sudan and Ukraine are also excepted from this license exception. Additionally, in order to use TSR, the consignee must sign a written authorization. The written authorization must show that the importer will not reexport or release the technology to a national of a country in Country Groups D:1, E:1, or E:2; and will not export to Country Groups D:1, E:1, or E:2 the direct product of the technology, if the foreign-produced direct product is subject to national security controls as identified on the Commerce Control List (CCL). Additional controls apply if a product of the technology is a complete plant or major component of one. The same rules apply to the release of software.
It is important to note that if these assurances are not received, you cannot use this license exception, so be sure to keep the written assurances with your records.
Using a license exception doesn’t need to be scary. If you read the requirements carefully and find an exception that meets all of those requirements, your export will be on its way much faster than applying for a license, saving your company precious time and money.
If you need assistance in determining whether or not you can use an exception, please call us for a free consultation, but sorry, we aren’t sharing our Halloween candy.
Emmalie Armstrong is a Trade Compliance Consultant with Export Solutions – a firm specializing in U.S. import/export regulations.