The US-China trade war is not new; it has been ongoing since 2018. The trade war began when the US President, Donald Trump, decided to increase tariffs on products imported from China as part of the "America First" policy introduced by his government. China retaliated by imposing tariffs on American imports, among other measures.
Needless to say, businesses suffered the brunt of this war. The tussle between the two countries is affecting the financial and economic conditions of both. In China, it has caused a significant decrease in economic growth and has negatively impacted the manufacturing activity. The United States is not immune to this dispute either; increased tariffs have made it challenging for American companies to sell their products in foreign countries.
Small businesses have observed a spike in their costs as imported goods have become more expensive. Manufacturing, services, retail, technology conglomerates, along with most small and large businesses have been negatively affected by this trade war. This article discusses the most recent US freight amendments on exporting items to Russia and China.
The Background
The United States suspects that the military-grade products made in China, Russia, and Venezuela are contributing to the decreasing security of the region. To ensure national security, the US has broadened its export license requirements to maintain more control over the supply of military-grade items in the region.
The new license requirements restrict the movement of export items, and so it is no surprise that China and Russia are disgruntled. In retaliation, these countries have imposed restrictions on US exports, decreasing trade activity on both sides. This tussle has affected manufacturing, export, shipping & freight, and related industries drastically. It has naturally caused an impact on the stock market as well.
These restrictions will slow down exports to CN, RU, and VE companies that were using these export items to produce, aid in the production of, or maintain military products. The increased tariffs and export license restrictions are affecting all types of tech-incentive companies, especially the semiconductor industry. One software development company reported that the trade war has a trickle effect on all businesses, whether directly affected by the trade war or not.
The US Changes to Export Licensee Requirements for CN, RU, and VE
In April of this year, the US Bureau of Industry and Security (BIS) published an amended version of the Export Administration Regulations (EAR). The implications of the amendment were threefold:
1. Firstly, the updated EAR requires Chinese, Russian, and Venezuelan exporters to obtain a license for military end-users as well as military end-use export items.
2. Secondly, America expanded the license requirement for export items meant for military use for the 3 countries. Simply, it means that a higher number of products are classified as military use items and therefore require a license to export.
3. Thirdly, it removed the existing policy on regional stability to include an element of discretionary review on certain items exported to these countries. The amendments also require that exports for these 3 countries must be filed electronically in the automated export system to maintain transparency and control over exports.
The Implication of the Amendments for Exporters
If you export, re-export, or transfer (in-country) items to China (CN), Russia (RU), and Venezuela (VE), then effective from June 29, 2020, you will have to make the following changes in your export procedures:
1. If your company is carrying goods that require a license for exports to CN, RU, and VE, under the new revisions, then you must file a file an Electronic Export Information (EEI) in the Automated Export System (AES). Make sure that you record the accurate Export Control Classification Number (ECCN).
2. Review the amendments to determine whether the item you export requires a license.
3. Many Civil End Users (CIV) exemptions have been revoked. Review the updates to determine whether your export item still qualifies for a license exemption.
License Exception GOV
Despite the new restrictions, certain items are still exempt from the license requirement. To find out whether the item you are exporting meets the exemption criteria, follow the steps listed below:
1. Visit bis.gov and search for the CCL or Commerce Control List.
2. Peruse the list to find the ECCN number of your export item. The CCL is divided into ten broad categories and has several subcategories, so you will need to research carefully to find your unique ECCN. It is possible that you may not find your ECCN in the CCL, if that's the case, it will be listed in No-License required (NLR) list. However, the only way to eliminate the possibility is to check the CCL list carefully.
3. When you find the ECCN, read the reason for the license requirement written next to it.
4. In case the control reason is a general prohibition, you will need a license. Similarly, there may be an X in the box next to the ECCN, or some other license requirement may be mentioned. In all these circumstances, you will need a license.
5. In case there is no explanation, your item is NLR.
6. Review the license exception published by BIS in article 740 to view license exception information.
FAQs
Do the amendments apply to exports from unincorporated territories of the US?
Yes, the new amendments are applicable to all US territories.
What should exporters ensure before booking a shipment?
It is the responsibility of the exporter to ensure that they determine whether their item is NRL or not. Moreover, they should bring the ECCN, ITN for the electronic filing system, or proof of exemption before they book a shipment.
If my ECCN and EAR99 items are worth less than $2500, do I still need a license?
If your item is an EAR99, you don't need a license for items less than $25K. However, for ECCN, you need a license regardless of the worth.
