Frequently Asked Questions about Exporting

Do I need a license to export?

What special forms are needed to export?

What is a "Certificate of Free Sale" and how do I get one?

What is a "Destination Control Statement?"

What are Harmonized System (HS) codes and Schedule B numbers?

When should a North American Free Trade Agreement (NAFTA) certificate of origin be completed?

How do you determine if a product qualifies for preferential tariff treatment under NAFTA?

What are Incoterms?

Are there restrictions on where and to whom I can export my products?

What is the Foreign Corrupt Practices Act (FCPA) and how does it affect my business?

How can I find out if there is a tariff, tax, or other charge on my product in country X?

What are the most common mistakes made by exporters?

How can I find out if my product will sell in other countries?

How do I locate potential agents or distributors in overseas markets?

How do you choose a good freight forwarder?

Should advertising and promotional materials be translated into the local language?

How do I take my laptop computer, professional equipment, or promotional materials overseas?

How can I get information on importing or sourcing?

Q: Do I need a license to export?
A: Only a limited number of products or destinations require an exporter to get a written or validated license from the Bureau of Industry and Security, an agency of the U.S. Federal Government. This agency used to be known as the Bureau of Export Administration (BXA), but the name change was felt to more accurately reflect its role. Most goods can be exported by simply entering "NLR" (no license required) on the Shipper's Export Declaration. A validated license is necessary when exporting high technology, software with encryption capabilities, defense-related, or dual-use (both military and civilian) products or when exporting to countries under a US trade embargo or other trade restrictions (e.g., Libya or Cuba). The regulations may require one type of license to ship a product to Country A, but a different license to ship the same product to Country B. More information on export licenses is available from the Bureau of Industry and Security *. The State of Wisconsin does not require a special permit or license to establish an import/export business. General information on starting a business in Wisconsin is available from the Department of Commerce's Division of Business Development.

Q: What special forms are needed to export?
A: The seller in an export transaction is responsible for several documents. Some freight forwarders will do much of the paperwork for a customer, but the shipper is ultimately responsible for making sure the documents are correct. The forms most commonly needed for an export shipment include:

The Shipper's Export Declaration (SED), Commerce Form 7525-V, is used for compiling the official U.S. export statistics and for export control purposes. It must be prepared and submitted to a customs agent for shipments valued at more than $2,500 or any shipment that requires a validated license no matter what value. There is an exception for Canada - When Canada is the ultimate destination of a shipment and the products will not be consumed or trans-shipped elsewhere an SED is not needed.

The form documents who is exporting the product, to whom it is being shipped, what is being shipped, and its value. The SED can be completed electronically by the exporter. More information is available from the U.S. Census Bureau *. The SED can also be completed by a freight forwarder for the exporter. Blank hardcopy SEDs may be also purchased from the Government Printing Office, (202) 512-1800, local Customs District Directors, or can be privately printed. Privately printed SEDs must conform in every respect to the official form. By mid 2004 all SEDs will need to be filed electronically.

The bill of lading is a contract between the owner of the goods and the carrier. There are two types: a straight bill of lading, which is non-negotiable, and the negotiable/shipper's order bill of lading, which can be bought, sold, or traded while goods are in transit and is used for letter-of-credit transactions. The customer usually needs a copy as proof of ownership to take possession of the goods.

A certificate of origin is a document signed by the exporter and witnessed by a semi-official agency, like a Chamber of Commerce. It indicates that the goods were truly produced in the country claimed by the exporter. There is no worldwide rule as to when a certificate of origin is required or what it must contain. Each country sets its own rules. Proof of origin is critically important when countries have reciprocal trade agreements that grant lower tariff rates to products coming from certain locations. Canada, Mexico, and the United States have agreed upon a common form and set of rules for a NAFTA Certificate of Origin.

As in a domestic transaction, the commercial invoice is a bill for the goods issued by the seller. A commercial invoice should include a description of the goods, addresses of the shipper and seller, and the delivery and payment terms. The buyer needs the invoice to prove ownership and arrange payment. Some government agencies use the invoice to assess customs duties.

An export packing list itemizes the material in each individual package, and shows the individual net, legal, tare and gross weights in U.S. and metric values. Package markings should be shown along with the shipper's and buyer's references. The packing list is attached to the outside of the package in a clearly marked waterproof envelope. The list can be used to determine the total shipment weight and whether the correct cargo is being shipped. Customs officials may use it to check the cargo at inspection points.

Some countries require a consular invoice to identify and track goods shipped to their country. The invoice is purchased from the consulate of the country into which the goods are being shipped and must be prepared in the language of that country. Your freight forwarder should be able to tell you which countries require consular invoices.

Some purchasers and countries may require a certificate of inspection attesting to the specifications of the goods shipped, usually performed by a third party and obtained from independent testing organizations. Some countries may also require a phytosanitary inspection certificate that shows that a shipment meets plant health and quarantine regulations. If the seller provides insurance, the insurance certificate states the type and amount of coverage.

Q: What is a "Certificate of Free Sale" and how do I get one?
A: A "Certificate of Free Sale" is a document that says a product can be sold in the country from which it is being exported. Some countries require them as a way of preventing a firm from dumping product abroad that has been ruled unsellable on the domestic market. These certificates have typically been required of medical or food products.

The U.S. Foods and Drug Administration (FDA) will issue "Certificates to Foreign Governments" that serve this function, but only for products that it directly regulates. If your product is regulated by the FDA you can follow this link  to get the instructions for requesting a certificate.  Information specific to certificates for food and cosmetic exports is available at this link.
The Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) will issue "Certificates of Free Sale," "Purity Certificates," or "Certificates of Sanitation" for producers that it directly inspects. These documents are available from the Division of Food Safety, telephone: (608) 224-4712.

Some foreign governments require "Certificates of Free Sale" for products not regulated by either FDA or DATCP. In order to assist manufacturers of quality Wisconsin products export their goods to other countries, the Wisconsin Department of Commerce will issue "Certificates of Free Sale" to companies whose products are not regulated by FDA, DATCP, or other federal or state government agencies. You can contact the Outreach Consultant in your part of the state for the requirements to receive a certificate.

Q: What is a "Destination Control Statement?"
A: This statement appears on the commercial invoice, ocean or airway bill of lading, and SED to notify the carrier and all foreign parties that the item may be exported only to certain destinations and not ultimately end up in a restricted country. The standard language for this statement is "These commodities licensed by the United States for ultimate destination (country) . Diversion contrary to U.S. law is prohibited."

Q: What are Harmonized System (HS) codes and Schedule B numbers?
A: The Harmonized System is an international method of classifying products for trading purposes. This classification is used by customs officials around the world to determine the duties, taxes and regulations that apply to the product. A six-digit number is assigned to each product. The description that corresponds to this number should mean the same thing in different countries. Some products that have multiple uses or can be described in different ways may have several possible HS codes. For others there may be only one. The material from which a product is made frequently determines the appropriate code number. Each country may further expand the Harmonized System by adding additional digits to describe a product in yet further detail. Schedule B is the U.S. adaptation of the Harmonized System used for export documentation. It adds four additional digits to a product description number for a total of 10 digits. The first six will still mean the same thing in all the countries using the Harmonized System. To find the HS or Schedule B number for your product, you can go to the Census Bureau website *.

Q: When should a North American Free Trade Agreement (NAFTA) certificate of origin be completed?
A: A NAFTA Certificate of Origin should only be completed for products exported to Canada or Mexico that meet the NAFTA rules of origin and which would face a higher tariff if they were coming from a fourth country. Under NAFTA, products that qualify under the rules of origin will have zero duties when traded between the U.S. and Canada, and will have low or zero tariffs when traded between the U.S. and Mexico. In some cases the tariff rate may be zero no matter where the products are produced. If the tariffs using NAFTA Preference are not better than the usual duties applied under Most Favored Nation (MFN) status, it is not worthwhile spending the time and effort to complete a NAFTA Certificate of Origin.

A NAFTA Certificate of Origin is not required for the commercial importation of a good valued at less than US $1,000. However, for goods to qualify for NAFTA preferential duties, the invoice accompanying the commercial importation must include a statement certifying that they qualify as originating goods under the NAFTA rules of origin. The statement should be handwritten, stamped, typed on or attached to the commercial invoice. This exception is valid as long as the shipment does not form part of a series of importations that may reasonably be considered to have been undertaken or arranged for the purpose of avoiding the certification requirement.

While the Certificate of Origin does not have to accompany the shipment, the importer must have a copy of the Certificate in hand before claiming the NAFTA tariff preference at customs. Certificates of Origin may, at the discretion of the exporter, cover a single importation of goods or multiple importations (blanket certificate) of identical goods.

Q: How do you determine if a product qualifies for preferential tariff treatment under NAFTA?
A: NAFTA has complex rules of origin to determine which products will qualify for preferential and eventually duty-free access. A product does not automatically qualify for NAFTA tariff treatment just because the product was manufactured in the United States or was purchased from a U.S. company. Natural resources or crops and animals raised in one of the NAFTA countries will qualify. Products that are assembled from components that are not in the same HS category as the finished product often can qualify, even if some of those components are imported from a non-NAFTA country. In some cases, even if no change in tariff classification occurs, but the goods have at least 50 percent value added in one of the three countries, NAFTA preferential treatment may apply. The applicable rules can differ depending upon the HS category of the product. The NAFTA Rules of Origin (Annex 401) are located on the NAFTA Customs website *.

Q: What are Incoterms?
A: The International Chamber of Commerce (ICC), headquartered in Paris, created a set of 13 terms (e.g. EXW, FOB, CIF) to create international agreement on the rights and responsibilities of buyers and sellers related to the movement of goods. When a seller and buyer agree to use one of the terms they determine which party will be responsible for arranging and paying for different aspects of the shipping process. The ICC periodically updates the Incoterms to reflect changes in shipping technology. The current set of terms is referred to as Incoterms 2000. Because these terms are specifically designed to cover international transactions, the meanings may be different from similar three-letter codes used to describe domestic shipments. More information on incoterms can be found at the ICC website *.

Q: Are There Restrictions on Where and to Whom I can Export My Products?
A: The U.S. government has sanctions against some countries that limit the types of products that can be exported. For some countries like Cuba, Iran, Libya, and Sudan those sanctions may cover most products. For other countries like Myanmar, North Korea, Syria, and Zimbabwe the sanctions may be more limited and specific. There are also restrictions on doing business with approximately 4,000 Specially Designated Nationals (SDN). These may be front companies or agents for terrorists, drug dealers, or governments seeking to illegally obtain U.S. technology or weapons. Ignoring sanctions or doing business with an SDN can mean that your firm will not get paid for a sale, you could face monetary penalties or jail time, and discredit your firm's public image. U.S. Customs and Border Protection maintains a website * where you can learn about existing sanctions and check to see if a potential customer is an SDN. The agency also maintains a hotline at (202) 622-2490 which you can contact with questions or report suspicious sales inquiries.  Information on SDNs and other "denied parties" has been added to an searcheable, on-line database.

Q: What is the Foreign Corrupt Practices Act (FCPA) and how does it affect my business?
A: The FCPA was enacted in 1977 and amended in 1988 by the United States Congress. This Act makes it a crime for U. S. individuals and companies, including their subsidiaries, branches or affiliates, to knowingly offer payment or promises of payment of money or anything else of value to foreign government officials to secure business. It does not apply to bribes offered to non-government officials, although there may be local laws that could result in prosecution. In recent years other countries have adopted their own regulations, but the rules and applications can vary from country to country. The rules set forth in the FCPA only apply to U.S. firms. It is important that U.S. exporters dealing with foreign government officials fully understand the requirements of this Act because violations could result in a fine of up to U.S. $2,000,000.00 for corporations, U.S. $100,000.00 for individuals, imprisonment of up to 5 years, or a combination of a fine and imprisonment. A "layman's guide" to the FCPA is available on the U.S. Department of Justice's website *.

Q: How can I find out if there is a tariff, tax, or other charge on my product in country X?
A: Every country sets its own tariffs or taxes on imports. Some countries depend on tariffs for revenue and others use them as a tool to protect or foster certain sectors of their economies. Most countries use the Harmonized System (HS) to classify products for tariff assessments. The country desk officers at U.S. Department of Commerce can also assist you with questions about tariff rates in other countries. If you know the HS code for your product you can view the tariff rates for over 70 countries at a U.S. Department of Commerce International Trade Administration website *. Many countries have been lowering their tariffs in recent years, but there may still be other taxes or charges that can be levied on products in other countries. The Value Added Tax (VAT) in many countries is higher than any tariff, but is usually applied to local competitors as well.

Q: What are the most common mistakes made by exporters?
A: The reasons some firms fail at international business usually have nothing to do with the international aspects of the business. Rather, the failures have the same causes as domestic problems such as under-capitalization, lack of committment from senior management, or short-term focus rather than implementing a strategic plan. The international issues that most frequently trip up exporters include: Selection of overseas representatives without thorough investigation. Chasing orders around the world instead of targeting markets. Neglect of new export customers when domestic markets are booming. Failure to treat international and domestic representatives on an equal basis. Refusal to modify products to meet foreign regulations and local preferences. Lack of sales, service and warranty messages in local languages. Refusal to use export management companies (EMC) in less promising markets. Failure to consider licensing or joint venture agreements in more restrictive markets.

Q: How can I find out if my product will sell in other countries?
A: Prior to starting an export operation, you can do a little market research. The Foreign Offices of the International Division can conduct a Market Overview Study that seeks to answer the following questions: Is the product culturally acceptable in the market? Is the product currently sold in the market? Is the product currently produced in the market? How much of the product is sold in the market? How is it sold? Who are your likely competitors? What are the tariffs, taxes, and other costs you will face when exporting to the market? How will your prices compare with your competitors? Are there significant regulatory issues that may affect market entry?

Follow the link for more information on a Market Overview Study. You can also obtain market research reports and industry sector analyses * from the U.S. Department of Commerce for markets around the world. Over 10,000 reports on a wide-range of industry areas are available.

Q: How do I locate potential agents or distributors in overseas markets?
A: Using in-country resources and their networks of local contacts, the Department of Commerce's Overseas Offices can search out potential business contacts for your firm. They can supply you with a list of businesses that you can contact directly, or they can screen potential contacts in order to find those that best fit a profile that you establish. The best candidates will be asked to complete a questionnaire that provides information such as the markets to which they sell, total sales, customers they target, number of employees, length of time in business, payment preferences, technical expertise, warehousing capabilities, other U.S. products they represent, etc. The Overseas Office will also arrange appointments for you to interview the candidates. Click here for more information on an Agent/Distributor Search. The U.S. Department of Commerce offers similar services called "Gold Key" Searches.

You can also search for a sales representative at trade shows. Many agents, distributors, and wholesalers will exhibit on their own or in partnership with the manufacturers they represent. At a trade show you are able to check out the other brands handled by a potential agent or distributor. You can compare their booth display and staff presence to others in the market and assess their sales and marketing skills. While at international trade shows you can also pick up copies of the local yellow pages. You will need to either be able to read the local language to review the ads in your category or hire the services of an interpreter. The internet is also a great source for information on potential agents and distributors.

There are many other low-cost ways that you can use to generate a list of potential candidates for further study. Check if your industry association has international members. If you are a member of the Wisconsin World Trade Center you should check what reciprocal services are offered by trade centers in other parts of the world. You can contact the American Chambers of Commerce in other countries. Members in non-competitive situations may be able to introduce you to contacts. If you have some existing customers in the market, ask them who are the respected firms in their market, or who they already deal with for related products.

Q: How do you choose a good freight forwarder?
A: A freight forwarder is one of your most important allies in your international sales efforts. Fast and efficient delivery can set you apart from the competition. Evaluate several freight forwarders before you choose the one that provides the best combination of service and price. Make sure the forwarder has a local office and their hours correspond to yours. You may have to rush shipments at odd hours to their location to meet deadlines. If they are located nearby, you will save on communication and travel expenses, especially if your customers expect you to ship on weekends.

It is also important that the forwarder have its own branches or partners in the markets to which you ship. Some forwarders may hand your shipments off to local delivery firms who may not be as dependable. Using the same firm from pick-up through delivery will make tracking a shipment much easier. Also, if a firm has infrequent service to one of your customer's locations there may be delivery delays.

Because a freight forwarder can act as your agent with power of attorney to prepare, examine, and distribute your shipping documents, including submitting them directly to your bank for collection and deposit to your account, you need to be confident in their record keeping methods and staff training methods. While a freight forwarder may prepare documents, the exporter is ultimately responsible for the accuracy of those documents.

Some forwarders may provide better service or better rates in different markets. Depending upon your customer base it may make sense to negotiate with multiple freight forwarders. Perhaps one for Asia and another for Europe and Latin America. At least once a year you should review any contracts or shipping arrangements you have. To obtain contact information for freight forwarders operating in Wisconsin, you can contact the Commerce Outreach Consultant responsible for your part of the state.

Q: Should advertising and promotional materials be translated into the local language?
A: If your customers cannot understand your product's benefits or attributes the likelihood of them making a purchase is significantly lowered. While many people around the world speak some English, many more do not. Translations should be done by professionals who know the jargon of the industry or sector in which your product will be sold. Your agent, distributor, or other contacts in the market should be called upon to proof any promotional material. Translations can be expensive and you would not want to let typos or inappropriate word choice ruin your message. You must also consider in what countries your material will appear or be heard. Just as there are differences between British and American English, there are also differences in Spanish, French, Arabic, Chinese, and other languages that are used in multiple countries and regions. Commerce Outreach Consultants can supply you with a list of language firms operating in Wisconsin.

Q: How do I take my professional equipment or promotional materials overseas?
A: The U.S. Government typically does not restrict travelers from taking laptops out of the country for personal business use. However, some equipment, including some high-speed or encrypted laptop computers, do require an export license from the U.S. Bureau of Industry and Security. Also, some technical materials, sophisticated equipment, and goods taken to certain countries will need a license.

Most importing countries exempt goods from import duties and taxes if they are entering that country only temporarily. Fifty nations currently accept a document known as the ATA Carnet. The ATA Carnet is essentially a passport for your goods. If the good can be described as a "tool of the trade", then, upon presentation of the ATA Carnet, the good may be exempt from duties and taxes. "Tools of the trade" are items such as commercial samples, professional equipment and items used for trade shows or exhibitions. Some ordinary goods such as computers (including laptops) or industrial equipment will also qualify as "tools of the trade". Carnets do not cover consumable goods, disposable items or postal traffic. The ATA Carnet can be ordered by contacting the United States Council for International Business * (ph: 800-5-DUTYFREE). It usually takes five working days to process the document, and the Carnet must accompany the good into the country. Processing fees will vary according to the declared value of the item being sent.

Countries that do not accept the ATA Carnet may have another type of temporary import procedure exempting goods from the normal application of import duties and taxes. Some countries require that the importer pay a temporary import bond that is reimbursable if the product leaves the country within a specified period of time (usually one year from the date of importation).

Finally, before you leave for your trip, we advise you to contact the U.S. Customs Service and notify them that your items will be coming back into the U.S. and that U.S. import duties and taxes should not be assessed on the goods once they return. U.S. Customs will need the serial number of the item you are taking. A trade specialist at the USA Trade Center can give you the contact information for your local customs office. This information is also available online on the U.S. Customs web site *.

Q: How can I get information on importing?
A: Customs and Border Protection is the government agency that regulates importation of foreign products into the United States. The Customs website provides information on tariffs, quotas, and other issues affecting imports. The Wisconsin Department of Commerce does not regularly assist firms seeking to import products into the United States. For such assistance we suggest you contact the consulates and trade commissions that represent foreign governments and business groups. Most of the United States' major trading partners have such offices in Chicago. The Consular Corps of Chicago provides contact information for foreign government offices and links to other resources.