Import Licenses Explained

An import license is not always required to import goods into the United States or the European Union. Outside of U.S. "free zones", imported goods are subject to both customs and restrictions, some of which require certain goods to be imported only with a license. Similar tariff structure and restrictions also exist within the European Union.

In the instance of the United States, licenses are sometimes required to "protect the economy and security of the United States, and to safeguard consumer health and well being, and to preserve domestic plant and animal life." (www.cpb.gov) The motives for import licensure are similar within the European Union.

The import license is a document issued by a regulatory branch of a Government allowing the import of certain goods. The licenses legalize importation but do not necessarily exempt imported goods from trade taxes such as tariffs or customs tax. In certain cases import limitations may also be imposed on certain goods as determined by the import legislation.

How to obtain an import license

The rules for obtaining an import license are different within the United States and the European Union. Generally specific Government departments issue import licenses/permits within the United States and the European Commission issues import licenses through member state organizations in the European Union. A brief overview of some of the different import requirements within the U.S. and the E.U. are provided below.

1. United States import licensure

The United States may require an import license via a specific Federal agency in addition to completion of customs entry forms. Customs entry forms can be completed online using the "Customs Automated Commercial System" (www.americanimporters.org). A few of the requirements that may be necessary are listed below:

•Import licenses/permits obtained through specific Government Departments Ex. USDA

•Customs entry form must be completed to expedite import

•Import Bonds allow possession prior to payment of tariffs for "formal" commercial importation.

2. European Union import licensure

Within the European Union a specific process is involved to acquire an import license. Additionally, issuance of import licenses do not necessarily allow for unrestricted quantities of imports in certain cases. The import license procedure and rules are governed by the European Commission through import legislation.

• An export document may be required to obtain an import license

• Applied for through member states and approved by the European Commission

• Expire after 6 months 

• Genetically modified organisms are restricted

• Import bans are in place for goods deemed hazardous

License costs

License costs are separate from tariff duties if such taxes are applicable. Within The United States , "customs brokers" and/or the Customs Border Protection Agency facilitate the application of the "Harmonized Tariff Schedule" which is a set of costs for particular goods as determined by agreements such as the North American Free Trade Agreement (NAFTA).

The cost of import licenses and permits will vary depending on the issuing agency's processing fees and the specific trading territory in which goods will be imported. These costs will be assessed in the currency of the final destination of the imported goods. An example license fee is the U.S. Department of Agriculture dairy import license, which at the time of this articles compilation was $150.00 per license within the tariff quota range i.e. within the allowable volume of imported goods.

Items requiring an import license

Both in the United States and the European Union, similar items are subject to import licensure requirements. An exception being genetically modified products and various hazardous materials within the European Union. Within the United States the U.S. Customs Border Protection Agency oversee the import of goods. Some of the goods more typically requiring licenses in both trading territories are as listed:

• Organic products such as food, milk and plants

• Animals

• Alcohol, tobacco, and in some cases medicine

• Culture specific artwork and crafts

• Books, published information and written material

• Hunting rifles and similar products

Summary

In summary, import licenses may or may not be a requirement for import of goods, however a customs entry form and import taxes may have to be paid if the imports enter a trading territory from a tariff free zone. Business identification numbers are not always required on customs entry forms and social security numbers may be used in lieu of such identification. Moreover, in the case of informal and formal import, a customs broker may complete the necessary documentation requirements. An examples of customs entry form includes the customs forms handed out on planes during international travel.

The licensure requirements and costs vary from state to state and trading territory to trading territory. Moreover, before importing goods, it may be advisable to contact the relevant Government agency and/or department to assess whether or not a license will be required in addition to contacting the applicable customs agent to assess any import holding periods, costs and paperwork requirements.

Sources:

1. http://www.americanimporters.org/pages/marketing/USimportrequirements.html
2. http://www.cbp.gov/linkhandler/cgov/newsroom/publications/trade/iius.ctt/iius.pdf
3. http://info.hktdc.com/euguide/2-9.htm
4. http://library.findlaw.com/2000/Jul/1/130645.html
5. http://www.itintl.com/how-to-get-an-import-license.html
6. http://www.fas.usda.gov/info/fr/2007/081407dairyimport.asp

The End of the 'Cheap Made In China' Era

The end of the cheap 'made in China' era is nearing for many economic and demographic reasons. Chinese global exports are shrinking from their peak of 35.4% year over year growth in 2004 according to the US-China Business Council. (1) This occurred the same year China allowed its currency to appreciate 21% in value according to Alex Kowalski and Tom Keene of Bloomberg Financial News. (2) What's more, lower demand for Chinese exports may cause manufacturers to increase prices to compensate for lower sales.

Another factor that could amount to the end of cheap made in China era is domestic lending. Domestic lending is an indicator of increased demand for goods and services that tend to be cost drivers. The Economist reports Chinese banks have been lending tremendous amounts of money to businesses, infrastructural development and consumers; more specifically, to the tune of 127% of the country's GDP in 2009.(3) Recently, one of China's four largest banks, The Agricultural Bank of China raised billions of dollars in a dual public offering indicating solvency and lending are important factors in China's banking plans.

In 2010, the World Bank forecasts China's GDP will grow 9.5% (4) which is enviable to a mature economy that would be lucky to squeeze out 3% growth in GDP in any given year. This economic expansion has been going on for most of the 2000's, and combined with the high savings rate of Chinese consumers demonstrates its capacity for growth is becoming less driven by cheap exports and more by domestic growth and economic maturation.

As the results of the financial crisis from 2007- 2009 have made clear, China's reliance on cheap exports is not immune from declines in demand. According to the International Monetary Fund (IMF), China and other Asian countries face economic policy challenges that allow their economies to continue to grow through Chinese business and consumer demands, rather than solely through demand for Chinese exports that are no higher, if not lower than levels before the financial crisis.(5)

As China's economy develops, and its banking system becomes more refined, the labor force will become wealthier, and the nature of the Chinese job market itself will lead to higher paying jobs that could stifle cheap Chinese made exports. Even though China's workforce is large, economic pressures do exist and quite possibly may drive up both demand for wage increases and increase the cost of  domestic materials used in manufacturing.

As the wealth and savings of Chinese consumers, corporations and government has increased, the increasingly sophisticated economy has experienced a second loosening of the Chinese currency, the Yuan-Renminbi. The loosening of the Yuan's peg to the U.S. Dollar is only fractional and relatively small, it does indicate China is willing to do so and may be willing to do so more in the future. What's more, even a small percentage fluctuation in currency valuation can have a dramatic affect on the price of goods through supply and demand relationships.

As the Chinese economy matures the country as a whole is becoming wealthier, this is at the root of the ending of the cheap 'made in China' era. Several years of very high economic growth in the Chinese economy will most likely lead to an eventual higher demand for goods and services which puts cost pressures on industries and manufacturers seeking to provide cheap exports to foreign nations. This price pressure may be tamed by inflation reducing measures such as increased lending rates, however with 2010 growth forecasted to be over 10% of GDP it's hard to imagine  putting the brakes on an economy with such high momentum for the sake of eliminating inflation of any kind.  

Sources:

1. http://bit.ly/xPQKT   (US-China Business Council)
2. http://bit.ly/c8SqEW (Bloomberg Businessweek)
3. http://bit.ly/cA5cKs  (The Economist)
4. http://bit.ly/98bBJz  (World Bank)
5. http://bit.ly/cc743y  (International Monetary Fund)