From the exporter’s point of view, No License Required (NLR) is the easiest and most common form of export authorization. There are no hoops to jump through, notifications to provide or exceptional record-keeping requirements.
NLR applies to the vast majority of U.S. exports.
To determine if an item is eligible for export under NLR, you need two pieces of information: the item classification, and its destination.
Step 1: Item Classification
An item must be subject to the Export Administration Regulations (EAR) in order to qualify for NLR authorization. NLR doesn’t apply to items regulated under the International Traffic in Arms Regulations (ITAR).
Classification is determined using Commerce Control List (CCL). Depending on the nature of an item, classification may be fast and easy. But it’s a technical process that often requires additional resources and training like that offered by the Export Compliance Training Institute.
If an item has its own Export Commerce Control Number (ECCN), the description provided on the CCL will include any reasons why it is subject to export control. As an example, consider ECCN 3A003, the identifier assigned in the CCL to spray cooling thermal management systems used for electronic devices.
Immediately beneath the ECCN heading is the License Requirements section, including the applicable reasons for control. In the case of ECCN 3A003, there are two reasons for control – national security (NS) and anti-terrorism (AT). But those controls don’t actually impose a license requirement to all countries; it depends where the system is being shipped.
Beneath the reasons for control is a chart that references the relevant columns in a separate part of the EAR, the Commerce Country Chart (see graphic below).
If the item doesn’t have its own ECCN, it’s classified as EAR99, which by definition means the CCL doesn’t contain a description of the item or any specific licensing requirements like you’d find under an ECCN (though EAR99 items do still require a license to a handful of countries).
Step 2: Reference the Commerce Country Chart
The Commerce Country Chart is a supplement to the Commerce Control List.
It identifies what export controls apply to any country, from Afghanistan to Zimbabwe. Each X on the chart represents an export restriction, so in the big picture, the Country Chart provides a visual representation of how much the U.S. government trusts a particular nation for export control purposes.
If there aren’t any X’s in the columns referenced in the ECCN, the item is eligible for NLR.
If there is an X in any of the columns referenced in the ECCN, it’s not eligible for NLR.
So let’s suppose our spray cooling thermal management system (ECCN 3A003) is intended for export to Ireland and Israel.
The Country Chart indicates that neither of the controls enumerated in the CCL – NS column 2, and AT column 1 – apply to Ireland. So the spray cooling system is eligible for export under NLR.
But for Israel, an X in NS column 2 means the spray cooling thermal management system isn’t eligible for export to Israel under NLR.
Step 3: Look for Exceptions and Complications
Part 740: Even if there’s an X in the relevant cell on the Commerce Country Chart, it doesn’t necessarily mean the system requires a license. Even if NLR is not an option, an exporter may undertake a more complicated process of considering eligibility for license exceptions, as covered in Part 740 of the EAR.
General Prohibitions: Even if the Commerce Country Chart indicates an item is eligible for export under NLR, there are still instances when a license may be required.
As an example, General Prohibition 10 in part 736 of the EAR is the “no shenanigans” rule that says you can’t proceed with a transaction if you have knowledge that an export violation has or is about to occur. It’s one of the reasons it’s important to know not just who will be receiving an export, but something about what they plan to do with it.
So, if you’re exporting an item to France under NLR, but you have information which suggests the party in France intends to repackage it, remove the Made in USA markings and forward it to Syria, General Prohibition 10 may come into play.
Part 744: Further, Part 744 of the EAR outlines export license requirements based on end use or the involvement of a restricted party. If a transaction triggers any of these prohibitions, an exporter may not use NLR and must apply for a license to proceed.
No ECCN: If an item is subject to the EAR but doesn’t have its own ECCN identifier, the item will be classified as EAR99. Most of these items may be authorized NLR, and as a result many exporters conflate the two.
But they aren’t the same. EAR99 is an item classification and NLR is an export authorization. While it is true that EAR99 may often be exported NLR, there are also situations in which EAR99 items require a license. Exporters should not assume that EAR99 always means NLR.
If an item is classified as EAR99, it means the item isn’t specifically described in the CCL – so you won’t find a list of specified reasons for any controls associated with it.
That means you can skip over the Commerce Country Chart, but the other exceptions and complications outlined here still need to be investigated.
The Big Picture
As mentioned earlier, most U.S. exports are authorized for NLR. For many companies, it’s unlikely any of the relatively unusual situations which may trigger a license requirement will ever be encountered. If your entire business is selling watermelons to Canada, the journey to NLR authorization is short and straight.
But if you sell something more sensitive, such as aircraft parts or software licenses to customers around the world, you’ll need investigate and understand the rules around every transaction.
- Part 738, Supplement No. 1 of the EAR: Commerce Country Chart
- Part 736 of the EAR: General prohibitions and determination of applicability
- Part 774 of the EAR: Commerce Control List
Do you have questions about NLR or exporting without a license? Visit www.learnexportcompliance.com to learn about our company, our faculty, our staff and our esteemed Export Compliance Professional (ECoP®) certification program. To find upcoming e-seminars, live seminars and live webinars and browse our catalog of 80-plus on-demand webinars, visit our ECTI Academy. You can also call the Export Compliance Training Institute at 540-433-3977 for more information.
Scott Gearity is President of ECTI, Inc.