07 Jun Export Control Classification Numbers (ECCN) in SAP: What They Can Do For You
There’s a saying in baseball: you only notice the umpire when he does a bad job. The whole point of an ump is for them to not be noticed. The game should run smoothly, with no interuptions, controversy, or delay. If you’re talking about the umpire, it means something has gone sideways.
That’s the case with Export Control Classification Numbers (ECCN) in global business. They are absolutely vital to exports, and having a handle on them is a requirement for your business. In theory, you shouldn’t ever have to think about them; you should have a system to make sure that all the goods across your network are properly labeled and you have the right export licenses.
So what happens when something goes wrong? As with an umpire, you’ll definitely notice. But there is a lot more at stake than balls or strikes: there are high-level risks that come with missing or mislabeled ECCNs that could have long-term catastrophic impacts on your business.
That’s why businesses look for the real-time compliance checks that come with an expertly-implemented SAP GTS system. It’s the best way to make sure that, home or abroad, you’re safe.
The Importance of Export Control Classification Numbers in SAP
An ECCN is five numbers and letters that could determine the fate of your business. They are how the Department of Commerce determines if any particular good needs a license for export, and which license it might need. The ECCN is based on the nature of the product (e.g. commodity, software, etc), its technological parameters, as well as examining whether its components, parts, and accessories can have alternative uses.
ECCNs are located in the Commerce Control List (“CCL”), 15 CFR §774. There are 10 categories and five product groups which make up the ECCN. The 10 categories are:
0 = Materials, Chemicals, Microorganisms, and Toxins
2 = Materials Processing
3 = Electronics
4 = Computers
5 = Telecommunications and Information Security
6 = Sensors and Lasers
7 = Navigation and Avionics
8 = Marine
9 = Propulsion Systems, Space Vehicles, and Related Equipment
These are paired with one of the product categories to make up the beginning of the ECCN. So if you have a laser categorized as material (which is “C”), your good will be 6C123 (or whatever the last three digits will be).
Not every product is specifically listed in the CCL. If yours doesn’t fall under one of these classifications, it is classified as an EAR99 product and is not specifically controlled by a license. But while classifying as EAR99 seems the best call to make, it can only be assigned after you have exhausted every other ECCN possibility.
This may seem straightforward, but it can be pretty complicated. A lot can go wrong. You might transpose a number and apply for the wrong license, which you may not notice until audited. More often, thinking your good is an EAR99 good you don’t even bother getting a license and are shocked when slapped with an export violation.
The result is the same though: Risk. Without the right tools, your best efforts could still land you in hot water.
The Importance of ECCNs in GTS License Management
ECCNs in and of themselves don’t do anything, but they let you know if you need an export license, and export license management is one of the most important parts of your business.
Tight controls over your product classifications are the best way to have confidence in your ECCN determination.. Ordering a new license could take many weeks. That’s something you can and should plan for, but if you suddenly realize you had your ECCN wrong, and need a license, it might be too late. You’ll have lengthy and costly delays.
A Global Trade Software system is the best way to monitor your licenses and make sure that you aren’t inviting violations. Make sure it’s correctly implemented with the right ECCNs. License management with the help of a trusted and expert partner is a vital part of your business.
The Dangers of Export Violations
Not having an export license for a good whose ECCN requires one is an export violation. These are the basis of exports, so you need to have the right one. Consequences of getting it wrong can include:
- Fines and fees. The most straightforward penalty is fines and fees. Fines from the Commerce Department can range anywhere from $50,000 to $1,000,000 for criminal violations, and up to $120,000 for civil matters. For many businesses, that can be a crippling amount.
- Loss of license. You can have your export license suspended or even revoked, depending on the severity and number of times you are in violation.
- Seizure of goods. Rare, but not unheard of, for export license violations.
- Legal trouble. In some worst-case scenarios, if you are found in criminal violation, you can face 10 years in prison.
- Shipment delays. Even if you don’t have legal problems, your shipment can be delayed, cutting deeply into already-tight margins.
- Audit. Violations can trigger an audit. With the right planning and system, an audit doesn’t have to be disruptive, but it’s always better to not elicit scrutiny that can impact your business or reputation.
Remember: Ignorance is No Defense. You can’t get out of a fine because the new guy transposed some numbers and didn’t get a license. Thinking that a product was EAR99 might be an honest mistake, but it makes you no less liable than the person who did it to save time.
That’s why you really want to make sure that when you are setting up your SAP system, your ECCN numbers are correct and you can monitor, manage, and audit your licenses.
The Importance of a Partner in Implementing GTS
A partner that is an expert in SAP GTS implementation has expertise in customs management and specialized custom procedures. They can help you with product classification, including Harmonized Tariff Schedules, Schedule B Codes, and Automatic Mass Reclassifications. It also includes ECCN.
You want a system that makes it easy to classify your goods, house vital support documentation, and monitor any changes. GTS systems won’t automate your license process, but they can monitor and manage it. They can help you keep your licenses in check, and let you know if you need to do anything to get that shipment off to your customer. That can help you avoid costly delays, fines, and penalties.
AN ECCN might only be five numbers and letters, but it is vital to your business. SAP GTS implementation experts can help you make sure you have them right, every time.
Don’t let ECCN mistakes keep you from doing business. Pinary, Inc. specializes in and global trade services (GTS) and making sure businesses have the tech and support they need to stay compliant and efficient. We have more than 20 years of successful SAP implementation experience. Contact us today to realize greater efficiency in auditing and trading operations overall.