Types of Licenses in International Trade

International Trade has become the order of the day in the current environment of Globalization. The nature of economies namely under developed, developing and developed countries as well as the availability of natural resources, labor, technology and capital required for production etc play a important role in countries economy as well as its reliance on international trade. While countries which are rich in resources look for exporting to other countries and earning foreign exchange, countries mostly the developed countries rely on imports from developing countries for their use.

Countries like Europe and Us are heavily dependant upon Imports, developing countries like China and other Asian countries tend to rely on exports to these countries.

Though the countries and WTO have been advocating free trade and several Bi Lateral Treaties and Multi Lateral treaties have come into being to remove trade barriers from one member county to another, all of the countries still find the need to practice and have protectionist attitude towards international trade. There are political as well as economic considerations that govern the import and export duties levied by Governments. Primarily import and export duties aim to encourage or restrict the consumption as well as production in the domestic economy and market.

Countries levy Import and Export Duties on specific items and also based on countries of origin. The management of duties and tariffs is managed through Trade Laws and Policies. Besides imposing duties, countries also restrict and manage the import and export of items with the help of Licenses to Import and Export.

Types of Licenses

1. Open General Licensed Items

   While normal items and traded goods like textiles, consumer durables, Handicrafts, electronics items, Food articles, Drugs etc are generally allowed to be imported and exported by all countries freely without restrictions.

2. Imports against Specific Import Licenses

   Many items like second hand capital equipment, plant and machinery, engines etc are traded, transferred and imported normally by developing and under developed economies.

   Such second hand machinery and goods are allowed to be imported into the receiving countries only through specific license obtained for the said purpose. Such license would set forth conditions required to be met by the importer to prove the residual life of the machinery etc.

   Import of Fire Arms and Ammunitions are always covered under specific licenses in most of the countries.

3. Import - Quantity Restrictions or Quota

   Some countries like USA do allocate quantity restrictions for import of items like textile on certain countries and exporters would have to adhere to the quota norms, which are periodically reviewed and amended as required.

4. Export Licenses

   While the domestic industries are engaged in export of some important natural resources and raw materials like iron and steel, certain kinds of herbs etc, Governments control and restrict the export through issuing Export Licenses.

5. Negative List

   Most countries maintain a negative list of items which prohibit import and export of certain items like animal hides and other wildlife, precious wild life, live stock, narcotics and many more sensitive items.

When people import or export items into the country without applicable licenses, do not bring in consignments avoiding customs clearance and thus avoid paying duties as well as those items that are prohibited are brought into the country illegally, such trade is labeled as smuggling.