Import and export licenses are used in countries that are interested either to defend the local manufacturing base from a fierce foreign competition or to control the volumes and the destinations of strategic materials and goods produced in the country. In this article, we give an overview of the difference between import and export licenses.
An import license is a document issued by a governmental body that authorizes a company to import specific commodities in the country up to a maximum volume stated in the license itself. Import licenses are protectionist measures adopted by some developing countries that are interested to protect local manufacturers and do not expose them to a fierce foreign competition (licenses are called “non-tariff barriers”).
An import license specifies the maximum quantity of a commodity that single importer can bring into the country, which is a quota of a total countrywide volume. Licensed importers pay an annual fee to the government to obtain an import license, plus a one time fee at the time of the application. In some countries, import licenses can be transferred from company to company.
An export license is a document issued by a governmental body that authorizes a manufacturer, a wholesaler or a trader to export a specific commodity (or group of commodities) to a certain country (or list of countries). Export licenses may also set a total maximum amount of goods (in value or quantity). Export licenses are common in developing countries and less in established economies (which have, generally, fairly open trading regulation – both in import and export): when in place, a company that exports without a valid license, or in excess of the authorized volumes, is subject to severe penalties.
Export licenses help governments to control the volume that local companies export and the destination of such goods.
Export licenses may apply to strategic materials and goods, such as:
- strategic materials (uranium, special alloys)
- sensitive technologies (advanced computer chips, artificial intelligence, encryption software)
- prohibited materials (drugs, genetically-modified agricultural products)
- dangerous materials (explosives, radioactive materials)
- goods in short supply in the home market (foodstuffs, raw materials)
- export to sensitive countries (those under embargo)