Leon Lacroix

ITAR-controlled goods, referred to as defense articles, are those items that are specifically identified in the United States Munitions List, or USML, which is a section within the ITAR.

This list includes descriptions of the items that are controlled. A defense article is any item or technical data listed on the United States Munitions List (USML).

Import substitution industrialization is an economic theory adhered to by developing countries that wish to decrease their dependence on developed countries.

ISI targets the protection and incubation of newly formed domestic industries to fully develop sectors so the goods produced are competitive with imported goods.

Developing countries began to reject ISI policy in the 1980s and 1990s.

The primary goal of the implemented substitution industrialization theory is to protect, strengthen, and grow local industries using a variety of tactics, including tariffs, import quotas, and subsidized government loans. Countries implementing this theory attempt to shore up production channels for each stage of a product's development.

ISI runs directly counter to the comparative advantage concept that occurs when countries specialize in producing goods at a lower opportunity cost and export them.

The History of Import Substitution Industrialization (ISI) Theory

ISI refers to the development economics policies of the 20th century. However, the theory itself has been advocated since the 18th century and was supported by economists such as Alexander Hamilton and Friedrich List.

From my point of view, it is pretty effective. Goods must be accompanied by a "Certificate of Origin" to qualify for any free trade agreement. This document will be reviewed at some point. It should be noted that at the time of release, goods are not thoroughly examined or checked. Less than 1% of all goods are actually examined. Documents alone are used to release goods.

Post-audits, on the other hand, are quite common. You may be asked to provide additional proof of origin later on. Customs in Canada has the authority to audit an entry up to four years after the goods have arrived.

Customs officials also have a lot of experience and a lot of data in their computers that they can quickly check. They know who makes what and how to spot a suspicious shipment.

I really like this article because it can help clarify things from a legal perspective as well: EXIMA’s Library | What You Need to Know About the Rules of Origin

Different Incoterms in the sales contract create different customs duty responsibilities. For example if the sale contract uses the incoterm ‘Delivered Duty Paid’ (DDP), where the seller is based in the UK and the buyer is in the EU, the seller will need to complete both the UK export customs declaration and the EU import declaration.

They will also need to pay the import VAT and any duty. This arrangement is also likely to lead to a requirement to register for VAT in that country.

But where the sale is on a Delivered At Place (DAP) basis the customer is the importer. And for sales on an ‘Ex Works (EXW)’ basis the buyer has to complete the UK export declaration as well as the EU import declaration.

An Authorised Economic Operator is a company (importer, exporter, transport operator etc) who, given their compliance with certain safety, financial and customs requirements, has the right to a specific priority treatment by customs, such as for example faster customs clearance and greater reliance on post-clearance audit. It is generally suitable for large companies with excellent record keeping, organized premises and no recent history of irregularities with customs or other state entities.