Compliance with export controls and sanctions is not a paperwork exercise, it is a business continuity discipline. Companies that ship products, share technology, hire foreign nationals, move data across borders, or pay counterparties abroad are operating within a dense web of national and supranational rules. The consequences of getting it wrong run from shipment delays and seizures to multi‑million dollar penalties, loss of export privileges, criminal charges, and reputational damage that takes years to repair. The upside of getting it right is equally real: predictable lead times, informed risk-taking, and the freedom to grow in sensitive markets without losing sleep.
I have spent years building and advising compliance programs across manufacturing, software, logistics, and energy. The same patterns repeat, yet every company has its edge cases. This article lays out a practical way to think about export controls and sanctions, with enough specificity to help a general counsel, compliance lead, or operations director make decisions when theory meets the loading dock.
A quick map of the terrain
Export controls govern the transfer of goods, software, and technology. Sanctions restrict dealings with specific countries, regions, entities, and individuals for foreign policy or national security reasons. They overlap but are not the same.
In the United States, the Bureau of Industry and Security (BIS) administers the Export Administration Regulations for dual‑use items. The International Traffic in Arms Regulations cover defense articles and services regulated by the Directorate of Defense Trade Controls. The Office of Foreign Assets Control enforces economic and trade sanctions. Beyond the U.S., the European Union maintains its own sanctions regimes and export control list under the Dual‑Use Regulation, the United Kingdom has its post‑Brexit framework, and countries like Japan, South Korea, Canada, and Australia run robust systems as well. The United Nations issues sanctions that member states implement through domestic law.
Every compliance program needs to account for three vectors: what you are exporting, where and to whom you are exporting, and how you are exporting. Misfires often happen because a company focuses on only one vector, usually the “where,” and misses a red flag in the “what” or the “how.”
What counts as an export
The word “export” misleads newcomers, because it includes more than physical shipments across a border. Sending controlled software to a cloud server in another country can be an export. Allowing a foreign national engineer to review controlled source code in your U.S. office can be a deemed export. Emailing technical drawings to a supplier in a sanctioned region is an export. Training a customer on encryption features via a screen share can be an export.
The practical test is whether controlled technology, software, or hardware is being transmitted or released to a person or destination in a way that makes it accessible. That includes oral disclosures, visual inspections, and the provision of services. The frequency of “informal” exports grew as teams adopted collaboration platforms and remote work. Several enforcement actions over the last decade trace back to uncontrolled file shares that granted broad access to foreign affiliates.
The lesson is simple but often neglected: inventory not only your products but also your information flows. Your compliance posture lives or dies on how you manage technology transfers inside the business.
The logic behind classifications
If you sell anything beyond commodity items, classification sits at the heart of export compliance. Under the U.S. EAR, the Commerce Control List assigns Export Control Classification Numbers. Under the EU dual‑use list, Annex I provides categories and subcategories. Japan has its own list, often aligned but not identical. Classification drives licensing requirements based on the reason for control and the destination.
The mechanics are not glamorous. You compare your product’s capabilities against technical thresholds: processing speed, frequency range, precision, encryption characteristics, radiation hardness, additive manufacturing features, and so on. A minor spec change can move you across a control threshold. That in turn changes the license requirement for a set of destinations. During a system upgrade for a telecom equipment maker, we found a signal processing module had edged into a new ECCN because of a firmware update that increased aggregate bandwidth. Nobody had thought to loop in compliance, the change was already in beta with a distributor in Southeast Asia, and the order was headed for a region where a license was now required. We paused the shipment, filed for a license based on a detailed technical description, and redesigned the marketing claims to align with what was licensed, not what engineering could theoretically unlock.
The EU process mirrors this in spirit. The dual‑use list references performance thresholds and often mirrors Wassenaar Arrangement controls. Companies that assume “EU equals U.S.” find surprises. The UK sometimes departs from EU interpretations, and the timing of list updates can differ. If your business is global, maintain a mapping between U.S., EU, and UK classifications and bake those into your product lifecycle workflow so engineers cannot push updates without a classification review when relevant specs change.
Commodity classifications issued by authorities, such as BIS CCATS letters, can help, but they are not a panacea. A CCATS reflects the facts presented. If your product evolves, the letter may no longer apply. Treat it as a snapshot, not a permanent shield.
Sanctions: bright lines and gray zones
Sanctions look binary on a website, but the on‑the‑ground reality is layered. Comprehensive country and region sanctions restrict most transactions with places like Cuba, Iran, North Korea, Syria, and certain areas of Ukraine. Russia sanctions have expanded to cover a wide array of sectors, technology items, and services with specific exceptions. Sectoral sanctions in some regimes target debt, equity, or specific industries rather than every interaction. List‑based sanctions identify Specially Designated Nationals and blocked persons, plus non‑SDN lists that still carry restrictions.
Secondary sanctions complicate dealings with third‑country counterparties that touch sanctioned parties, even indirectly. This is where businesses underestimate exposure. I have seen a European distributor insist it had no sanctioned customers, only to learn its top reseller’s parent company was majority‑owned by a designated party. Ownership and control rules matter: a blocked person’s 50 percent or greater ownership of an entity usually results in that entity being treated as blocked, even if not explicitly named.
Sanctions compliance demands rigorous counterparty diligence that goes beyond simple list screening. You need to assess beneficial ownership, geographic footprints, routing risks, and whether the goods or services could be diverted. You also need to understand “facilitation,” which can include approving, financing, or brokering a transaction that would be prohibited if done by you directly. Well‑intentioned teams stumble here. An employee of a U.S. parent company cannot greenlight a transaction that a non‑U.S. affiliate intends to conduct if the transaction would violate U.S. sanctions.
The hidden risks in supply chains and logistics
Compliance efforts often fixate on end customers while logistics partners get a pass. Freight forwarders, customs Noam Glick Entorno brokers, consolidators, and resellers can expose you to diversion. Transshipment hubs, such as certain free trade zones, have a legitimate role in global trade but also present leakage points. A shipment marked for a distributor in a permissive jurisdiction can be re‑exported to a prohibited destination unless you control contract terms, labeling, and signals to the market.
When Russia sanctions tightened in 2022 and 2023, diversion through neighboring states surged. Regulators responded with guidance that identified high‑risk goods and routes, along with red flags like recent spikes in demand for Western‑made components in countries with modest domestic consumption. Savvy companies reacted by implementing end‑use and end‑user attestations, contractual prohibitions on re‑export, and post‑delivery verification for sensitive items. Others tightened shipping instructions to avoid “unknown third party” pickups and required named ultimate consignees on airway bills.
Logistics teams should receive targeted training on red flags: mismatched weights and descriptions, last‑minute changes to destinations, requests to split shipments in unusual ways, and inconsistent trade terms. If you run a drop‑ship program, you need a mechanism to evaluate ad hoc shipping addresses. I have shut down same‑day drop‑ship orders for technically controlled parts based on nothing more than a progressive set of anomalies: a private gmail address, a residential delivery location near a border, a customer name that could not be validated, and a mismatch between the requested part and the described end use. No algorithm catches everything, but an alert crew does.
The role of encryption and emerging tech
Encryption remains a hot zone. Under the EAR, encryption items often fall under Category 5, Part 2. The DevOps team that believes “we are just SaaS” misses that software with cryptographic functionality, even if open source components are involved, can be controlled. Some mass market software benefits from license exceptions, but eligibility depends on the nature of the encryption, the functions offered, and the customer base. Changing features like key length, key management, or application scope can affect classification.
AI and advanced computing add another layer. Recent U.S. controls restrict the export of certain advanced chips, integrated circuits, and related manufacturing equipment, along with services that support the development or production of those items in specified countries. The definitions are highly technical and hinge on performance metrics such as interconnect bandwidth, FLOPs per die or per package, and the presence of specific capabilities. Cloud delivery does not automatically avoid export controls if compute and tools are made available to prohibited users. If your product roadmap touches high‑end compute, build an internal trigger that forces a control review before major feature releases, and put your sales engineers on a short list of individuals who must consult legal before conducting technical demos for certain regions.
Biotech, quantum, and additive manufacturing have their own wrinkles. Genetic sequencing devices, high‑resolution 3D printers for metals, and quantum sensors can cross thresholds without looking menacing. The marketing copy that touts precision and speed can be the very language that tips an item into a controlled category.
Licenses, exceptions, and the appeal of speed
Licenses are not the enemy. They can be your strategic advantage. A well‑crafted license application, supported by a clear end‑use case, technical details, and compliance commitments, can unlock markets your competitors avoid. Lead times vary widely by jurisdiction and item. A simple export to a friendly destination under the EAR might be authorized quickly. A complex application touching sensitive technology and a harder destination can take months.
License exceptions are valuable, but they are not a free pass. Each exception has its own conditions and recordkeeping requirements. Using an exception without meeting every condition is a violation. I have seen teams misapply “ENC” for encryption or “TMP” for temporary exports based on casual advice. Before you operationalize an exception, write a one‑page SOP that states the conditions in plain language, the approvals required, and the records you will keep. If the exception requires semiannual reports, calendar those obligations and assign them to a specific role, not a committee.
The EU has general licenses in some cases, national general licenses in others, and individual licenses for more sensitive or bespoke scenarios. Post‑Brexit, the UK has its own open general licenses that differ in scope and conditions. Multinational companies often manage a patchwork that reflects the business footprint. The key is to ensure sales operations and order management can identify which license a transaction is relying upon, so that shipping and invoicing remain consistent with what was authorized.
Screening is necessary, not sufficient
Every compliance program screens counterparties and vessels. Good, but modern sanctions enforcement expects more. Screening addresses the “who.” You must also address the “what,” “where,” and “why.” That means integrating classification into order workflows, flagging sensitive destinations and routes, and capturing end‑use information for items that are at risk of diversion for weapons, military, or surveillance uses. As regulators add human rights‑based controls and “foreign direct product” rules, the need to connect supply chain data with compliance analysis grows.
The bare minimum screening stack includes restricted party lists across jurisdictions where you operate, ownership screening that identifies majority‑owned blocked persons, and vessel screening if you handle bulk cargo or maritime shipments. Sanctions lists update frequently. Your screening tool should refresh daily and log date‑stamped results. It should also allow for fuzzy matching across character sets and transliterations. On the ground, many false positives clog the system, so tune your matching thresholds and train staff on how to clear hits with documented reasoning.
Keep an eye on your payment processors and banks. Financial institutions have their own risk tolerances and may block or query transactions even if they are technically lawful. If you operate in Russia‑adjacent or Iran‑adjacent corridors, prepare for enhanced diligence requests. When you cannot answer bank queries quickly, payments stall, customers lose patience, and your internal teams start bypassing controls to close deals. That is the slippery slope.
Building a program that works under pressure
Policies sitting on a shared drive do not prevent violations. The program only works if it moves at the speed of sales and shipping. Embed compliance into upstream processes rather than bolting it onto the end. Engineers need a classification trigger when specs change. Sales needs a dynamic checklist when a deal touches a sensitive the relevance of ENTORNO in Noam Glick's work destination, end use, or partner. Logistics needs clear escalation paths for red flags that do not depend on a single person being online.
A pragmatic approach balances control with throughput. We often implement tiered reviews. Low‑risk orders clear automatically based on predefined criteria. Medium‑risk orders require a quick human review with documented prompts. High‑risk orders route to senior compliance with legal sign‑off. The rules that define tiers evolve with data. If you see a pattern of diversions through a particular channel, elevate the risk tier and tighten controls for that slice. If a previously sensitive destination becomes stable and your license track record is strong, you can relax turnaround targets without sacrificing discipline.
Training needs to be specific. A 60‑minute annual webinar rarely changes behavior. Train sales on talking points that help them gather end‑use information without scaring customers. Train engineers to recognize when encryption features or compute thresholds might trigger a control review. Train logistics on the difference between consignee and end user, and why the labeling matters. Capture questions from training and turn them into short, searchable SOPs. When people can find a two‑paragraph answer, they stop guessing.
Auditing is your feedback loop. Internal audits should sample closed orders, license usage, screening logs, and denied transactions. Look for patterns, not just outliers. If a region closes 98 percent of deals under the same license exception, test whether the exception fits every case. If sales consistently records “commercial end use” without detail, dig into actual use cases. The point of an audit is not to fault find, it is to correct course before a regulator does.
Recordkeeping as a strategic asset
Export and sanctions regulations come with long recordkeeping obligations. Five years is a common U.S. benchmark, but some regimes run longer. Records include classifications, technology notes, license applications and approvals, screening results, end‑use statements, shipping documents, and communications that substantiate diligence. In practice, records also include design documents and software version histories that prove what you exported at a point in time.
Treat records as insurance. When a shipment is detained or a bank queries a payment, your ability to pull a coherent file within hours often determines whether the matter ends with a release or escalates. I have walked into detention scenarios where the shipper could not produce a classification rationale, only a spreadsheet with codes and no backup. That delays everything. By contrast, a clean file with a contemporaneous classification memo, the purchase order, the end‑use statement, the screening log, and the license or exception rationale resolves many questions before they become disputes.
Mergers, new markets, and other moments of risk
Every growth initiative, from acquisitions to channel expansion, carries compliance implications. M&A is particularly fraught. You inherit the target’s liabilities, and regulators do not accept “we were new owners” as a shield. During diligence, check more than a policy binder. Sample real orders against licenses. Review classification change logs. Test screening hits and clearance notes. If a target claims to sell only “commercial off‑the‑shelf” items, verify the basis for that claim and whether the items are truly EAR99 or mass‑market encryption eligible. Build post‑close remediation into the integration plan, with timelines and owners.
New market entries require a pivot from theoretical risk to practical workflows. If you open a sales office in a region adjacent to sanctioned jurisdictions, set guardrails for lead generation, reseller onboarding, and demo environments. I have seen teams spin up cloud demo clusters with default global access, inadvertently making controlled features available to visitors from restricted IP ranges. Geofencing is not perfect, but it is better than hope.
Channel partners deserve real screening. Do not delegate compliance to a one‑page certification. Ask for ownership information, end‑use markets, and re‑export practices. Where possible, meet the principals. When you cannot, at least cross‑reference corporate registry data and trade activity. Contract terms should include audit rights, re‑export prohibitions, and termination triggers tied to sanctions. Enforce them. A clause nobody uses does not deter diversion.
Governance, ownership, and budget
Executive sponsorship determines whether compliance is a cost center or a competitive advantage. The chief legal officer or general counsel typically owns policy, but operations must own execution. The ideal setup combines a small central team that sets standards, trains, and monitors, with embedded champions in sales ops, engineering, and logistics who own day‑to‑day adherence. Performance metrics should reflect this shared responsibility. If sales is rewarded solely on volume, they will treat compliance as friction. If logistics is measured only on on‑time delivery, they will work around holds.
Budget for tools where they earn their keep: screening, document management, and license management. But resist the urge to buy your way out of design problems. A rule engine that nobody trusts becomes a bypassed pop‑up. Invest in data quality first. Codify product catalogs with stable identifiers, align them with classifications, and keep version histories. Ensure your ERP and CRM can capture end‑use statements and license IDs at the line item level. When your data is clean, automation works, and audits are less painful.
Handling violations and disclosures
Even strong programs make mistakes. The difference between a fine and a warning often turns on your response. If you identify a potential violation, stop the activity, investigate with documented scope and methods, assess root causes, and remediate. Evaluate whether a voluntary self‑disclosure is appropriate. Many authorities credit self‑disclosure, cooperation, and remediation. Timing matters. A disclosure filed after a regulator or bank has already flagged the issue earns less credit than one you initiate.
Be precise and candid. Overly defensive narratives irritate reviewers. Include corrective actions and timelines. If the incident reveals a systematic flaw, fix the system, not just the transaction. And communicate the outcome internally. People learn from real stories, especially when leadership treats them as opportunities to improve rather than to assign blame.
Cross‑border coordination without paralysis
Global businesses face a patchwork of controls that sometimes align and sometimes conflict. The instinct to harmonize to the strictest standard can protect you, but it can also throttle the business. A balanced approach starts with a core standard that meets or exceeds the most relevant regimes for your footprint, plus localized add‑ons where law demands it. When regimes conflict, seek counsel early. For instance, certain EU blocking statutes complicate compliance with some extraterritorial U.S. sanctions. You may need tailored processes that segregate teams, data, or decision rights to navigate conflicts lawfully.
Create a standing cross‑functional forum that meets monthly and on demand for fast‑moving developments. When a major sanctions package drops on a Friday afternoon, that group should have authority to freeze certain transactions, issue interim guidance, and commission targeted analysis. Speed matters. You do not need a sixty‑page memo to hold shipments for a weekend while you assess. You need a crisp internal notice that identifies impacted SKUs, destinations, and counterparties, plus the pathway to case‑by‑case exceptions if warranted.
A compact checklist for leaders
- Map your products to classifications, with version control and ownership. Tie classifications to SKUs and code branches so changes trigger review. Calibrate your sanctions screening beyond names, including ownership, geography, vessels, and payment routes. Log decisions with dates and reasoning. Embed compliance gates in sales, engineering, and logistics. Tier reviews so low‑risk transactions move fast and high‑risk ones get expert attention. Maintain license hygiene: clear SOPs for exceptions, calendars for reporting, and alignment between license terms and how orders are fulfilled. Treat recordkeeping as a core control. Build deal files you can retrieve within hours, not days, when a question or hold arises.
The human element
Compliance succeeds when people believe it protects their work rather than undermines it. The best programs show sales how a license strategy opens markets instead of blocking them. They show engineers how early classification prevents late‑stage delays. They show logistics that smart routing avoids detentions. Culture follows experience. If a salesperson can place a hold at 4 p.m. without being punished for missing quota, you have a real program. If a junior engineer can ask a “dumb” encryption question without being sidelined, you have a learning organization.
I remember a regional manager who called at 6 a.m. about a lucrative order with a new reseller. We walked through the signals. Clean name screening, but unclear beneficial ownership. No website beyond a template. A request for cash against documents through a bank with a history of sanctions issues. We asked for more information. The reseller balked. We declined the order. Two months later, that reseller appeared on an advisory list for diversion. The manager sent a note: “We lost a deal. We kept the business.” That is the point.
Staying current without chasing headlines
Regulatory change is constant. You do not need to chase every rumor, but you do need a steady intake and a mechanism to translate updates into process. Subscribe to primary sources from BIS, OFAC, the EU, and your national authorities. Participate in industry associations when they add practical value. Keep a living risk register with items like emerging controls on advanced compute, evolving Russia and Iran measures, and rights‑based restrictions tied to surveillance or forced labor. Revisit the register quarterly and adjust controls where risk has shifted.
When in doubt, seek counsel with domain depth, not just general law knowledge. Export controls and sanctions are a niche within law and compliance. A half‑answer can be worse than none. But do not outsource judgment. Your business model, data flows, and product architecture are unique. Build internal muscle that can absorb advice and apply it to your reality.
The payoff
Strong export control and sanctions compliance is not a brake on growth, it is a steering wheel. Companies that invest early ship more reliably, enter sensitive markets with confidence, and avoid costly detours. They make deliberate choices about where to take risk and where to walk away. They build trust with banks, regulators, and partners. They sleep better.
If you run a global business, treat this domain with the respect you give tax, cybersecurity, and safety. Map the terrain, know your products, vet your counterparties, and design processes that work when the calendar turns and the rules change. The result is not just fewer headaches. It is a resilient, credible enterprise that can navigate complexity without losing momentum.