A US-headquartered technology group finalises a distribution agreement with a partner in a third market. The goods carry a dual-use classification. The counterparty is not listed anywhere. Yet the deal requires two separate determinations before any goods move: one from OFAC, asking whether the destination or the end-user triggers a sanctions prohibition, and a second from the Bureau of Industry and Security under the Export Administration Regulations, asking whether the item, the end-use, and the end-user together require a licence under the Commerce Control List (the CCL – BIS's master schedule of controlled goods, software, and technology). Getting either analysis wrong exposes the exporter to penalties that can be severe and, under some regimes, criminal.
As of April 2026, export-licence determinations under OFAC and under BIS / the EAR run on parallel but distinct tracks. OFAC's analysis is sanctions-first: it asks whether a transaction is prohibited because of who is involved or where goods are going, regardless of what the goods are. BIS / EAR analysis is item-first: it classifies the goods, then overlays destination controls, end-user controls, and end-use restrictions. A deal may clear one authority and be blocked by the other. Both tracks must be run, and the stricter prohibition governs.
This analysis maps the two determinations side by side – the governing authority, the procedure, the tests applied, the points of divergence, the risk flags practitioners see most often, and when cross-border counsel adds the most value. Where relevant, it notes the position under OFSI, the EU dual-use regime, and other jurisdictions, because few export decisions are purely domestic.
What authority governs each determination?
OFAC and BIS / EAR are distinct agencies with distinct legal bases, and conflating them is one of the most common errors in export compliance work. OFAC, a bureau of the US Treasury, administers the US economic sanctions programmes authorised principally under the International Emergency Economic Powers Act (IEEPA) and, for older programmes, the Trading With the Enemy Act. OFAC's authority is over transactions: it prohibits dealings with designated persons, prohibited jurisdictions, and – through the 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked) – entities that blocked persons own in the aggregate. OFAC does not, in the primary sense, regulate the movement of goods as goods; it regulates transactions, and goods happen to move through them.
BIS, part of the Department of Commerce, administers the Export Administration Regulations under the Export Control Reform Act. The EAR assigns every commercially significant item an Export Control Classification Number (ECCN – BIS's alphanumeric code placing an item on the CCL and specifying the controls that apply to it) or, where no specific control applies, designates the item as EAR99. The EAR then overlays country groups, entity-level restrictions (the Entity List, the Denied Persons List), end-use controls, and a set of licence exceptions. The question is not primarily who the buyer is; it is what the item is, where it is going, who will use it, and for what purpose.
In our cross-border practice, confusion between the two frameworks is most acute in technology sectors. A software product may be EAR99 – carrying no specific CCL control – yet moving it to a sanctions-affected jurisdiction still requires an OFAC analysis. Conversely, a highly controlled dual-use item may be destined for a jurisdiction with no OFAC programme, but BIS licence requirements still apply. Neither authority substitutes for the other. Running only one analysis is a structural gap.
How the item-classification step differs from a sanctions screen
The BIS / EAR determination begins with classification: does the item have an ECCN, and if so, what controls does that number trigger? An ECCN carries reason-for-control codes – national security, missile technology, nuclear non-proliferation, anti-terrorism, and others – and those codes determine which country groups require a licence and which licence exceptions may be available. A business must classify its item accurately before it can determine whether a licence is needed at all.
The OFAC screen works differently. There is no classification of the goods. The analyst asks: is any party to the transaction – the buyer, the seller, an intermediary, a financial institution in the payment chain, a freight forwarder – a designated person or an entity caught by the 50 percent rule? And is the destination a jurisdiction covered by a comprehensive OFAC programme? If the answer to either is yes, the transaction is prohibited unless a specific or general licence applies. The analysis is counterparty-and-destination-driven, not item-driven.
That structural difference has practical consequences. A technology company may have a flawless ECCN classification process and a weak OFAC ownership-and-control screen, or vice versa. In our experience, the two gaps rarely appear together in the same compliance programme. Exporters with strong trade-compliance functions sometimes under-invest in sanctions ownership mapping; banks and financial institutions strong on OFAC sometimes lack the technical knowledge to ask the right questions about item classification.
What specific risk does that gap create? Consider a distributor in a neutral jurisdiction whose ultimate beneficial owner is a blocked person. The goods – say, commercial electronic components – may be EAR99, so BIS imposes no licence requirement. OFAC, however, treats the distributor as a blocked entity under the 50 percent rule. The export is prohibited. A classification-only process would miss it entirely.
The licence-exception and general-licence structure: a key point of divergence
Both regimes provide for transactions that would otherwise require authorisation to proceed under defined conditions. But the mechanics differ significantly, and the terms are not interchangeable.
Under the EAR, a licence exception is a regulatory provision that permits a specific category of export without an individual licence, provided the exporter meets all stated conditions and maintains records. Licence exceptions under the EAR are self-executing: the exporter determines eligibility, documents the basis, and ships. There is no prior approval. Common exceptions cover low-value shipments, technology releases to certain categories of recipients, and controlled items going to close allies. Using an exception when the conditions are not fully met is a violation; underuse of available exceptions is not a regulatory problem but is a commercial one.
Under OFAC, the comparable tool is a general licence (a standing authorisation permitting a defined category of transactions without a separate application). General licences vary substantially by sanctions programme. Some are broad – covering the importation of informational materials, remittances under defined thresholds, or personal communications. Others are narrow. And some programmes have very few general licences at all, meaning that any transaction not squarely within a prohibition's exceptions requires a specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction), applied for directly to OFAC.
Where neither a general licence nor a licence exception is available, the routes diverge further. A BIS licence application goes to an inter-agency review process. An OFAC specific-licence application goes to OFAC's Licensing Division and is evaluated on OFAC's own licensing policy for the relevant programme. The two processes run to different timelines, require different supporting materials, and are governed by different approval criteria. Running them in parallel – where both are needed – is the correct approach. Sequencing them risks delays that can become commercially fatal.
We regularly advise clients who have obtained an OFAC specific licence for a transaction only to discover that a BIS licence application must then be initiated separately. The OFAC licence does not authorise the export under the EAR. That misunderstanding has caused significant delays in time-sensitive commercial programmes.
Where do OFSI, EU dual-use rules, and other regimes add a third layer?
Export transactions in practice rarely sit within a single jurisdiction's rules. A US-origin item re-exported from the United Kingdom by a UK subsidiary is subject to EAR extraterritorial controls, but it also engages ECJU licensing requirements under the Export Control Order and OFSI's financial-sanctions screen if any party is designated under UK sanctions. The UK has its own autonomous sanctions regime, administered by OFSI under the Sanctions and Anti-Money Laundering Act, and its own export-control licensing regime, administered by ECJU. Neither mirrors OFAC or BIS precisely.
The EU adds a further layer. EU dual-use controls under the relevant Council Regulation impose a parallel classification and licensing structure. EU member states administer their national licensing authorities, but the regulation is uniform across the bloc. The EU regime includes a catch-all control: an exporter who knows or suspects that an item not otherwise listed will be used for weapons of mass destruction-related purposes must seek a licence even where no ECCN equivalent applies. That catch-all has no direct EAR analogue in its formulation, though the EAR has end-use controls that operate similarly in practice.
Under OFAC, the secondary-sanctions dimension is critical for cross-border businesses. Secondary sanctions create risk for non-US persons who deal with certain designated entities or engage in significant transactions in certain sectors, even where those persons have no US nexus in the primary-sanctions sense. A European or Asian exporter who believes OFAC does not apply because the goods are non-US-origin must still assess whether the transaction creates secondary-sanctions exposure – particularly where it involves persons connected to programmes that carry secondary-sanctions provisions.
Singapore, Japan, the UAE, Canada, and Australia each maintain export-control and sanctions regimes of varying scope. None is identical to the US framework. In a deal with genuinely multi-jurisdictional routing, every leg of the transaction may engage a different set of controls. The rule is consistent: where multiple regimes apply, the stricter prohibition governs, and no clearance under one regime substitutes for the absence of clearance under another.
Related practices
- Deemed-export and technology controls under BIS / EAR – classification, deemed-export analysis, and licence applications for technology transfers
- OFAC vs Canada: export-licence determinations compared – how OFAC and GAC obligations interact for cross-border exporters
- OFAC vs EU: export-licence determinations compared – mapping the US and EU dual-use regimes for the cross-border practitioner
Risk flags: where export-licence determinations fail in practice
The most common failure is treating the OFAC screen and the BIS / EAR classification as sequential rather than concurrent. In a well-designed programme, both run from the moment a potential transaction is identified. Waiting for the BIS determination before starting the OFAC analysis, or vice versa, introduces avoidable delay and, in some cases, leads teams to proceed on the basis of a partial clearance.
A second persistent risk is inadequate beneficial-ownership analysis. The EAR's Entity List and Denied Persons List focus on named legal entities. OFAC's 50 percent rule reaches any entity that blocked persons own in the aggregate, whether or not that entity is itself listed. A distributor or purchasing agent that clears the EAR Entity List check may still be caught by OFAC through its ultimate ownership. Screening tools that do not map the ownership chain – not just the immediate counterparty – will miss this.
Third: licence exceptions and general licences are frequently misapplied in opposite directions. Some exporters claim EAR licence exceptions where the conditions are not satisfied – shipping above the value threshold, or to a recipient who does not qualify. Others fail to claim available general licences under OFAC, defaulting unnecessarily to a specific-licence application and waiting months for approval that was never required. In our experience, both errors are expensive: the first creates a violation, the second destroys commercial timelines.
Fourth, technology transfers – including deemed exports, which are the release of controlled technology to a foreign national on US soil – are an area where the BIS / EAR analysis is frequently omitted because no physical good crosses a border. A deemed export (the release of controlled technology or source code to a foreign national in the United States, treated as an export to that person's home country) is subject to the same CCL controls as a physical shipment. And the OFAC screen still applies: if the foreign national is a national of a sanctions-affected jurisdiction, the release may be separately prohibited under OFAC's applicable programme.
Finally, record-keeping failures are an enforcement trigger. Both OFAC and BIS expect exporters to retain documentation supporting their licence determinations, their use of licence exceptions, and their ownership screens. A business that made the right determination but cannot demonstrate it may face the same scrutiny as one that made no determination at all. The applicable record-keeping obligations run for a defined period that exporters should confirm under the current rules; verify the current position before relying on it.
A common misconception: one authority's clearance covers the other
A belief we encounter frequently among in-house teams and, occasionally, among advisers operating outside their primary specialism, is that obtaining a specific OFAC licence means the export is authorised. It does not. An OFAC licence authorises a transaction that would otherwise be prohibited under OFAC's sanctions programmes. It says nothing about whether BIS / EAR requires a separate licence for the same goods to move. That determination rests entirely with BIS, under the EAR, on the basis of the item's ECCN and the applicable country and end-user controls.
The mirror error is equally common: a business confirms that its item is EAR99 – carrying no CCL control and therefore no BIS licence requirement – and concludes no licence is needed at all. EAR99 means BIS imposes no licence requirement for the item. It does not mean OFAC has no view. If the buyer, the beneficial owner, the destination, or any party in the transaction chain is caught by an OFAC programme, the transaction may still be prohibited.
Cross-border businesses operating in technology, industrial goods, chemicals, and financial services all face this dual-track reality. What practical difference does it make? It means that the team running the BIS / EAR analysis and the team running the OFAC screen must coordinate rather than operate as separate workstreams. In many organisations they do not – and that structural separation is where combined exposure accumulates.
If a transaction has already been flagged under one authority, or a filing has been refused, an early review of the parallel authority's position can preserve options that close with time. For a confidential review of your exposure, contact Calder & Vance at info@caldervance.com.
When to involve export-control and sanctions counsel
Not every export determination requires external counsel. A routine shipment of EAR99 goods to a jurisdiction with no OFAC programme, where counterparty screening returns no hits, is a straightforward compliance task for an internal team with the right tools. The cases where external counsel adds material value are those where the two determinations intersect in a non-obvious way, or where either determination is uncertain.
Specific situations that warrant early counsel involvement include: transactions where the ECCN is unclear and the classification determines whether a licence is required; any transaction involving a party whose ownership structure is layered or opaque, creating 50 percent rule exposure that requires legal analysis; transactions where an OFAC specific-licence application is needed and the licensing policy for the applicable programme is not straightforward; re-exports involving UK, EU, or other jurisdictions where additional controls apply; and any situation where a prior shipment may have occurred without the required BIS or OFAC authorisation, creating a potential voluntary self-disclosure question.
Voluntary self-disclosure (a VSD – disclosure of an apparent violation to the relevant regulator, typically treated as a mitigating factor in enforcement) is available under both OFAC and BIS. The decision to disclose, and the preparation of the disclosure, are legal matters. A VSD that is well-prepared and accurately scoped the violation is treated differently from one that is incomplete or that inadvertently expands the period of review. In our practice, we scope the apparent violation, advise on whether a VSD is the appropriate course, and prepare the submission and supporting evidence package.
For a business that has not yet encountered a specific issue but wants to stress-test its export-compliance programme, a gap analysis across both the BIS / EAR track and the OFAC track – with a specific focus on where the two interact – is a cost-effective investment relative to the penalties that a gap can produce. To discuss that analysis, contact Calder & Vance at info@caldervance.com.
A scenario: dual-track determination in practice
In a recent matter, a technology business in the industrial-components sector was evaluating a distribution arrangement in a third market. The goods included items that the business had not formally classified under the CCL, on the assumption that they were commercial-grade and EAR99. The proposed distributor had a clean profile at the entity level. We were retained to review the transaction before signature.
Our analysis identified two issues. First, one item in the product range carried an ECCN – not the highest control tier, but one that triggered a licence requirement for the intended destination under the applicable country-group restrictions. The business had never classified this item. It had been exported previously under the assumption of EAR99 status, creating a record of uncharged prior violations.
Second, the distributor's ultimate beneficial owner included a holding company in a jurisdiction associated with an OFAC programme. The holding company itself was not listed. But its ownership stake, when aggregated with a related entity's stake, crossed the 50 percent threshold, bringing the distributor within OFAC's block on that basis. The entity-level screen had returned no hits; the ownership-chain analysis did.
We advised on the scope of the prior export issue, including the VSD question; assisted in the formal ECCN classification of the product range; and identified the ownership issue early enough that the client could re-structure the distribution arrangement before any prohibited transaction occurred. The matter resolved without enforcement action. No outcome is ever guaranteed, but early engagement – before the contract is signed – preserves choices that are not available after the fact.