A global distribution company has spent six months negotiating a supply agreement. The goods are ready. The buyer is approved. Then the compliance team asks the question that should have come first: does this shipment require a licence under OFAC? As of May 2026, OFAC administers more than thirty active sanctions programmes, and the answer to that question can mean the difference between a closed deal and a civil penalty.
Export-licence determinations under OFAC require a structured, sequential analysis: identify whether the goods, the destination, the counterparty, or the transaction is caught by a sanctions programme; determine whether a general licence (a standing authorisation for a defined category of activity) already permits the transaction; and, if not, assess whether a specific licence (a case-by-case authorisation) is available and worth pursuing. The governing authority is OFAC, acting under IEEPA and related statutes. The analysis is distinct from – but often runs in parallel with – a BIS export-control review under the EAR.
This guide walks through each stage of an OFAC export-licence determination, identifies the points where businesses most often go wrong, and explains when this analysis intersects with the UK, EU, and other regimes.
Step 1: Understand what OFAC regulates – and why it is not the same as export-control law
OFAC's sanctions programmes prohibit or restrict transactions with designated persons, listed entities, and – in some programmes – entire jurisdictions. They operate independently of the export-control rules administered by BIS under the EAR, although the two systems frequently overlap on the same transaction.
The distinction matters in practice. BIS controls focus on the classification of the good itself: its technical characteristics, its ECCN (Export Control Classification Number under the US Commerce Control List), and the country and end-use in question. OFAC controls focus on who the counterparty is, where the transaction touches, and whether any proceeds flow to a blocked or restricted person or territory. A shipment of goods that requires no BIS licence may still be entirely prohibited under OFAC – and vice versa.
In our experience, the most common early error is treating the two bodies of law as a single inquiry. A business that clears BIS and stops there has not completed the OFAC analysis. The two tracks must both be run, and they must be run in sequence rather than as a single merged question.
OFAC's programmes fall broadly into two categories. Programme-based sanctions restrict all transactions touching a particular jurisdiction or sector, regardless of whether any individual counterparty is listed. List-based sanctions target specific persons and entities – captured on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons) and related lists. Understanding which type of programme is in play governs what the licence determination looks like.
Step 2: Screen the transaction – counterparty, destination, goods, and payment route
A complete OFAC screen covers four vectors: the counterparty and its ownership chain, the destination country and any intermediate transit points, the goods themselves and their end use, and the financial route through which payment will move. Missing any one of these can expose the entire transaction.
Counterparty screening is the best-known step, but it is also the step most frequently done incompletely. The 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked, even if not separately listed) extends the SDN prohibition to unlisted subsidiaries and affiliates. Screening only the immediate buyer and stopping there will miss a parent company that is itself an SDN. Have you traced the ownership chain at least two levels up?
Destination analysis requires more than checking whether the country of final delivery is the subject of a programme-based restriction. It includes transit countries, the nationality of freight forwarders, and any re-export risk. In our cross-border practice, we regularly advise clients whose goods travel through a third country before reaching the buyer. That transit leg can engage a separate programme.
The financial route receives less attention than it deserves. Dollar-denominated transactions clear through the US financial system. That means a payment routed through a US correspondent bank – even for a transaction with no other US nexus – can trigger OFAC's jurisdiction. Non-dollar transactions may still engage OFAC if any US person, including a US bank, touches the deal.
A brief but important cross-regime note: the UK's ownership and control test (the UK and EU test for whether a non-listed entity is caught through a listed person) applies a broader control analysis than OFAC's mechanical 50 percent threshold. A counterparty that clears the OFAC screen may still be caught under OFSI or EU rules. Where the exporter or its group has UK or EU connections, the screen must run across all three regimes.
Step 3: Identify applicable general licences before pursuing a specific-licence application
General licences are the first and most efficient route through an apparent prohibition. OFAC publishes general licences programme by programme; they authorise categories of activity – humanitarian transactions, overflight fees, personal remittances, certain intellectual property payments – without requiring the applicant to submit a case-by-case request.
Reading a general licence demands care. Each has conditions, defined terms, and, in many cases, reporting obligations. A transaction that meets the headline description may fail a condition buried in the text. The prohibition on re-export or retransfer is a common condition that catches businesses that read only the first paragraph.
The process at this stage is disciplined: (1) identify every OFAC programme that the transaction touches; (2) for each programme, search the published general-licence index; (3) read the licence in full, map each condition against the specific transaction facts; (4) document the analysis in writing. That documentation is not optional. If a question arises later – whether from OFAC, from a correspondent bank, or from an internal audit – the written contemporaneous record of the general-licence analysis is the first thing a regulator will ask to see.
If a general licence applies and all conditions are met, the transaction may proceed. The analysis is complete. A specific-licence application is not needed and should not be submitted for a transaction that a general licence already covers.
Step 4: Assess specific-licence eligibility and decide whether to apply
Where no general licence covers the transaction, a business faces a decision: apply for a specific licence, restructure the transaction to remove the OFAC touchpoint, or decline to proceed. The decision is not automatic.
OFAC's specific-licence process is a regulatory proceeding. The agency reviews applications on a case-by-case basis against a policy framework that varies by programme. Some programmes have permissive licensing policies for humanitarian goods; others are highly restrictive. Knowing the policy posture before investing in an application matters. An application submitted against a programme with a near-blanket prohibition is unlikely to succeed, and the time spent on it is time lost.
The application itself requires a clear statement of the transaction's purpose, the identity and role of all parties, the goods or services involved, the destination, and the legal authority under which OFAC has jurisdiction. Supporting documentation – commercial contracts, end-use certificates, corporate structure charts – should accompany the application from the outset. Incomplete applications generate queries and extend timelines. In our experience, applications built around a complete, well-organised evidentiary package move materially faster than those that require iterative supplementation.
Timelines are not fixed by regulation and vary by programme and workload. For planning purposes, businesses should treat a specific-licence determination as a matter that may take several months for a standard application, and potentially longer for complex or novel requests. The decision to apply should be made with that timeline factored into the deal schedule.
The position above covers the standard case. Your facts – the counterparty, the goods, the route, the specific programme in play – change the analysis significantly. For an initial assessment of your specific transaction, contact Calder & Vance at info@caldervance.com.
Step 5: Manage the cross-regime dimension – BIS, OFSI, EU, and beyond
No OFAC-cleared transaction operates in isolation. Businesses with UK, EU, Swiss, Canadian, Australian, or Singapore connections must run a parallel analysis under each applicable regime. The regimes do not mirror one another, and clearance under one does not confer clearance under another.
The BIS dimension is the most immediate for US exporters. A good classified under the EAR may require a BIS licence independent of any OFAC issue. The two enquiries – OFAC sanctions and EAR export controls – must both be resolved before the shipment proceeds. For goods that are also subject to BIS controls, the deemed export and technology transfer analysis under BIS/EAR is an essential companion step.
For groups with EU operations or EU-incorporated subsidiaries, the EU dual-use rules and the relevant Council regulations impose parallel obligations. The EU's ownership and control test, noted above, may capture counterparties that fall outside OFAC's 50 percent threshold. EU persons must comply with EU rules regardless of whether OFAC has cleared the US side of the same transaction.
OFSI in the United Kingdom applies a financial-sanctions regime that, since the UK's departure from the EU, has diverged in meaningful ways from both OFAC and the EU. The licensing process, the ownership and control analysis, and the enforcement posture are each distinct. Where a transaction is routed through a UK entity or involves a UK-incorporated company, the OFSI analysis runs independently of both OFAC and the EU review.
In matters involving goods that may be classified as dual-use under multiple regimes simultaneously, the stricter prohibition governs: a transaction permissible under one regime but prohibited under another cannot lawfully proceed on the basis of the permissive regime alone. This is the cross-border principle that most frequently surprises businesses accustomed to managing a single-regime compliance programme.
Step 6: Document and maintain the record
A completed licence determination is only as durable as its documentation. OFAC's record-keeping obligations require that businesses retain records of transactions – and of the compliance analysis supporting those transactions – for a defined period. The specifics vary by programme; verify the applicable requirement before relying on a general statement.
In practice, a well-maintained licence determination file includes: the screening results and the date they were run, the ownership-chain analysis for each counterparty, the general-licence analysis with a copy of the licence text, any specific-licence application and OFAC's response, and the commercial documents underlying the transaction. That file serves three purposes: it is the evidence of compliance if OFAC ever enquires; it is the basis for internal audit; and it is the starting point if the same counterparty or similar transaction appears again.
Record-keeping is also a cross-regime issue. The EU and UK impose their own retention obligations, which may differ in length and scope from OFAC's requirements. Where a transaction is subject to multiple regimes, the most demanding retention period should govern the programme for that file.
If a transaction has already been flagged, a filing has been refused, or a potential breach has been identified, early legal advice can preserve options that narrow with time. For a confidential review of a potential breach or a filing question, contact Calder & Vance at info@caldervance.com.
Common risk flags in OFAC export-licence determinations
Certain patterns recur in enforcement actions and in the licence queries we receive. Recognising them early reduces risk materially.
First: ownership chains that are deliberately opaque or structured through multiple intermediate layers. The 50 percent rule applies to indirect ownership. A counterparty that holds its beneficial owner through three layers of holding companies in three jurisdictions still triggers the prohibition if the cumulative ownership of a blocked person reaches the threshold. The existence of a complex structure is itself a red flag that warrants deeper investigation, not a reason to stop screening.
Second: transactions denominated in non-dollar currencies that nonetheless clear through US financial institutions. The dollar-clearing route is frequently the overlooked OFAC touchpoint for transactions that appear to have no other US nexus.
Third: re-export and retransfer risk. A licence that authorises an initial export does not automatically authorise the buyer to re-export the goods to a third party. Where the goods are fungible or the buyer is a trading company rather than an end-user, the re-export analysis should be documented alongside the initial determination.
Fourth: the myth that a long-standing commercial relationship is evidence of compliance. We address this directly below.
A common misconception: past clearance does not mean current clearance
A persistent misconception in export-licence practice is that a counterparty cleared last year can be treated as cleared this year. Sanctions lists are dynamic. OFAC adds designations with no advance notice. A person or entity that was clean in January may appear on the SDN List by March. A determination made for a previous shipment does not carry over to the next.
This misconception creates real exposure. In our practice, we have advised businesses that conducted thorough screening at the outset of a multi-year supply agreement and then let the screening lapse. When OFAC designated an affiliate of the buyer mid-contract, the business faced the question of whether continued performance was prohibited – without the contemporaneous analysis that would have identified the change at the time it occurred.
The answer is not to screen once and rely on the result. Ongoing transaction monitoring – re-screening at each shipment, at each payment, and on a periodic basis between transactions – is the standard that regulators expect. The compliance obligation does not end at contract signing.
A related myth is that a voluntary self-disclosure (a VSD, meaning a self-disclosure to a regulator of an apparent violation) will always produce a reduced penalty. VSD can be a significant mitigating factor in OFAC's penalty determination, but it is not a guarantee of any particular outcome. The strength of the disclosure, the quality of the remediation, and the compliance history of the business all affect the result. VSD is a litigation decision that requires legal advice before submission, not an administrative filing to be made without counsel.
Related practices
- Deemed export and technology transfer – BIS/EAR – classification and licence determinations for controlled technology and software under the EAR.
- Export-licence determinations: OFSI and UK controls – how OFSI and the ECJU approach equivalent questions under UK law.
- Export-licence determinations: EU dual-use and Council regulations – the EU parallel analysis for businesses with European operations.