A technology company headquartered in the United States agrees to form a joint venture with a partner in a third-country market. The JV will develop, manufacture, and distribute products incorporating US-origin components. Weeks before closing, the compliance team asks a question that should have been raised at term-sheet stage: who controls the JV's export decisions, and are any of the underlying technologies, software, or technical data subject to licence requirements under the Export Administration Regulations (the EAR – the US rules administered by the Bureau of Industry and Security, known as BIS, governing the export, re-export, and in-country transfer of dual-use and certain commercial items)? The answer, and the structure of the JV, may determine whether the venture can operate at all.
Structuring a joint venture for sanctions and export-control risk under the BIS / EAR requires five sequenced decisions: classify the items and technology the JV will handle; screen the partner and the JV's proposed jurisdictions against the Entity List, the Denied Persons List, and OFAC's SDN List; identify and allocate the applicable licence requirements and exceptions; establish governance controls that prevent unauthorised re-exports or in-country transfers; and build an ongoing compliance programme that survives personnel change and corporate restructuring. As of January 2026, the EAR's extraterritorial reach – the de minimis rule and the Foreign Direct Product Rule – extends these obligations well beyond the US party alone.
This guide walks through each phase in the order a cross-border transactions team should address it, flags where the EAR diverges from OFSI and EU export-control rules, and identifies the decision points where specialist counsel adds the most value.
Step 1: Understand the EAR's scope and why it reaches your JV
The EAR applies not only to US persons but to any export, re-export, or in-country transfer of items subject to its rules – a category defined broadly to include physical goods, software, and technology regardless of who initiates the transaction. The first structural question for any JV is therefore not "are we a US company?" but "do the items, software, or technical data we are placing into the JV have US origin or a sufficient US-origin content?"
Two rules determine whether non-US parties face EAR obligations. The de minimis rule catches foreign-made items that incorporate US-controlled content above a defined percentage threshold. The Foreign Direct Product Rule (FDPR) catches foreign-made items that are the direct product of US-origin technology or software, or that are produced by a plant whose major equipment is the direct product of such technology. In our cross-border practice, the FDPR catches more JV structures than counterparties expect – particularly in semiconductor, advanced materials, and defence-adjacent sectors.
The practical implication is this: a JV with a majority non-US ownership does not escape the EAR simply because the US parent holds a minority stake. If the JV manufactures or distributes items subject to the FDPR, every export, re-export, and in-country transfer it makes may require a BIS licence or a confirmed licence exception, regardless of who controls the board.
Step 2: Classify the items and technology the JV will handle
Export control classification is the foundation of every subsequent decision in joint-venture sanctions structuring. An item that is EAR99 – meaning it falls below the control threshold on the Commerce Control List (CCL) – carries minimal licensing burden. An item assigned an Export Control Classification Number (ECCN – a five-character alphanumeric code on the CCL that describes an item's technical parameters and the licence requirements that flow from them) carries regime-specific obligations that vary by destination, end-use, and end-user.
Classification decisions belong in the deal room, not the post-closing integration workstream. We regularly advise JV parties who discover, only after the structure is agreed, that a core item earns an ECCN associated with national-security or anti-terrorism controls. Those controls can restrict technology transfer to the JV itself – not merely to third-party customers – if the transfer constitutes a deemed export to a foreign national working inside the venture.
A deemed export arises when controlled technology or source code is released to a foreign national within the United States. For a JV staffed by nationals of countries subject to stricter EAR controls, deemed-export licences may be required before a single engineer can access the technical data. This is among the most frequently overlooked obligations in joint-venture due diligence. Have you reviewed the nationalities of the JV's proposed key personnel against the CCL's licence requirements?
The classification process itself requires a technical analysis of the item against each relevant ECCN parameter, a review of any applicable product-group notes and special controls, and – where classification is uncertain – a commodity jurisdiction or classification request to BIS. Allow adequate time in the deal timetable for that process.
Step 3: Screen the partner, the JV entity, and proposed jurisdictions
Export-control screening and sanctions screening are related but distinct exercises, and both are required before a JV is formed. BIS maintains three primary restricted-party lists: the Entity List (parties subject to licence requirements due to end-use concerns), the Denied Persons List (parties barred from participating in EAR-controlled transactions), and the Unverified List. OFAC maintains the SDN List (OFAC's list of Specially Designated Nationals and blocked persons) and programme-specific lists under IEEPA and other authorities. A counterparty may be absent from the Entity List but appear on the SDN List, or present on neither but flagged by adverse-media review.
Screening must reach the ownership chain, not just the named JV partner. OFAC's 50 percent rule treats any entity owned 50 percent or more in the aggregate by blocked persons as itself blocked. Under the EU equivalent, and under OFSI's rules, a control test supplements the ownership threshold – so a party that falls below 50 percent ownership may still be caught. In our experience, this divergence produces the most consequential surprises in multi-regime JV reviews: a partner who passes OFAC screening may still trigger EU or UK concerns.
The jurisdictional screen is equally important. If the JV intends to operate in, or export to, destinations subject to comprehensive OFAC sanctions programmes, a BIS licence exception that appears available may be overtaken by an OFAC prohibition. The stricter prohibition governs. A cross-border compliance counsel should map both sets of controls before the term sheet is finalised.
The position above covers the standard case. Your facts – the counterparty's ownership chain, the goods and technology involved, the proposed jurisdictions, and the regimes in play – change the analysis materially.
For a confidential review of your JV's counterparty and ownership chain, contact Calder & Vance at info@caldervance.com.
Step 4: Identify and allocate licence requirements and exceptions
Once classification and screening are complete, the core licensing analysis begins. Two questions govern: what authorisation is required for each export, re-export, or in-country transfer the JV will make, and who bears the obligation to obtain or confirm it?
Licence exceptions under the EAR are self-effectuating – they do not require a prior BIS approval, but they must be confirmed before each use. Their conditions are technical and often subject to end-user or destination restrictions. The most widely used exceptions in JV structures cover technology transfers within multinationals, intra-company transfers, and items exported for civil end-use. Each exception carries conditions that must be reviewed against the JV's actual operations. An exception that applies at formation may lapse if the JV later changes its activities, destinations, or customer base.
Where no exception covers the transaction, a specific licence application to BIS is required. BIS licence applications are assessed against the relevant country policy, the nature of the items, the end-use, and the end-user. There is no guaranteed timeline – processing periods vary – but early-stage applications, filed with a well-documented request, reduce uncertainty. The JV agreement should address how licence applications are prepared, who bears the cost, and what happens if a required licence is denied.
Allocation of licensing obligations between the JV parties is a negotiation point. The US party will often seek to limit its post-closing exposure by requiring the JV and the non-US partner to bear responsibility for re-export and in-country transfer compliance. However, if the JV is structured such that the US party retains control over export decisions – through board composition, a technical-review committee, or contractual consent rights – BIS may regard the US party as the responsible party regardless of what the JV agreement says.
If a transaction has already been flagged, or a licence application has been refused, an early review can preserve options that narrow with time. Contact us at info@caldervance.com.
Step 5: Build governance controls that prevent unauthorised transfers
A JV agreement that identifies the applicable licence requirements is necessary but not sufficient. The JV itself must be governed in a way that makes unauthorised re-exports or in-country transfers structurally difficult to execute, and organisationally visible if they occur.
Effective governance for export-control purposes requires several layers. First, the JV's management structure should include a designated export-control function with clear authority over transactions that may require a BIS licence or confirmation of an exception. In smaller JVs, this may be a single individual; in larger structures it will be a team. The authority should be documented in the JV agreement and in the JV's own governance documents.
Second, the JV should operate a written export-control compliance programme. BIS and OFAC both regard a written compliance programme as a significant mitigating factor in enforcement. A programme that was absent at the time of a violation, or that existed only on paper, will not attract the same credit. The programme should cover item classification, customer and end-use screening, the handling of red flags, record-keeping, and reporting obligations.
Third, contracts with JV customers and distributors should include end-use and end-user representations, re-export notices in the language required under the EAR, and contractual rights to audit compliance. These controls do not eliminate risk, but they create an audit trail that demonstrates the JV exercised reasonable care.
Fourth, consider how the JV agreement addresses a material compliance failure. If a JV party, or the JV itself, commits an apparent violation, the agreement should specify who manages the investigation, who instructs counsel, who decides whether to file a voluntary self-disclosure (VSD – a voluntary self-disclosure to BIS or OFAC reporting an apparent violation, which BIS treats as a significant mitigating factor in penalty calculation), and who bears the cost. These decisions are time-sensitive; an agreement that leaves them unresolved creates compounding risk.
How does EAR governance differ from UK and EU export-control requirements?
The EAR is not the only export-control regime that may apply to a JV. Where the JV, its parties, or its products have a UK or EU connection, the comparable national regimes – administered by the UK's Export Control Joint Unit (ECJU) and the relevant EU dual-use rules under the applicable Council Regulation – run alongside the EAR obligations. The three regimes share a common taxonomy rooted in the Wassenaar Arrangement and similar international regimes, but they diverge in ways that directly affect JV structuring.
UK and EU export licences are issued for the exporting party in that jurisdiction. They do not substitute for a US BIS licence, and a BIS licence does not satisfy a UK or EU requirement. A JV that manufactures in the EU and re-exports to a third country may need both an EU export licence and confirmation that the re-export is authorised under the EAR. In our practice, the failure to map all three sets of requirements at inception is one of the most common sources of post-closing compliance exposure.
The control lists also diverge in detail. An item that is EAR99 may nonetheless be controlled under the UK or EU list, particularly in the chemical, biological, and certain technology categories where national controls extend beyond the common international baseline. Conversely, some items that attract ECCN-level control in the US fall below the EU or UK threshold.
Financial-sanctions obligations add another layer of divergence. OFAC's SDN List, OFSI's UK consolidated list, and the EU's consolidated list are not identical. Screening against one list does not satisfy the obligation to screen against the others. A JV whose parties operate across multiple jurisdictions should maintain a screening process that runs against all relevant lists simultaneously, and that is updated on the frequency that each regime's designated authorities update their lists.
For a fuller treatment of the Canadian regime's interaction with these rules, see our guide at JV sanctions structuring – Canada. For a multi-regime cross-border overview, see JV sanctions structuring – cross-border guide. Issues at the intersection of financial-institution sanctions risk and cross-border transactions are addressed in our service note at correspondent banking, de-risking, and OFAC.
Step 6: Maintain and test the programme after closing
The compliance work done before closing will not protect the JV indefinitely. Regulations change, BIS updates the Entity List and the CCL, OFAC amends its programme-specific rules, and the JV's own business evolves. A structuring exercise that was adequate at formation may become inadequate within twelve months if it is not maintained.
Testing matters as much as the written programme. An export-control programme that has never been audited against actual transactions is a programme of unknown reliability. In our experience, internal audits conducted annually – against a sample of the JV's actual exports, re-exports, and in-country transfers – surface gaps that a paper review would miss. These include classification errors that have propagated across a product line, licence exceptions that are being used outside their permitted scope, and end-user screening that has not kept pace with customer acquisitions.
Training is a component that deteriorates without investment. Personnel responsible for export decisions change. New staff who have not been trained in EAR requirements will not apply them correctly. The JV's governance documents should require regular training for relevant personnel, and the training programme should be updated when the regulations change.
Finally, consider the trigger for specialist review. BIS and OFAC both publish updated guidance, policy statements, and enforcement actions that affect how the rules are applied in practice. A JV compliance programme that was designed to the standards of two years ago may not reflect current enforcement priorities. Scheduling a periodic review with export-control counsel – at least annually, and whenever the JV enters a new market or product line – is a lower-cost alternative to managing an investigation.
Common risk flags and when to involve counsel
Certain patterns in JV negotiations should trigger an immediate compliance review. They do not necessarily indicate a problem, but each one creates a risk of inadvertent violation that structural and contractual measures can address before the JV becomes operational.
- A partner with operations, customers, or affiliates in a destination subject to comprehensive OFAC sanctions programmes. The JV may be structured to avoid direct dealings with such destinations, but if the partner's existing business relationships create an indirect exposure, the JV's items and technology may be drawn in.
- Items or technology at or near the ECCN control threshold. Classification decisions at the boundary of the CCL are inherently fact-sensitive. A classification that appears correct for the baseline product may become incorrect when the JV makes incremental performance improvements.
- A JV operating in a jurisdiction where the FDPR has been specifically expanded. BIS has, in recent years, expanded the scope of the FDPR for certain categories of items destined for specific countries. The current state of those expanded rules should be verified before a JV in an affected sector or destination is formed.
- Governance arrangements that create ambiguity about who controls export decisions. A JV where neither party has clear authority over export approvals is a JV where compliance responsibility is unclear. BIS enforcement actions have reached parties who disclaimed responsibility for decisions they had the practical ability to prevent.
- Planned technology transfers from the US parent to the JV. If the US parent intends to share manufacturing know-how, source code, or technical data with the JV, those transfers are subject to the EAR's deemed-export and deemed re-export rules from the moment the first document is shared.
Myth to address directly: some transaction teams believe that a JV minority stake insulates the US party from EAR responsibility. It does not. Responsibility under the EAR attaches to the person who causes the export, re-export, or transfer – and a minority party who designed the JV's product line, contributed the controlled technology, or retained a right of approval over export decisions may be that person, regardless of what the capitalisation table shows.
Related practices
Related practices
- Correspondent banking, de-risking, and OFAC – sanctions risk in financial-institution transaction flows and de-risking decisions
- JV sanctions structuring – Canada – how Canada's export-control and sanctions regime interacts with a cross-border joint venture
- JV sanctions structuring – cross-border guide – multi-regime overview for JVs spanning more than two jurisdictions