A trading company signs a cross-border supply agreement. Its counsel inserts a standard sanctions representation copied from a prior deal. Three months later, BIS sends a letter: the buyer's affiliate sits on the Entity List, and the goods shipped under a now-invalid licence exception. The representation was not false – it was simply incomplete. That distinction rarely matters when an enforcement file is open.
Sanctions representations and warranties under the BIS / EAR (the US Export Administration Regulations, administered by the Bureau of Industry and Security) must cover three distinct legal layers: the classification of the goods, the status of all parties in the transaction chain, and the intended end-use. A representation that omits any one of those layers leaves the exporter exposed, because BIS enforcement can reach conduct that is technically compliant with the letter of a poorly drafted clause.
As of January 2026, the BIS / EAR regime sits at the centre of an intensifying cross-border enforcement environment. This guide walks through each drafting step, identifies where the EAR diverges from OFAC financial-sanctions practice and from the EU dual-use rules, and flags the clauses that most commonly fail in diligence review.
Step 1: Understand what the BIS / EAR regime requires before you draft a single clause
A sanctions representation and warranty under the BIS / EAR can only be as sound as the drafter's understanding of what the regime actually prohibits. The EAR controls the export, re-export, and in-country transfer of items subject to US jurisdiction – a category that extends far beyond goods physically shipped from the United States. Any item with US-origin content, US-origin technology, or produced using US-controlled equipment can remain subject to BIS authority wherever it moves in the world.
This extraterritorial reach is the first thing a drafter must internalise. A representation that says "no export control laws have been violated" is legally meaningless if the signatory has not first confirmed whether the goods are subject to the EAR at all, whether they carry an ECCN (Export Control Classification Number under the US Commerce Control List) that triggers a licence requirement, or whether a licence exception applies. In our cross-border practice, we see representations drafted as if the EAR only governs shipments originating in the US. That assumption is wrong, and it is the source of a large share of the problems we are asked to resolve after the fact.
The BIS / EAR also distinguishes sharply between the prohibition on exporting to a listed party (a "denied party" under the Denied Persons List or the Entity List) and the prohibition on exporting a controlled item without a licence. Both layers must appear in the representation. A clause that addresses only party status, for example, will not catch a violation arising from a mis-classified item shipped to an unlisted party.
Step 2: Map the transaction chain before deciding the scope of the representation
The scope of the representation must match the actual structure of the transaction, not an idealised two-party version of it. Before a single clause is drafted, the exporter or its counsel should map the full transaction chain: the seller, the buyer, any intermediate broker or freight forwarder, the stated end-user, the end-use country, and any known sub-buyer or downstream distributor.
Why does this matter? Because a BIS / EAR representation that covers only the named buyer may miss the party that actually matters. Under the EAR's know your customer guidance, an exporter who has reason to believe that goods will be re-exported to a prohibited destination or end-user is on notice, regardless of whether the immediate buyer is listed. A representation structured only around the immediate counterparty does not capture that risk.
In a recent matter, a manufacturer of specialised optical components agreed a supply contract with a European distributor. The end-use certificate named a legitimate research institution. Due diligence on the distributor's customer base, conducted at our recommendation, identified a downstream purchaser whose procurement pattern was inconsistent with the stated end-use. The representation was restructured to require ongoing end-use confirmation at each sub-sale level. The matter did not proceed to a filing, but the exposure that a standard "known buyer" clause would have left in place was material.
The scope question also determines which lists must be searched. The BIS Entity List, the Denied Persons List, the Unverified List, and OFAC's SDN List (OFAC's list of Specially Designated Nationals and blocked persons) are distinct instruments with distinct legal effects under different statutes. A representation that says "no party is listed on applicable US government lists" should specify which lists, in which databases, were searched, and as of what date.
The position above covers the standard case. Your facts – the goods, the jurisdiction, the ownership chain, and the regime in play – change the analysis materially.
For an initial assessment of your transaction structure under BIS / EAR, contact Calder & Vance at info@caldervance.com.
Step 3: Draft the classification representation – the layer most often missed
The classification representation is the layer that experienced export-control counsel always insist upon, and that general commercial lawyers most often omit. It sits separately from the party-status representation and the end-use representation, because it addresses the nature of the goods rather than the nature of the parties.
A sound classification representation will confirm, at minimum: (a) whether the items are subject to the EAR; (b) the ECCN or, if the items are EAR99 (items subject to the EAR but not listed on the Commerce Control List, and therefore subject to fewer restrictions), confirmation of that classification; (c) whether any licence exception applies and, if so, which one; and (d) that no licence requirement has been triggered that has not been satisfied.
The warranty element – as distinct from the representation – should require the seller to maintain the classification through the life of the agreement. ECCN classifications change when the Commerce Control List is amended, and a classification that was correct at signing may become incorrect at delivery. A static representation without a continuing warranty obligation leaves a gap that BIS enforcement has historically been willing to exploit.
How should the drafter handle items that the seller has not yet classified? This is a common problem in technology-transfer and joint-venture agreements, where the goods or software being transferred may not yet exist in final form. The representation should include a process obligation: the seller commits to classify before export, to update the buyer on any change in classification, and to confirm the position in writing at least a stated number of days before each shipment. Qualitative language alone – "to the best of the seller's knowledge" – is not adequate where the EAR imposes an affirmative duty to know.
Step 4: Draft the party-status and end-use representations
The party-status representation addresses two overlapping but distinct prohibitions. First, the EAR prohibits exports to parties named on BIS's control lists. Second, OFAC's parallel regime blocks transactions with parties on the SDN List and other OFAC-administered lists. A complete party-status representation should address both, because a transaction that is compliant with the EAR but involves a blocked party violates OFAC rules – and vice versa. Compliance counsel should never treat BIS and OFAC as mutually exclusive.
The end-use representation is the most factually intensive of the three layers. It must address: (a) the country of ultimate destination; (b) the stated end-use and its consistency with the item's ECCN; (c) confirmation that the end-use is not a prohibited end-use under BIS rules, including military, nuclear, chemical, biological, and missile-related applications; and (d) the identity and status of the ultimate end-user.
Where the transaction involves deemed exports – the disclosure of controlled technology to a foreign national within the United States – the representation must also address the nationality of any person who will receive or access the technology and whether a deemed-export licence has been obtained. This is one of the most under-represented clauses in commercial agreements involving technology licensing, and it is an area where BIS enforcement activity has increased in recent years.
If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. Contact us at info@caldervance.com.
How do BIS / EAR reps differ from OFAC, OFSI, and EU dual-use representations?
The BIS / EAR representation is structurally different from an OFAC financial-sanctions representation, and both differ materially from the approach required under the EU dual-use rules and UK export controls. A party that copies a standard OFAC representation and assumes it covers BIS obligations will be wrong on several material points.
Under OFAC, the central concern is the identity of the parties: are any of them blocked persons, and does the transaction involve sanctioned property? The EAR adds a second axis – the nature of the goods and the identity of their intended end-use – that OFAC does not address. An OFAC representation therefore needs to be supplemented with, not substituted for, an EAR classification and end-use representation.
The EU dual-use regime under the applicable Council Regulation operates differently again. The EU applies a catch-all mechanism that can require a licence even for non-listed items if the exporter has reason to believe they may be intended for certain end-uses. The catch-all can bite where a BIS EAR99 item would require no US licence at all. In our experience, exporters who operate between the US and EU markets frequently under-estimate the EU catch-all because their internal classification processes are calibrated to BIS thresholds.
Under UK export controls, administered by ECJU under the Export Control Order, the substantive licence triggers are broadly aligned with the EU dual-use list, but the licensing authority, the procedure, and the enforcement posture differ. A representation under a transaction that touches both the UK and the US should expressly identify which regime's obligations each clause addresses. Composite language like "all applicable export control laws" is superficially tidy but operationally weak: it tells the counterparty nothing about what was actually checked.
The one point of convergence across all major regimes is the ownership and control question. The OFAC 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked), the UK ownership-and-control test under OFSI, and the EU equivalent each require the drafter to look through the corporate structure of the named party. A representation that certifies party status without confirming ownership verification methodology is incomplete under every regime.
What are the common risk flags and drafting errors?
Several failure patterns recur with enough regularity that they merit explicit attention. The first is the "knowledge qualifier" problem. Representations phrased as "to the best of the seller's knowledge" or "as far as the seller is aware" significantly reduce the practical value of the clause, and may not meet the standard that BIS enforcement applies when it asks whether the exporter took adequate steps to verify. Where the EAR imposes an affirmative duty – and on end-use and party status it does – the representation should be unqualified or should specify the steps taken to verify.
The second common error is date anchoring without a refresh obligation. A representation that a party is not listed "as of the date of this agreement" says nothing about the position at the date of export, which may be months or years later. Designation changes happen at any time. The warranty should require re-verification at each shipment or, at minimum, at defined intervals during a long-term supply relationship.
Third, the representation frequently omits the sub-buyer. Under the EAR, the risk of diversion – re-export to a prohibited destination by the buyer – is the exporter's risk, not the buyer's. A representation that records only the buyer's own compliance without addressing the buyer's downstream customers and the steps taken to control them leaves the most material exposure unaddressed.
Fourth, representations in technology-licensing and software agreements often treat physical goods and controlled technology as equivalent. Controlled source code, controlled technical data, and controlled software are each subject to separate EAR rules, and a representation drafted for hardware will not adequately cover a licensing arrangement. This is a point where we regularly advise clients to re-examine template language carried over from prior deals.
Fifth, the voluntary self-disclosure or VSD (voluntary self-disclosure to a regulator) mechanism matters here. A well-drafted representations package should include a process clause: if either party discovers that a representation was incorrect, there is a defined window for notification and a defined obligation to preserve records. Without that clause, the innocent party may not learn of a potential violation until a BIS enquiry arrives, at which point the window for a proactive VSD – which carries significant weight in BIS enforcement decisions – may already have closed.
When should you involve export-control counsel?
Export-control counsel should be involved before the representations are drafted, not after. The classification of the goods, the due diligence methodology for party-status checking, and the end-use controls are all inputs to the drafting exercise; they cannot sensibly be completed after the fact. In our cross-border practice, the matters that create the greatest difficulty are those where a transaction was completed on boilerplate representations, and the question of whether those representations were accurate is only raised when an enforcement enquiry or a deal review makes it unavoidable.
The threshold for seeking advice is lower than many in-house teams assume. A transaction does not need to involve a designated party or a known prohibited end-use to warrant careful drafting. The EAR's extraterritorial reach, the deemed-export rules, and the interaction with OFAC financial-sanctions obligations mean that a transaction that looks routine from a commercial standpoint can carry real BIS exposure. The cost of adequate representations drafting is a fraction of the cost of a BIS enforcement matter.
Specific situations that should always trigger external review include: transactions involving items with an ECCN that restricts exports to certain country groups; transactions where the end-user is not the immediate buyer; long-term supply agreements with technology-transfer elements; agreements governed by a non-US law but involving US-origin goods or technology; and any transaction where the buyer's ownership chain includes entities in a country that appears on BIS's country groups that require heightened review. We also regularly advise parties to M&A transactions on the representations needed when a target holds licences or is a party to existing supply agreements with BIS obligations.
Related practices
- Correspondent Banking and De-risking (OFAC) – OFAC financial-sanctions risk management for banks and payment businesses
- Sanctions Representations and Warranties: Canada Guide – how to structure sanctions reps under the Canadian sanctions regime
- Sanctions Representations and Warranties: Cross-Border Guide – multi-regime comparison for transactions spanning two or more jurisdictions