A technology distributor operating across multiple markets places a long-term supply agreement with a counterparty. Midway through performance, the US Bureau of Industry and Security adds the counterparty to the Entity List. Shipments must stop. But existing inventory sits at the counterparty's facility, outstanding invoices remain unpaid, and sub-distributors downstream hold goods already in transit. What happens now?
Wind-down authorisations under the Export Administration Regulations ("EAR") – the body of US export-control rules administered by BIS (the Bureau of Industry and Security) – are time-limited permissions to complete, close, or terminate a contractual relationship that export-control restrictions have rendered prohibited. As of June 2026, BIS administers these through the licence-application process under the EAR, and the Entity List wind-down mechanism for transactions involving listed parties has a 30-day statutory window from the effective date of a listing before it expires.
This guide walks through the legal basis, the step-by-step process, the cross-border dimensions that affect multinational businesses, the most common errors practitioners see, and when to involve compliance counsel before the window closes.
Step 1: Understand what a wind-down authorisation covers – and what it does not
A wind-down authorisation under the EAR permits defined transactions that would otherwise require a licence – or be prohibited outright – to continue for a fixed period solely for the purpose of concluding an existing commercial relationship.
The scope is narrower than most clients expect. The authorisation covers transactions necessary to fulfil pre-existing contractual obligations: receiving payment for goods already delivered, returning equipment already transferred, completing a service contract already substantially performed. It does not cover new orders, new deliveries, or any transaction that enlarges the counterparty's access to controlled items beyond what the original contract contemplated.
This distinction matters immediately. In our experience, businesses instinctively treat a wind-down window as a grace period to wrap up the commercial relationship on their preferred timetable. Regulators treat it as a strict permission to bring an existing obligation to a lawful close. Any transaction that looks like new business – even if commercially linked to the prior contract – falls outside the authorisation and requires a separate licence or is prohibited.
The counterparty's status on the relevant BIS list also shapes what the authorisation can cover. Entity List restrictions differ from those that apply under a Temporary Denial Order or a Denied Persons List entry. A wind-down authorisation available for one designation type may not be available for another. Identifying the specific BIS instrument that triggered the restriction is therefore the first analytical step, not a background fact.
Step 2: Identify the governing instrument and the applicable licensing policy
The EAR establishes different licensing requirements and licensing policies depending on the Export Control Classification Number (ECCN) of the item, the country of destination, and the end-user status of the recipient. Once a counterparty is listed – whether on the Entity List, the Denied Persons List, or under a Temporary Denial Order – the relevant BIS instrument specifies the licence policy that applies to that party.
For Entity List entries, BIS specifies in the listing whether a licence is required for all items subject to the EAR ("all items" entries) or only for items at specified ECCN classifications. The licence review policy for the listed party – typically a presumption of denial – sets the standard against which a wind-down application will be assessed.
Practitioners must also check whether any applicable licence exception still applies. Some exceptions are explicitly suspended for Entity List parties. Others remain available. The interaction between the listing, the ECCN, and the applicable exceptions requires a classification review before any wind-down steps are taken. Skipping that step is, in our practice, the single most common source of exposure.
Does the transaction involve items classified as EAR99 – items subject to the EAR but not listed on the Commerce Control List? EAR99 items are not exempt from Entity List controls. A widely-held misconception is that low-classification or everyday goods fall outside the restriction entirely once a party is listed. They do not, if BIS has imposed an "all items" licence requirement on that entity.
Step 3: Act within the wind-down window – and document everything
The wind-down window for Entity List transactions is 30 days from the effective date of the listing. This window permits transactions that would otherwise require a licence, provided those transactions are solely to fulfil pre-existing contracts and do not involve the export, re-export, or transfer of items to the listed entity beyond what is strictly necessary to conclude the prior arrangement.
After that window closes, any transaction with the listed entity requires a BIS licence unless a licence exception applies. At that point, the licensing timeline – which can extend to several months for a full licence application – may outlast any commercial urgency. The practical implication: the decision to apply for a wind-down licence or to rely on the short window must be made quickly, often within days of the listing becoming effective.
Documentation is not a formality. BIS enforcement actions routinely turn on whether the party claiming a wind-down relied on it in good faith and kept records demonstrating that each transaction fell within the permitted scope. The records to preserve include: the original contract, proof of the delivery or performance timeline, any correspondence with the counterparty, the internal compliance review note, and records of each shipment or payment made during the wind-down period. A VSD (voluntary self-disclosure to BIS) may also be available if the wind-down analysis concludes that any prior transaction was non-compliant. Early legal advice on whether a VSD is appropriate can materially affect the enforcement outcome.
In a recent matter, a manufacturing business continued to accept payments from a counterparty during what it believed was the wind-down window, without first confirming that the window was still open and that the payment receipts fell within permitted wind-down transactions. We assessed the scope of the exposure, advised on voluntary self-disclosure, and structured the penalty-mitigation package. The outcome was not guaranteed, but acting promptly preserved options that would have narrowed with time.
How does the BIS / EAR wind-down process compare with other regimes?
The BIS / EAR wind-down mechanism is operationally distinct from OFAC sanctions wind-down authorisations, UK OFSI licensing, and EU Council-regulation derogations – and businesses operating across multiple jurisdictions must manage all relevant regimes simultaneously.
Under OFAC, wind-down authorisations for newly designated parties are typically issued as general licences (standing authorisations permitting a defined category of transactions) effective from the designation date and time-limited, often to a period comparable with the BIS window. OFAC general licences are published and self-executing: a party that meets the conditions of the licence does not need to apply. The BIS Entity List wind-down, by contrast, is a narrow regulatory provision that permits certain transactions without a licence only during the specific window and only for genuinely pre-existing contracts.
Under UK OFSI sanctions, there is no automatic wind-down window. A specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction) is required. OFSI's licensing timelines differ from BIS, and the grounds for granting a licence are governed by the Sanctions and Anti-Money Laundering Act and the relevant thematic regulations, not by the EAR. A business that must simultaneously wind down under BIS and OFSI faces two separate application tracks with different substantive tests and different timelines.
EU Council regulations similarly require a specific authorisation – a derogation granted by the competent authority of the relevant Member State – rather than a self-executing window. The substantive grounds differ by regime. In our cross-border practice, we regularly advise clients who must manage BIS, OFAC, OFSI, and EU authorisations in parallel for the same transaction, because each jurisdiction's rules apply independently to parties and items within its territorial and jurisdictional reach.
Canadian export-control and sanctions regimes administered by Global Affairs Canada (GAC) likewise require separate authorisation for wind-down transactions. For businesses active in Canada, our wind-down authorisation guide for the Canadian regime and the companion guide on practical Canadian wind-down steps set out the separate procedural requirements in detail.
One cross-cutting rule applies across jurisdictions: where a transaction is caught by more than one regime, the stricter prohibition governs. A transaction that a BIS general licence permits but an OFAC designation prohibits remains prohibited. Compliance teams managing multi-regime wind-downs must map the position under each applicable regime before concluding that any transaction is permissible.
What are the most common mistakes in BIS / EAR wind-down authorisations?
The most common mistake is treating the wind-down window as broader than it is – and the second most common is not checking whether it has already closed.
Businesses often discover a listing through trade-press alerts or counterparty notifications rather than through a direct BIS notification. By the time internal escalation reaches the compliance function and legal review begins, part of the 30-day window may already have elapsed. Time spent clarifying the scope of the restriction internally is time not spent acting on it externally.
A related error is the assumption that a wind-down authorisation covers all open obligations with the listed party. It covers obligations under pre-existing contracts. If the commercial relationship involved rolling purchase orders, each order may be assessed separately. An order placed after the listing date is not a pre-existing obligation and is not covered.
A third pattern we see regularly is inadequate engagement with the supply chain. The direct counterparty may be the listed party, but the wind-down obligations extend to controlled items already in transit through freight forwarders or logistics intermediaries. The export-control obligation applies to the exporter; the fact that an intermediary holds the goods does not transfer the compliance burden. Have the freight forwarders and logistics partners been notified? Have in-transit consignments been identified and instructions issued?
Finally, some businesses assume that once the wind-down window closes, they can simply wait until a BIS licence application is decided before taking further action on the counterparty relationship. That assumption can be costly. Transactions conducted after the window closes and before a licence is granted – including routine account maintenance, receiving payments, or providing technical support – may constitute violations regardless of whether a licence application is pending.
Risk flags that require immediate legal review
Certain features of a wind-down situation elevate the risk profile and require prompt involvement of experienced compliance counsel rather than in-house management alone.
The first flag is a Temporary Denial Order (TDO) rather than an Entity List entry. A TDO is an emergency measure that suspends the export privileges of the named party with immediate effect. The wind-down provisions available for Entity List parties do not automatically apply to TDOs. Any transaction with a TDO-named party that has not been pre-cleared with counsel is a significant exposure.
The second flag is a criminal referral or an ongoing DOJ investigation. BIS and the Department of Justice coordinate on criminal export-control matters. If a counterparty listing is connected to a broader law-enforcement action, the wind-down process intersects with criminal exposure that requires advice beyond standard export-control counsel.
The third flag is re-export or in-country transfer by a foreign distributor. Where a US exporter's goods have been on-sold through a foreign distributor and that distributor now holds inventory, the question of whether completing the in-country transaction constitutes a prohibited re-export or in-country transfer under the EAR must be assessed under the EAR's extraterritorial reach provisions. The EAR applies to items of US origin or incorporating US technology above defined de minimis thresholds, wherever those items are in the world. This extraterritorial reach is one of the most consequential features of the BIS / EAR regime and one of the most frequently underestimated by non-US businesses.
A fourth flag is dual BIS and OFAC involvement. Where both agencies have designated or restricted the same party, the applicable rules do not harmonise automatically. Each agency's wind-down provisions must be satisfied independently, and the more restrictive position prevails for any transaction caught by both.
When should you involve sanctions and export-control counsel?
The answer is: as soon as a listing is identified that affects an existing commercial relationship. The 30-day wind-down window does not pause while internal escalation proceeds. Every day spent in internal discussion before legal review is initiated is a day that narrows the window and the options within it.
Counsel should be involved before any transaction is undertaken during the wind-down period. The characterisation of a transaction as "wind-down" rather than "new business" is a legal conclusion, not a business judgement. Where that characterisation is wrong, the consequence is a violation rather than a missed opportunity.
If the wind-down window has already closed by the time a listing is discovered – a situation we see in our practice when listings are identified through secondary review rather than primary monitoring – counsel involvement becomes more urgent, not less. At that point the question shifts from "how do we use the window?" to "what exposure has arisen, does a VSD protect us, and what does a licence application require?"
The position above covers the standard case. Your facts – the specific BIS instrument, the ECCN classification of your goods, the contracts in place, and the other jurisdictions involved – change the analysis materially.
For an initial review of your wind-down position under the EAR, contact Calder & Vance at info@caldervance.com. We assess eligibility, prepare and submit the licence application, and manage BIS's queries through to decision.
Related practices
- Frozen account management under BIS / EAR – managing blocked assets and account restrictions under US export-control rules
- Wind-down authorisation: Canada (GAC) – procedural requirements for Canadian regime wind-down authorisations