A trading company – active across several jurisdictions and moving dual-use components through a network of freight partners – discovers that a payment account held by its US-incorporated subsidiary has been frozen. The funds are not blocked by OFAC. The restriction arises from a hold placed under the Export Administration Regulations, administered by the Bureau of Industry and Security (BIS – the US Commerce Department agency that administers export controls under the EAR). No criminal allegation has been made. But the funds are inaccessible, a shipment is on hold, and the company's General Counsel has a short window to act before the position hardens.
Release of blocked funds under the BIS / EAR case pattern examined here turned on a licensing and authorisation question, not a straight sanctions matter. The applicable instrument is the Export Administration Regulations – a distinct regime from OFAC's economic sanctions – and the pathway to releasing the funds ran through BIS directly, requiring a careful classification review, a licence application, and a parallel engagement with the agency's compliance division.
This case comment walks through the situation, the legal question it raised, the regime analysis across the US, EU, and UK positions, the options we considered, the route taken, and the lessons for similarly placed businesses. As of mid-2026, the interplay between BIS holds and OFAC freezes remains a common source of confusion for cross-border compliance teams.
The situation: how funds come to be held under the EAR
A BIS / EAR release of blocked funds case begins – unlike a straightforward OFAC freeze – with an export-control trigger, not a sanctions-list hit. BIS has the power to restrict activity and, in certain enforcement and licensing contexts, to hold value in accounts connected to a regulated transaction when the underlying goods, technology, or software may have been exported, re-exported, or transferred in apparent violation of the EAR.
In the matter discussed here, the trigger was a query raised during a BIS pre-enforcement review. The US subsidiary had processed payments in connection with a shipment that included items later re-classified upward by BIS – meaning that items previously falling outside licence requirements were found, on further review, to require a licence for the stated end-use and destination. The freight partner had already moved part of the consignment. A hold was placed on funds in the subsidiary's account pending resolution.
Three features made this situation difficult. First, the hold applied to the full account balance, not only the amount attributable to the disputed shipment. Second, the parent company – incorporated in a European jurisdiction – faced parallel questions under EU dual-use rules, since the same goods had also transited an EU member state. Third, the operational timeline was acute. Payroll, supplier invoices, and a separate unrelated export transaction all depended on access to the frozen account.
We regularly advise on situations where a BIS hold and an OFAC freeze co-exist in the same fact pattern, or where a client initially believes the issue is OFAC when it is in fact BIS. The distinction matters: the licensing regime, the authority, and the release pathway differ entirely between the two agencies.
The legal question: what gives BIS authority to hold funds, and on what basis is release sought?
The Export Control Reform Act, implemented through the EAR, gives BIS broad authority to regulate the export, re-export, and in-country transfer of items on the Commerce Control List (CCL – BIS's schedule of controlled goods, software, and technology by Export Control Classification Number). Where a person or entity has engaged, or is suspected of having engaged, in activity contrary to the EAR, BIS may impose a range of restrictive measures, including holding value connected to the regulated activity pending an administrative or enforcement resolution.
The release pathway is not a delisting process and it is not an OFAC specific-licence application. It is a distinct administrative procedure. The applicant must demonstrate three things: that the classification of the relevant items has been correctly determined; that the applicable licence exception or licence authorisation covers the transaction; and that the end-use and end-user controls required by the EAR have been or can be satisfied.
One common complication is the Entity List – BIS's list of foreign persons subject to enhanced licence requirements – and the Unverified List, which identifies parties whose bona fides BIS has not been able to confirm. Neither list operates exactly like an SDN list under OFAC. An Entity List entry does not automatically block a transaction; it triggers a licence requirement where a licence might not otherwise apply. But it changes the analysis entirely, and it changes the burden on the applicant seeking to release a hold.
In our experience, the single most common error at this stage is submitting a release request without first completing a thorough classification review. BIS will not release a hold on the basis of good faith alone. The application must show the position, not assert it.
Cross-border dimension: how EU and UK export-control regimes interact with a BIS hold
A purely domestic US analysis would have been incomplete here. The same goods had moved through EU territory, and the parent company was EU-incorporated. That created a separate obligation under EU dual-use rules – the regime governing the export of goods and technology with both civilian and potential military applications. The EU dual-use regime operates through Council-level regulations and is administered at the member-state level; the relevant national competent authority was the exporting member state's licensing body.
Under EU dual-use rules, the classification of an item and the licence obligation may differ from the US position. A re-classification by BIS does not automatically change the EU status of the item. But the practical effect – an ongoing shipment, a freight partner who has taken possession, an end-user in a destination of concern – created the risk of a concurrent EU issue even if the EU classification remained unchanged.
The UK position adds a further layer. Post-2021, the UK maintains its own Export Control Order and its own CCL-equivalent, administered by the Export Control Joint Unit (ECJU). UK classifications track the EU list closely but are not identical; divergence has grown incrementally since the UK list was frozen at the point of departure and has since been updated independently. Had any part of the goods or payments route passed through a UK entity, an ECJU licence question would have arisen in parallel.
For the client in this matter, the key cross-border risk was reputational and regulatory: a finding by BIS that the US leg of the transaction violated the EAR could be referred to EU and UK authorities, either formally or informally. That risk made the BIS engagement the priority, but it did not eliminate the need for a parallel EU assessment. We coordinated with local counsel in the relevant EU jurisdiction to ensure that the EU dual-use position was mapped before the BIS application was filed.
The options considered: five routes to release
Before selecting a path, we mapped five possible routes. Each had a different risk profile, a different timeline, and a different effect on the company's ongoing relationship with BIS.
The first option was a voluntary self-disclosure (VSD – a formal submission to BIS acknowledging a potential violation and providing a full account of the relevant facts). A VSD, where appropriate, can reduce penalty exposure significantly. BIS treats a well-documented VSD as a mitigating factor in enforcement proceedings. However, a VSD is not a mechanism for releasing frozen funds; it addresses the underlying violation, not the hold. It was necessary, but not sufficient.
The second option was a direct licence application to BIS for authorisation of the transaction post-hoc. This is available where the item, the end-use, and the end-user can be confirmed and where BIS is satisfied that the conditions for a licence are met. The timeline for this route is not fixed by statute in the way that, for example, OFSI's specific-licence window is in the UK; BIS timelines depend on the complexity of the matter and the workload of the licensing division.
The third option was to seek a licence exception – a standing authorisation under the EAR that permits a defined transaction category without a separate application. Whether a licence exception was available depended on the re-classified ECCN and the destination. In this case, the re-classification moved the item to a category where several of the standard exceptions did not apply.
The fourth option was a formal administrative hearing. This route is available where a party contests the underlying BIS determination. It is slower, more resource-intensive, and – where the classification question is genuinely contestable – sometimes appropriate. Here, the classification was difficult to contest on the merits after the re-classification was examined closely.
The fifth option was a structured settlement with BIS, combining a VSD, a compliance commitment (including a remediation plan and enhanced end-use controls), and a request for release of the hold as part of the settlement terms. This is the route that was ultimately pursued.
The route taken and how the hold was resolved
The structured settlement route combined three elements, filed in sequence over a period of several weeks. The precise timeline is not one we can publish, but the sequence and its logic are instructive for any business facing a comparable situation.
First, we completed a full classification review of every item in the consignment – not just the re-classified items. This is a step many firms skip under time pressure, and it is the step BIS scrutinises most closely. The review identified two further items that had been mis-described on the export documentation. Those items were added to the disclosure package, which made the VSD more complete and reduced the risk of a subsequent enforcement finding on matters not initially visible.
Second, the VSD was prepared with a detailed factual chronology, a classification analysis, a description of the end-user and the end-use, and a proposed remediation plan. The remediation plan included enhanced screening at the point of classification, mandatory ECCN confirmation before any CCL-adjacent item was invoiced, and a revised freight-partner due-diligence procedure. BIS treats the credibility of the remediation plan as integral to the settlement discussion; a generic plan is unlikely to support a prompt release.
Third, the settlement request asked BIS to release the full account hold, on the basis that the amount connected to the disputed shipment was a fraction of the total balance and that the remainder was unrelated to the matter. BIS agreed to release the unrelated balance while retaining a hold on an amount corresponding to the value of the shipment at issue. That partial release restored the company's operational liquidity within a manageable period.
The final resolution – full release and a compliance commitment in lieu of a civil penalty proceeding – was reached some time after the VSD was filed. We do not state an outcome as a guarantee; BIS's decisions are fact-specific and the result in any individual matter depends on the agency's assessment of the disclosure and the remediation plan.
Risk flags: what nearly made this worse
Several features of this matter, had they not been addressed early, would have materially worsened the outcome. They are worth setting out as risk flags for any business managing a comparable situation.
The first risk flag was the delay between the freight partner moving the goods and the company's internal compliance team becoming aware of the re-classification. That gap was several weeks. In our cross-border practice, a re-classification that occurs after goods have shipped but before funds have settled is one of the highest-risk windows in any export-control programme. Monitoring for BIS CCL updates – particularly for items in technology sectors where controls are actively reviewed – is a compliance obligation that should be scheduled, not ad hoc.
The second risk flag was the breadth of the account hold. Because the subsidiary's account combined the proceeds of multiple unrelated transactions, the hold affected operational funds that had no connection to the disputed shipment. A cleaner account structure – separating proceeds by transaction type or by jurisdiction – would have allowed a narrower hold from the outset. This is an organisational point, not a legal one, but it has direct legal consequences.
The third risk flag was the initial instinct of the company's US counsel – who was generalist commercial counsel, not a sanctions or export-control specialist – to treat the BIS hold as an OFAC matter. The two regimes are administered by different agencies, under different statutory authorities, with different release mechanisms. Misidentifying the authority means approaching the wrong agency, which wastes time and may affect the company's relationship with the correct authority when it eventually makes contact.
A fourth risk was the EU dual-use exposure going unassessed until after the US engagement was underway. Had BIS's enquiry triggered a referral or a media report, the EU authority might have opened its own file. Starting the EU assessment contemporaneously with the US engagement – rather than sequentially – is the standard of care we apply in all matters with a cross-border goods-movement element.
The lesson: what similarly placed businesses should do now
The lesson of this matter is not specific to the BIS / EAR. It applies to any business that moves dual-use goods or technology across borders: the release of blocked funds under export controls is a structured administrative process, not a negotiation, and the quality of the submission determines the pace of the resolution.
A frequent myth is that BIS holds can be resolved informally – through a phone call to the relevant licensing office or a letter of explanation from the company's CEO. That approach does not work. BIS expects a documented classification analysis, a factual chronology, an honest account of what happened, and a credible remediation plan. Informal approaches without a formal VSD can be read by the agency as a failure to engage with the compliance process seriously.
What should a business do in the first 48 hours after it identifies a BIS hold? First, do not move money from the affected account without BIS authorisation; doing so could convert a hold into an enforcement action. Second, identify legal counsel with BIS / EAR experience and instruct them before making any contact with the agency. Third, instruct counsel to begin a classification review immediately, in parallel with any factual investigation. Fourth, preserve all documentation relating to the shipment, the end-user, and the classification history.
The position above covers the standard sequence. Your facts – the specific items, the end-user country, the prior classification history, any Entity List connection, the amount at issue – will change the analysis. Acting early protects options that close with time.
Related practices
- Frozen account management under BIS / EAR – fixed-fee service for clients managing a BIS account hold
- Release of blocked funds – an OFAC matter – a parallel case comment on the OFAC-specific release pathway
- Specific licence application – a cross-border matter – case comment on multi-regime licence applications