Export control means that trade with certain goods, countries or persons is restricted or even prohibited (embargo) for security policy reasons. This means that it's not permitted to simply deliver any goods from one country to another without checking whether there are restrictions or even prohibitions. A violation of embargoes or restrictions is a serious compliance violation and can have grave consequences for companies and individuals. In this context, export control is of particular concern to companies who have their own production and supply chains.

In this article, we review the key fundamentals of export control:

Who issues export control regulations and why?
Do the requirements apply to all products or only to a certain range?
What are the consequences of non-compliance?
How can companies protect themselves and support their departments in making the right decisions?

Who issues export control regulations and why?

The export control rules in force are set by national governments or international organizations. In Germany, for example, the Federal Office of Economics and Export Control (BAFA) monitors the export of certain goods and technologies.

The reasons and motivations for this can be diverse: For example, an embargo can be imposed on a country for political reasons, regardless of what is to be supplied.

However, it may also be that only the supply of certain goods to a country is prohibited - e.g. the supply of weapons to a crisis region. Sanctions against certain companies or individuals can also be a reason. Or the supply of certain products and technologies is restricted because they could be "dual-used" for military purposes.

Export control can thus apply on different levels:

People, companies, or organizations
Products or technology
The use of certain products/technology
Entire countries

There are also legal gray areas or cases that are not immediately clear.
For example, while the export of weapons or ammunition for a tank is obviously subject to export control, there are many goods that could be used for both civilian and military purposes.

These are called "dual use products". These products could, for example - depending on its specification - be installed in a passenger vehicle or in a submarine. For this reason, export control also targets the use of the products, because it is often the intended use that determines whether the export of a product is controlled.

Which goods are subject to export control?

The scope of export control regulations varies by country and product category. Not all products are affected, but mainly specific goods, technologies or materials that could serve for military or security purposes. Potentially dangerous goods that could be used for mass destruction or terrorism are also subject to strict export rules. Companies must therefore carefully check whether their products fall into these categories and comply with corresponding regulations.

Here, the word "product" refers not only to tangible goods, but also to intangible goods such as software or technology transfer in general. This includes consulting, training and technical information sent by e-mail or offered for download. Products that have been classified as "dual use" are on export control lists and may only be exported with a license. In Germany, this is done by the AL number, while in the USA the ECCN number is often found on invoices or delivery bills.

Sometimes products will also be subject to export control without being explicitly on one of the control lists. This may be the case if they could be used for military or nuclear purposes.

It is essential to take these restrictions of use into account, especially in politically problematic regions or with critical customers such as the military. Therefore, so-called "end-use declarations" are often required as a precautionary measure, in which companies or customers must confirm the ultimate intended use. However, such confirmations are not normally required for non-critical transactions.

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What are the consequences of export control violations?

Depending on the severity of the violation, prison sentences may be imposed on the individuals involved. Particularly in the case of deliveries of tools, machines, IT equipment or know-how, there's always a chance that "dual use" goods could be involved. So it is crucial to find these needles in the haystack.

If export control regulations are violated, companies can be investigated, which can lead to serious legal consequences. Fines and sanctions can be imposed, which can of course cause enormous damage to a company's reputation and sales.

Train your departments and strengthen compliance

In order to ensure reliable export control, it is crucial that companies are fully informed about current regulations and apply for an export license if necessary. Especially if their products are subject to these regulations. With such a license, it is possible to trade with controlled goods, countries or persons.

To qualify for a license all requirements must be met and the specified conditions adhered to. It is strongly recommended that you contact relevant authorities and experts to ensure compliance with export control regulations and minimize potential risks.

Hands-on examples:

Procurement Departments: New suppliers should be carefully screened and checked for on sanctions lists before entering into a business relationship.
Human Resources: Applicants should be thoroughly screened before being hired.
Logistics: New logistics service providers also require a thorough review.
R&D: Innovative new developments should be screened for potential "dual use" capabilities.

For critical products and countries, checklists as well as one's own gut feeling (or common sense) are important decision-making aids. If there are uncertainties, employees should rather ask too many questions than too few.

To ensure that your departments are well sensitized and empowered, a regular compliance training for export control is a good idea. Ideally, you supplement an e-learning with intranet content, contacts from your compliance team, and links to key resources.

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