What Every Multinational Should Know About . . . U.S. Export Controls & Economic Sanctions

Both the Biden and the Trump administrations have been expanding U.S. export controls (particularly regarding China) and promulgating new and comprehensive economic sanctions. To reflect the increasing risks of these international regulatory regimes, this article is the first in a series that will explore key export control and economic sanctions issues that arise for multinational companies. In today’s globalized economy, with heightened geopolitical tensions, every company should operate with a working understanding of these frameworks. Even corporations that do not traditionally “export” products can find themselves subject to these rules, which may apply to domestic as well as international transactions. Awareness and education are the foundation of compliance — and the costs of missteps can be severe.

Before we address specific regulatory developments in future articles, it is helpful to first explain the basic framework of export controls and economic sanctions. Export controls primarily regulate the transfer of goods, technology, and technical data, while economic sanctions focus on restricting dealings with certain countries, regions, individuals, and entities as well as access to the U.S. financial system. For many companies, it makes sense to handle export controls and economic sanctions in an integrated fashion because their requirements can overlap. As a simple example, if a U.S. person exports U.S.-origin goods to Iran without a license, the transaction may trigger both export controls and economic sanctions issues. Particularly in the new environment, it is important for companies — even those that do not produce or export any controlled goods — to understand the baseline requirements applicable to companies that operate, export, or sell abroad.

Export Controls

At their core, export controls are regulations that restrict the export and transfer of certain goods, software, technology, and technical data to foreign countries, individuals, or entities. They are typically justified by national security and foreign policy interests and are aimed at keeping sensitive items out of the hands of foreign nationals and organizations that could use them to the detriment of the United States. Depending on the type of goods, software, technology, or technical data at issue, a license may be required from the U.S. government to legally complete the transaction.

In the United States, export controls are administered primarily by two agencies:

• The Department of State’s Directorate of Defense Trade Controls (DDTC): Oversees defense articles and services on the U.S. Munitions List (USML) under the International Traffic in Arms Regulations (ITAR). These include firearms, ammunition, military aircraft, satellites, and related technical data. Items can be controlled because of their inclusion on the USML or because they are specially designed or modified to meet military specifications. Transactions involving the export of USML items almost always require licenses.
• The Department of Commerce’s Bureau of Industry and Security (BIS): Administers the Export Administration Regulations (EAR), which cover commercial and “dual-use” items on the Commerce Control List (CCL). Although the primary restrictions under the EAR are for controlled items, end-use and end-user controls can restrict even shipments of uncontrolled items. Depending on the classification, destination, and end-user, a BIS license may be required before undertaking a transaction.

Goods not specifically listed on the CCL are designated “EAR99.” These generally do not require a license unless they are destined for a comprehensively sanctioned country, a prohibited end-user, or a prohibited end-use (e.g., nuclear proliferation).

Adding to the complexity of export controls is the expansive meaning of “export.” In the United States, an export can mean physically shipping an item outside of the country, but it also includes releasing controlled technology or technical data to a foreign person in the U.S. (a “deemed export”), the transfer of goods within a non-U.S. country, or the transfer of a U.S.-origin item between two foreign countries (a “reexport”).[1] U.S.-origin items continue to be controlled even after their export, unless they are incorporated into a downstream product and constitute less than a de minimis level of content (either 25 or 10 percent). Incorporating ITAR items into a downstream product turns the whole downstream item into an ITAR-controlled item, due to the operation of the ITAR “look through” rule. Export controls thus apply both domestically and extraterritorially.

Export control laws are dynamic and can evolve with shifting foreign policy priorities, as illustrated by changes to the rules governing export to China over the last two administrations. Diplomatic developments, security risks, or emerging technologies can all trigger updates. Companies must therefore remain attentive to regulatory changes and reassess compliance obligations over time.

Economic Sanctions

Whereas export controls regulate what goods and technology can be moved or shared, economic sanctions restrict who companies may deal with — typically targeting specific countries, governments, entities, and individuals. Sanctions are more punitive in nature and are meant to influence behavior or constrain access to the U.S. financial and commercial system.

Sanctions can be country-wide (such as comprehensive embargoes) or targeted (such as asset freezes and transaction bans on listed individuals and entities). For example, the United States has maintained a comprehensive sanctions program against Iran since March 15, 1995, when President Clinton declared that actions and policies of the Government of Iran constituted an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and declared a national emergency to deal with that threat.[2]

Sanctions laws generally fall into two categories: country-specific sanctions and embargoes or list-based sanctions (such as the Specially Designated Nationals and Blocked Persons List). Economic sanctions usually come in the form of asset freezes, trade embargoes, and financial transaction restrictions. Although economic sanctions generally follow a similar framework, details can differ from one program to the next, so it always is important to check the specific restrictions and requirements of any potentially applicable economic sanctions regime, including any general licenses issued by the Department of Treasury’s Office of Foreign Assets Control (OFAC) and OFAC guidance in its Frequently Asked Questions.

In the United States, sanctions programs typically originate from Executive Orders and are administered by OFAC. Often, OFAC sanctions are eventually codified and placed in the Code of Federal Regulations. OFAC programs cover areas ranging from terrorism and weapons proliferation to malicious cyber activity and human rights abuses. U.S. persons are generally prohibited from engaging in transactions with sanctioned persons or entities, and their U.S.-based assets can be blocked.

Like export controls, sanctions programs evolve over time. They may be expanded, narrowed, or rescinded depending on political and diplomatic developments. As an example, sanctions against Syria were rescinded effective July 1, 2025, pursuant to Executive Order 14312, citing “positive actions taken by the new Syrian government under President Ahmed al-Sharaa.”[3] Sanctioned individuals may also petition OFAC for removal from lists if circumstances change or if they believe they were wrongly designated. Monitoring changes to sanctions programs and listings is thus essential to ensure compliance in any country in which companies operate or in relation to business transactions with foreign nationals.

Practical Guidance

The information above represents a baseline export controls and economic sanctions framework. In future installments of this series, we will address these topics in greater depth and include practical compliance strategies, including how companies can implement effective internal controls, conduct due diligence, and respond to regulatory changes.

For now, companies should keep the following foundational points in mind:

• Export Controls: Ensure correct classification of goods, software, and technology (e.g., USML, CCL, EAR99). Proper classification is the starting point for determining license requirements and compliance obligations. If your organization has not conducted an export controls classification review in the last two years, it might make sense to consider doing so.
• Economic Sanctions: Know where your goods are being sold and with whom you are conducting business. Customer due diligence; screening customers, suppliers, financial institutions, and counterparties against sanctions lists; and understanding geographic restrictions are critical components of a well-functioning economic sanctions compliance program.
• Supply Chains: Map supply chains and transaction flows to identify touch points where export controls or sanctions could be implicated.
• Compliance Programs: Develop and maintain compliance policies that address both export controls and sanctions and regularly update them to reflect evolving regulations. Draft and implement key internal controls, such as screening protocols for economic sanctions and export controls technology control and physical security plans.
• Geopolitical Awareness: Monitor international developments, as shifts in foreign policy or security priorities can quickly alter regulatory landscapes.

By anchoring compliance programs in these fundamentals, companies will be better positioned to address export controls and economic sanctions issues and will be prepared to respond as the legal and geopolitical environment evolves.

[1] See 22 C.F.R. Parts 120.50 and 120.51.

[2] See Executive Order 12957.

[3] See 31 C.F.R. Part 542.