What are Export Controls?

More and more countries all over the world have started to implement export control laws to enforce restrictions on certain exports, brokering and transshipment, sale and transfer of military and dual-use articles, technology and know-how. The intention behind implementing export controls is to prevent entities of concern from gaining access to potentially dangerous technology and products related to chemical warfare, biological warfare, weapons of mass destruction and nuclear weapons. Economic controls are not a driving factor behind export control law and regulations. Simply put, the driving force behind such controls is to prevent bad actors from gaining access to deadly capabilities that they may in turn use for mass murder, terrorist activities or other such undesirable intentions. Export controls usually require the trader to first identify the correct export control classification number or equivalent (depending on the jurisdiction of the country) before it can be determined if the export is controlled by the regulations. Determining a ECCN (or equivalent) can be a significantly complicated task requiring expert knowledge of the classification process.

What are Economic Sanctions?

Economic sanctions are implemented by countries due to national security reasons and foreign policy reasons. These sanctions can also be put into place to protect local industries when it has been established that states, nations or individuals have acted in bad faith to exploit the facilitations of free trade. Sanctions can also be put into place intentionally to disrupt the economic progress of a country as a form of retaliation against oppressive or aggressive regimes. Economic sanctions are not product specific, which is unlike export controls. Economic sanctions do not require the trader to identify an identification number specific to sanction controls and hence are usually easier for trader to interpret.

Hence, it is easier for a trader to decide if he/she can ship to a party without breaking economic sanctions vs. whether he/she can ship to a party without breaking export control regulations.

From the definitions it can be seen that export controls and economic sanctions are not the same thing. However, traders have to meet both these regulations. The good news is that most of the information a trader needs to understand these regulations is available online. The bad news is that the legal text of regulations and laws can be hard to interpret. Even the freely available screening portals can sometimes present information in a format that is not easy to interpret.

A final note

Significant differences lie in the export control regime of countries. For example some export control laws are extra territorial and some are highly dependent on the end-use destination, while others are not. Moreover the administrative processes related to export controls are non standard across countries as well. This usually means that any company dealing with cross border trade of technologically advanced products, military use products or dual-use products require the services of a trained export control specialist familiar with the laws of many countries and with the administrative processes of applying for multiple licenses in many countries. This is a critical investment for companies to make, since export control penalties are severe in most countries, sometimes even including jail-time. In extreme cases, negligent companies can find themselves inadvertently placed on a denied party list for not managing their exports controls properly.

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