INTERNATIONAL TRADE LAW
Sanctions Compliance for Aerospace & Defense
Sanctions compliance in aerospace and defense means managing three overlapping regimes at once — OFAC sanctions, the ITAR, and the EAR — because a single part, drawing, or transaction can fall under more than one. This guide explains how the regimes fit together and how to build a single program that covers all of them, rather than three programs that miss the seams.
Aerospace and defense sit at the intersection of the most heavily controlled rules in U.S. trade. The risk is not just dealing with a sanctioned party; it is exporting a controlled article or technology without the right jurisdiction, classification, or license.
The Three Regimes You Are Managing
Most A&D compliance failures trace back to treating these as one thing. They are administered by different agencies under different statutes.
| Regime | Administered by | Governs |
|---|---|---|
| OFAC sanctions | Treasury (OFAC) | Dealings with sanctioned countries, entities, and persons |
| ITAR | State (DDTC) | Defense articles and services on the U.S. Munitions List (USML) |
| EAR | Commerce (BIS) | Dual-use and less-sensitive items on the Commerce Control List (CCL) |
A jet component might be ITAR-controlled if it is specially designed for a defense article, EAR-controlled if it is dual-use, and still subject to OFAC sanctions depending on the destination and parties. The compliance question is always which rules apply before whether you can proceed.
Why Aerospace and Defense Is High-Risk
The sector concentrates several risk factors that lighter-touch industries do not face. Products are frequently controlled by design. Technical data and source code are themselves exports. Supply chains are global and multi-tier, so a sanctioned sub-supplier can sit several layers down. And much of the work involves foreign nationals, which raises the deemed export issue: releasing controlled technology or technical data to a foreign national — even inside the United States — is treated as an export to that person’s home country.
Note that the regulatory detail here moves. The USML categories and the line between ITAR and EAR control are periodically revised, so any program needs a process to re-confirm classifications rather than rely on a one-time answer.
Building One Program That Covers All Three
The good news is that OFAC’s five framework elements — management commitment, risk assessment, internal controls, testing and auditing, and training — map cleanly onto the broader export-controls picture. A few A&D-specific controls sit on top.
Get Jurisdiction and Classification Right First
- Determine which regime controls each item, technology, and service: USML (ITAR), CCL (EAR, by ECCN), or EAR99. When in doubt, use the formal commodity jurisdiction and classification processes rather than guessing. See how to classify dual-use goods for export.
- Re-validate classifications when rules change or products evolve.
Screen Parties and Apply the 50% Rule
- Screen customers, suppliers, freight forwarders, and intermediaries against the SDN List, the consolidated lists, and the relevant denied/entity lists.
- Apply OFAC’s 50% Rule: an unlisted entity owned 50% or more by sanctioned persons, in the aggregate, is itself blocked.
Control Deemed Exports and Technical Data
- Track access to controlled technical data by foreign nationals on staff and on visiting teams.
- Use access controls, technology control plans, and licensing where a release would require it.
License, Document, and Retain
- Obtain the export licenses or authorizations the applicable regime requires before shipping or releasing data.
- Retain records for 10 years, consistent with OFAC’s recordkeeping requirement effective March 2025 and prudent across export programs generally.
What Non-Compliance Costs
The penalties across these regimes are severe and overlapping. OFAC civil penalties are imposed on a strict-liability basis and can reach the greater of an inflation-adjusted statutory maximum or twice the transaction value. Willful violations under the sanctions and export-control statutes can be prosecuted criminally, with exposure up to $1,000,000 in fines and up to 20 years in prison per violation, alongside loss of export privileges and debarment from government contracting. For the export-control side specifically, see how to comply with the EAR and understanding export restrictions and embargoes.
Frequently Asked Questions
Which agency regulates aerospace and defense exports? Potentially three. OFAC (Treasury) administers sanctions, DDTC (State) administers the ITAR for USML items, and BIS (Commerce) administers the EAR for dual-use items. Many transactions implicate more than one.
What is a deemed export, and why does it matter in this sector? Releasing controlled technology or technical data to a foreign national is treated as an export to their home country — even if it happens inside the U.S. A&D firms employ many foreign nationals, so this is a frequent and easily missed exposure.
Do we need a license for every controlled export? Not always — some items move under license exceptions or general authorizations — but you must confirm the requirement before you ship or release data. Classify first, then determine licensing.
How long do we keep export and sanctions records? Ten years is the prudent standard, matching OFAC’s recordkeeping rule effective March 2025.
Aerospace and defense compliance fails at the seams between OFAC, ITAR, and EAR — which is exactly where one program should hold them together. Reidel Law Firm helps aerospace and defense exporters classify, screen, and license across all three regimes, delivered as a flat-fee compliance memo with direct attorney access. Get an export compliance memo →
