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Dual Use Compliance

Most companies in the defense industry are well aware of the export regulations relating to military goods, as set forth in the International Traffic in Arms Regulations (ITAR). However, some commercial aerospace companies may not know that they too may be subject to export controls of the United States that relate to dual use goods and intellectual property.

Separate from ITAR, there is another set of laws in the United States that relate to dual use exports, called the Export Administration Regulations (EAR). The EAR, as set forth in CFR Chapter VII, subchapter C, is administered by the Bureau of Industry & Security (BIS), which is an agency within the Department of Commerce. The EAR controls the export of items from the United States that are not controlled by another agency and are predominantly related to dual-use technology (those with military and commercial utility) listed on the Commerce Control List.  Examples include: avionics, sensors, navigation, and lasers.

Compliance with EAR is not difficult.  It just requires advance planning and the implementation of policies and procedures to ensure continued compliance. While enforcement actions from the BIS are a concern, they are relatively rare. However, when companies are acquired, buyers almost always conduct exhaustive due diligence into EAR compliance, prior to closing.  Deficiencies found can result in delays in closing and increases in the size of indemnification escrows.

If you are considering selling your middle market commercial aerospace company in the near future, make sure that you are fully compliant with the requirements of EAR and have the proper policies and procedures in place to ensure continual compliance.

Have a great day everyone!

Bill Alderman