Export control

Based on Wikipedia: Export control

The Invisible Gatekeepers of Global Trade

During the development of the SR-71 Blackbird—the sleek, titanium-skinned spy plane that could outrun missiles at three times the speed of sound—the United States Central Intelligence Agency faced a peculiar problem. They needed vast quantities of titanium ore to build the aircraft, but the world's largest supplier was the Soviet Union. The very country they were designing the plane to spy on.

So they created shell companies. Fake operations in third-world countries. Elaborate corporate fronts that bought Soviet titanium and secretly funneled it to Lockheed's Skunk Works in California. The Soviets, ironically, provided the raw materials for one of the most successful espionage aircraft ever built.

This story captures something essential about export controls: they are the invisible rules that shape what flows across borders, and the lengths nations will go to either enforce or circumvent them. Every day, thousands of shipments are scrutinized, approved, or rejected based on a complex web of legislation that most people never think about—until something goes wrong.

What Gets Controlled, and Why

At its core, export control is straightforward. Some things are too dangerous, too strategically valuable, or too sensitive to sell freely to anyone who wants them. Governments maintain lists of these controlled items and require exporters to get permission before shipping them abroad.

The interesting part is how nations decide what belongs on those lists.

Consider something as simple as a computer graphics card. In your gaming rig, it renders explosions in video games. In a research lab, that same chip might train artificial intelligence models. And in the wrong hands, those AI models could design weapons, crack encryption, or automate surveillance systems. The physical object is identical. The threat depends entirely on who's using it and what they're doing with it.

This is what experts call "dual use"—items that have both perfectly legitimate civilian applications and potential military purposes. A centrifuge can enrich uranium for nuclear power plants or for nuclear weapons. Advanced machine tools can manufacture car parts or missile components. Even certain chemicals and biological organisms have dual applications, which is why export controllers pay such close attention to them.

The challenge for regulators is drawing lines that are precise enough to stop dangerous transfers while loose enough to allow legitimate trade. Get it wrong in one direction, and you enable proliferation. Get it wrong in the other, and you strangle commerce.

A Brief History of Saying No

Export controls are older than the United States itself. The American colonies restricted the export of certain goods, and the newly independent nation continued the practice. But the modern export control system really took shape in the twentieth century, forged in the fires of two world wars and a long cold one.

The Trading with the Enemy Act of 1917 gave the American government sweeping powers to restrict commerce with adversaries during World War I. Then came the Export Control Act of 1940, passed as war clouds gathered over Europe and Asia. One of its primary targets was Imperial Japan, which depended on American oil, steel, and scrap metal for its military expansion.

The embargo worked—perhaps too well. Cut off from essential materials, Japan calculated that it had only eighteen months of oil reserves. This resource desperation was one factor that pushed Japanese leaders toward their fateful decision to attack Pearl Harbor and seize the oil fields of Southeast Asia.

After World War II, the threat shifted from fascism to communism. In 1948, Western nations created the Coordinating Committee for Multilateral Export Controls, known as CoCom. For nearly five decades, CoCom coordinated Western efforts to deny the Soviet bloc access to advanced technology. When the Cold War ended, so did CoCom—but the need for coordination remained.

The Multilateral Web

Today's export control system operates through a series of international agreements, each focused on different categories of dangerous goods. Understanding these regimes is essential to grasping how export control actually works in practice.

The Wassenaar Arrangement, which replaced CoCom in 1996, covers conventional weapons and dual-use goods and technologies. Its forty-two member states share information and align their national control lists. If you're trying to export advanced electronics, telecommunications equipment, or certain manufacturing tools, the Wassenaar Arrangement probably shapes the rules you're following.

The Nuclear Suppliers Group focuses on exactly what its name suggests: preventing the spread of nuclear weapons by controlling exports of nuclear materials, equipment, and technology. The group traces its origins to India's 1974 nuclear test, which used plutonium from a reactor that Canada had supplied for peaceful purposes. That surprise detonation made clear that nuclear technology transferred for civilian use could be diverted to weapons programs.

The Missile Technology Control Regime restricts exports of missiles, drones, and related technology capable of delivering weapons of mass destruction. The Australia Group coordinates controls on chemical and biological weapons precursors. The Zangger Committee, named after its Swiss founder, predates the Nuclear Suppliers Group and focuses on implementing the nuclear safeguards required by the Non-Proliferation Treaty.

These regimes don't create binding international law. They're voluntary arrangements among like-minded nations. But they matter enormously because they harmonize national regulations. When a Swiss company applies for an export license, the Swiss government evaluates the application against criteria very similar to what a German or American regulator would use.

This harmonization serves a crucial purpose: it prevents "regime shopping." Without coordinated controls, companies could simply route their exports through whichever country had the loosest rules. By aligning their lists, participating nations close off those escape routes.

The Classification Game

Every controlled item needs a classification—a code that tells regulators exactly how sensitive it is and where it can go. Different countries use different systems, but they share a common logic.

The United States uses Export Control Classification Numbers, or ECCNs. These alphanumeric codes tell exporters which regulations apply to their products. An item classified as "EAR99" is subject to minimal controls and can generally be exported without a license. But move up the sensitivity ladder, and restrictions multiply.

India maintains the Special Chemicals, Organisms, Materials, Equipment and Technologies list—mercifully abbreviated as SCOMET. Japan uses lists maintained by the Ministry of Economy, Trade and Industry, which Japanese speakers call METI.

Getting classification right is both technically demanding and legally consequential. A company that misclassifies an item and exports it without the proper license can face criminal penalties, civil fines, and exclusion from future export privileges. The stakes are high enough that many companies employ specialists whose entire job is navigating these classification systems.

The Licensing Labyrinth

Once you've classified your item, the next question is whether you need a license to export it. The answer depends on three things: what you're selling, where it's going, and who's receiving it.

Some destinations are essentially off-limits. Comprehensive sanctions programs bar nearly all exports to countries like North Korea. Other restrictions are more targeted—specific individuals or companies appear on lists that trigger extra scrutiny or outright prohibition regardless of how innocuous the item might seem.

If a license is required, the application process begins. Regulators want to know everything: who's buying, what they plan to do with the item, how it will be shipped, who else might handle it along the way. For particularly sensitive items, the buyer might need to provide an End User Undertaking—a formal declaration promising not to misuse the goods or transfer them to someone else.

The government then decides. Some applications sail through. Others get denied outright. Many fall into a gray zone where additional information is requested, conditions are attached, or long delays ensue.

A license, once granted, comes with obligations. The exporter must keep records, include license numbers on shipping documents, and submit to potential audits. Inspectors may want to examine the goods before they leave the country. Years later, enforcement agencies might come asking questions about whether all the license terms were followed.

The American System

The United States, as you might expect from the world's largest economy and most powerful military, has one of the most elaborate export control systems on the planet. Three different agencies share primary responsibility, each with its own regulations and areas of focus.

The Directorate of Defense Trade Controls, housed within the State Department, administers the International Traffic in Arms Regulations—universally known as ITAR. These rules cover defense articles and services: weapons, military vehicles, classified software, and the technical data needed to design or produce them. ITAR is notoriously strict. Items on the United States Munitions List often cannot be exported to any foreign person, regardless of destination or purpose, without specific authorization.

The Bureau of Industry and Security, part of the Commerce Department, enforces the Export Administration Regulations, or EAR. These broader rules cover dual-use items—the vast middle ground of goods that have both civilian and potential military applications. The Bureau also maintains the Entity List, which names specific foreign organizations subject to extra restrictions. Appearing on that list can be commercially devastating, as Huawei discovered when it lost access to American semiconductors and software.

The Office of Foreign Assets Control, within the Treasury Department, administers economic sanctions programs. These can target entire countries, specific industries, or individual people and organizations. When the United States freezes the assets of a Russian oligarch or bans transactions with Iranian banks, it's OFAC wielding the weapon.

Coordinating all this is the Export Enforcement Coordination Center, which brings together eighteen federal agencies to share intelligence and align enforcement efforts. The American system may be fragmented, but it is not uncoordinated.

Across the Atlantic

The European Union has its own comprehensive framework. Council Regulation 2021/821, which took effect in September 2021, sets the rules for dual-use exports across all member states. It replaced an earlier regulation from 2009, updating the system for new technological realities and emerging threats.

But here's the crucial difference from the American approach: while the EU sets common rules, individual member states issue the actual licenses. Germany's Federal Office for Economic Affairs and Export Control—known by its German acronym BAFA—handles applications from German exporters. France has its own competent authority, as does Italy, and every other member state.

This creates both opportunities and complications. Within the EU's customs union, most civilian goods flow freely between member states without export licenses. Ship a drilling machine from Munich to Milan, and no one asks questions. But military goods still require authorization, and anything destined for outside the EU faces full export control scrutiny.

Companies operating across Europe are expected to maintain Internal Compliance Programs—systematic procedures to ensure they identify controlled items, screen transactions against sanctions lists, and apply for licenses when required. Regulators look more favorably on companies that can demonstrate robust compliance systems, and may grant more flexible license types to those they trust.

Brexit Complications

Britain's departure from the European Union created a peculiar situation for export control.

When the UK left, it brought EU Regulation 428/2009 into domestic law through the European Union Withdrawal Act. The old rules, essentially frozen in amber at the moment of Brexit, still apply in mainland Britain with various amendments. But the EU has moved on. The 2021 recast regulation doesn't apply in Great Britain because it came after departure.

Northern Ireland presents an even stranger case. The Northern Ireland Protocol keeps the region aligned with EU customs rules even though it remains part of the United Kingdom. So exports from Belfast are subject to the new EU regulation that doesn't apply in Birmingham. Moving dual-use goods between Great Britain and Northern Ireland requires no license, but exporting from Northern Ireland to third countries follows EU rules.

The Export Control Joint Unit, part of the Department for Business and Trade, administers the British system. They operate a web-based licensing platform called SPIRE, though a newer system called LITE has been phasing in since 2021. British exporters can apply for several license types: Standard Individual Export Licenses for specific shipments, Open Individual Export Licenses for multiple shipments to approved destinations, and various general authorizations that pre-approve certain categories of exports.

The Enforcement Challenge

Writing rules is one thing. Enforcing them is quite another.

The sheer volume of international trade makes comprehensive screening impossible. Millions of containers cross borders every day. Customs officials cannot inspect more than a tiny fraction. Enforcement necessarily relies on intelligence, risk assessment, and the cooperation of exporters themselves.

This is why the licensing system matters so much. When companies apply for licenses, they provide information that helps regulators track sensitive goods. When they're required to keep records and report shipments, they create paper trails that auditors can follow. The bureaucratic overhead isn't just red tape—it's the scaffolding of enforcement.

Penalties for violations can be severe. Criminal prosecution, civil fines running into millions of dollars, denial of export privileges—these consequences give companies powerful incentives to comply. Major corporations invest heavily in compliance programs, training staff, screening transactions, and documenting everything. The cost of compliance is significant, but the cost of getting caught violating export controls can be existential.

The Crypto Question

Cryptography deserves special mention because it illustrates how export controls struggle to keep pace with technology.

Strong encryption was once treated as a munition. Through the 1990s, American companies couldn't export software with robust encryption without specific authorization. The government's concern was understandable: encryption that protects your email also protects terrorist communications. But the result was absurd—American software makers shipped weakened products abroad while foreign competitors offered the strong encryption that customers actually wanted.

Eventually, the rules relaxed. Mass-market encryption software now faces minimal restrictions. But export controls on cryptographic technology haven't disappeared entirely. The National Security Agency may still require notification when companies plan to publish certain cryptographic software. And new cryptographic capabilities—especially those relevant to intelligence collection—remain closely watched.

The underlying tension is permanent. Governments want the ability to read communications when necessary for law enforcement and national security. Strong encryption makes that impossible. Export controls are one tool governments use to manage this dilemma, limiting the spread of cryptographic capabilities they can't break.

Why It Matters for AI

The connection to artificial intelligence is not abstract. As AI capabilities advance, export controls have become a central tool of technology competition between nations.

The United States has imposed increasingly strict controls on semiconductor exports to China, particularly advanced chips used for AI training. The logic is straightforward: if China's AI development depends on American technology, restricting that technology slows China's progress. Graphics processing units from NVIDIA, chip-making equipment from ASML, even software tools for designing semiconductors—all have become subjects of intense export control scrutiny.

China, meanwhile, has imposed its own export controls on materials critical to the semiconductor industry, including germanium and gallium. The message is clear: restrictions can flow in both directions.

This technology competition raises fundamental questions about what export controls can actually accomplish. In a world of open-source AI models, globally distributed research communities, and commercial pressure to sell to the largest possible market, how much can any government really control? The history of export controls suggests both possibilities and limits. They can delay adversaries' access to technology, but rarely can they prevent it forever. They can shape competitive dynamics, but only if enforcement keeps pace with evasion.

The Permanent Tension

Export controls exist at the intersection of competing imperatives. Governments want to protect national security, but they also want their companies to compete globally. They want to enforce rules, but they don't want to strangle trade. They want to coordinate with allies, but they also want to maintain sovereign discretion over their own policies.

There is no perfect balance. Every export control decision involves tradeoffs. Block too much, and you drive innovation overseas, hurt your own industries, and frustrate allies who depend on your technology. Block too little, and adversaries acquire capabilities that threaten your security.

The titanium story from the SR-71 program captures this tension perfectly. The United States had every reason to prevent strategic materials from flowing to the Soviet Union. And yet, when American interests required Soviet titanium, ways were found to acquire it. Export controls shape the landscape of international trade. They do not make it impermeable.

For companies navigating this system, the practical implications are substantial. Classification matters. Documentation matters. Knowing your customer matters. The penalties for getting it wrong are severe, and ignorance is no defense. In an era of intensifying technology competition, export controls are only becoming more important—and more complex—to master.