This clause requires the contracting parties—typically a company and its service provider, vendor, or contractor—to comply with all applicable export control laws and regulations when performing work under the contract. Export controls restrict the transfer of certain goods, technology, technical data, and services to specific countries or end-users for national security, foreign policy, or non-proliferation reasons. The clause obligates both parties to obtain necessary export licenses, conduct screening against government-maintained denied-party lists (such as the U.S. OFAC list), avoid transactions with sanctioned countries or entities, and implement internal compliance procedures. This matters because violations can result in severe criminal and civil penalties, including fines in the millions of dollars and imprisonment of responsible individuals, plus reputational damage and loss of export privileges.
The categorization as "employment" is misleading; this is fundamentally a regulatory compliance and international trade clause. However, it may have employment implications if the contract involves hiring foreign nationals or transferring employees internationally, as those movements can trigger export control restrictions on technology transfer.
First, determine whether your contract actually involves controlled items—this includes not just physical goods but also technical data, software, and specialized services. If export controls potentially apply, insert specific language allocating compliance responsibility (typically the vendor warrants compliance, but you should verify their procedures). Require the vendor to conduct denied-party screening before performance and to notify you immediately of any compliance concerns. Include audit rights allowing you to verify the vendor's export control procedures, and require them to maintain compliance documentation for your review. Add a termination right if either party becomes subject to sanctions or export restrictions. Consider requiring vendors to certify their export control compliance status in writing and to maintain appropriate insurance. If your company has an export compliance officer, involve them in contract review; if not, consult an international trade attorney before signing any contract involving cross-border services, technology transfer, or foreign nationals.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause requires the contracting parties—typically a company and its service provider, vendor, or contractor—to comply with all applicable export control laws and regulations when performing work under the contract.
Why should I care about this clause?
Export controls restrict the transfer of certain goods, technology, technical data, and services to specific countries or end-users for national security, foreign policy, or non-proliferation reasons.
What are my options?
The clause obligates both parties to obtain necessary export licenses, conduct screening against government-maintained denied-party lists (such as the U.S.
How does this affect small businesses?
OFAC list), avoid transactions with sanctioned countries or entities, and implement internal compliance procedures.