This clause allocates responsibility for obtaining and maintaining export licenses required to ship goods, services, or technology across international borders. The clause specifies which party (typically the seller/exporter) must secure the necessary governmental authorizations before goods leave the country of origin. This is critical because exporting controlled items—such as technology, software, encryption, or goods with dual-use applications—without proper licensing can result in severe criminal and civil penalties, including fines and imprisonment. The clause also typically addresses what happens if an export license is denied or delayed: whether the contract is terminated, suspended, or if one party must indemnify the other for losses incurred. Without clear allocation of this obligation, both parties may assume the other is handling licensing, creating a dangerous compliance gap that exposes both to legal liability.
The practical importance of this clause cannot be overstated in international commerce. Export controls vary dramatically by country of origin, destination country, and product type. A seller who fails to secure proper export authorization may face criminal prosecution, asset seizure, and debarment from future government contracts. A buyer who receives unlicensed goods may also face liability in some jurisdictions. This clause protects both parties by establishing clear expectations and providing contractual remedies if licensing fails.
Ensure the exporting party explicitly accepts responsibility for obtaining all required export licenses before shipment, and specify that the contract is conditioned upon license approval. Include a timeline for license application and a termination right if the license is denied or delayed beyond a specified period. Require the exporting party to provide proof of license to the importing party before goods ship. If your business involves controlled technology or dual-use items, consult with a trade compliance attorney to identify which products require licenses and which destinations are restricted. Consider including a clause allowing either party to terminate without penalty if licensing becomes impossible due to government action.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause allocates responsibility for obtaining and maintaining export licenses required to ship goods, services, or technology across international borders. The clause specifies which party (typically the seller/exporter) must secure the necessary governmental authorizations before goods leave the country of origin.
Why should I care about this clause?
This is critical because exporting controlled items—such as technology, software, encryption, or goods with dual-use applications—without proper licensing can result in severe criminal and civil penalties, including fines and imprisonment. The clause also typically addresses what happens if an export license is denied or delayed: whether the contract is terminated, suspended, or if one party must indemnify the other for losses incurred.
What are my options?
Without clear allocation of this obligation, both parties may assume the other is handling licensing, creating a dangerous compliance gap that exposes both to legal liability. The practical importance of this clause cannot be overstated in international commerce.
How does this affect small businesses?
Export controls vary dramatically by country of origin, destination country, and product type. A seller who fails to secure proper export authorization may face criminal prosecution, asset seizure, and debarment from future government contracts.