Restricted: How export controls are reshaping markets

As geopolitical tensions continue to mount, governments around the world are expanding restrictions on what domestic companies can sell abroad. Most business leaders are familiar with export controls affecting military or dual-use items (those that have both military and civilian applications). What is harder to untangle are the complex export control restrictions that governments can implement, or have already implemented, to promote policy goals affecting their countries’ technological and economic security.

Multinational corporations and global exporters and importers face an increasingly complex trade environment. The three main causes are the proliferation of restrictions, the fracturing of alliances, and the growing application of extraterritorial authority.

The growing number and complexity of global export controls make it crucial for business leaders to assess the impact of such measures and mitigate any associated risk. They should also seek to identify potential competitive opportunities. To this end, companies should consider the following steps.

1. Adapt product design to account for export control risk.  Decision-makers should consider whether including sensitive technology in their products could make those products subject to export controls. They should also reexamine assumptions about target markets included in the original investment case in light of emerging trade restrictions. Since export controls can cover product inputs and components, and even the tools used in production, business leaders may need to make contingency plans across the entire product footprint.
2. Reassess the supply chains of existing products.  Executives should review their supply chains for dependencies on components and suppliers that could be subject to restrictions. They should also consider risks beyond regulatory compliance. Implementing software that checks whether customers are on export restriction lists, for example, will not highlight broader vulnerabilities in high-priority but potentially high-risk export markets. On the flip side, some companies may see opportunities emerge from new restrictions affecting foreign competitors.
3. Understand how export controls can affect your (and your competitors’) operations.  Keeping abreast of evolving trade controls, geopolitical alliances, and their respective impact on markets has become central to maintaining corporate resilience. Export controls’ impact can go beyond supply chains and the ability to export products to specific markets—it can also affect research and development, manufacturing, and people operations.
4. Ensure legal and compliance teams are up to the task.  The compliance function is critical to managing the impact of export controls—not only to avoid costly fines but to create potential competitive advantages. When legal and compliance professionals are properly trained on export controls, they can help their employers capitalize on new market opportunities by efficiently navigating complex regulations and license application processes.