U.S. Export Control Compliance for SaaS Startups

 

A four-panel comic shows a team at a SaaS startup discussing U.S. export control compliance. Panel 1: They question whether export controls apply. Panel 2: A robot confirms and lists EAR, ITAR, and OFAC. Panel 3: The team discusses geofencing and user screening. Panel 4: They agree on the need for a compliance plan.

U.S. Export Control Compliance for SaaS Startups

Many SaaS startups operate under the assumption that export controls don’t apply to them—after all, there are no physical goods crossing borders.

However, U.S. export control regulations such as the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR) often apply to cloud-based services, encryption software, and global data transfers.

Non-compliance can result in serious penalties, license revocations, and reputational damage.

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Why Export Control Laws Matter to SaaS Startups

Export control laws were originally designed to restrict the transfer of sensitive technologies and information to foreign entities.

Today, that includes certain categories of software and cloud services—even if no hardware is shipped.

SaaS platforms offering features like end-to-end encryption, geolocation services, AI analytics, or remote data access may fall under EAR or ITAR restrictions.

Simply hosting data on a cloud server accessible overseas may count as a "deemed export."

Key Regulations: EAR, ITAR, OFAC

EAR (Export Administration Regulations): Managed by the Bureau of Industry and Security (BIS), applies to dual-use technologies and certain encrypted software.

ITAR (International Traffic in Arms Regulations): Covers military-grade software or any SaaS solution tied to defense or satellite systems.

OFAC (Office of Foreign Assets Control): Prohibits business with embargoed countries and individuals listed on the SDN (Specially Designated Nationals) list.

Startups unknowingly servicing restricted jurisdictions or users may violate these laws even without intent.

Risk Areas in SaaS Delivery Models

✔ Automatic provisioning of services to users in embargoed countries (e.g., Iran, North Korea).

✔ API access granted to restricted end-users without proper screening.

✔ Data replication across global data centers without knowing the jurisdictional exposure.

✔ Use of third-party libraries with encrypted or ITAR-classified functionality.

Best Practices for Staying Compliant

1. Implement geofencing to block access from embargoed countries.

2. Screen customers and users against denied party lists using tools like Descartes or LexisNexis WorldCompliance.

3. Classify your software using ECCNs (Export Control Classification Numbers).

4. If exporting controlled tech, file for BIS or DDTC licenses in advance.

5. Train legal and engineering teams on regulatory red flags and reporting obligations.

Related Legal Compliance Resources

Explore more about SaaS and international regulation below:

Virtual Law Practice Compliance

Franchise Law for AI SaaS

Voice Clone IP Risks

Litigation KPIs for Compliance

DAO Structuring & Export Law

Keywords: SaaS export compliance, EAR and ITAR, OFAC regulations, cloud software law, U.S. export control