Real-World Example of Legal Due Diligence for Tech Exports

Exporting high-tech products sounds exciting—but it can be legally risky if not handled properly. Whether you’re exporting hardware, software, or dual-use technology, conducting legal due diligence for tech exports is essential to avoid compliance issues, financial losses, or even government penalties.

In this post, I’ll walk you through a real-world example of how legal due diligence protected a tech exporter from a bad deal. I’ll also share practical steps you can follow to safeguard your own export transactions.

Why Legal Due Diligence Is Critical for Tech Exports

When you’re selling technology across borders, you’re dealing with:

• Export control laws

• Intellectual property rights

• International payment risks

• Contractual obligations that differ by country

• Political or regulatory changes

Without legal due diligence for tech exports, even a simple shipment can turn into a legal nightmare.

Case Study: How We Protected a Client in a Tech Export Deal

Let’s break it down:

1. Country-Specific Compliance: Dual-Use Goods Risk

Our client, a small hardware company, wanted to export an advanced sensor system to a distributor overseas.
At first glance, it seemed like a simple commercial sale. But during legal due diligence, we discovered:

• The sensor was classified as dual-use technology under national export control laws.

• Special licenses were required because the system could be used for both civilian and military purposes.

Without securing the proper export authorization, the client could have faced severe fines—or worse, criminal charges.

Lesson: Always check if your product is subject to dual-use controls before agreeing to export.

2. Export Contract Review: Spotting Red Flags

We also reviewed the proposed sales agreement. Here’s what we found:

• Vague payment terms with no clear currency or deadlines.

• No force majeure clause to protect the seller if new export bans were introduced.

• No governing law or dispute resolution clauses—leaving room for jurisdiction battles.

We revised the agreement to include:

• Detailed payment schedules in USD.

• Arbitration in a neutral country.

• Export law compliance warranties on both sides.

Lesson: A poorly written export contract can expose you to massive risks you didn’t sign up for.

3. Intellectual Property and Licensing Issues

Because the product included some proprietary software, we also checked:

• Who owned the embedded software.

• Whether any third-party licenses were needed for export.

The client’s engineer had licensed a small library from another software company—licensed only for domestic use!
Without updating the license, exporting the product would have been a breach of contract.

We negotiated a new license that covered international sales before proceeding.

Lesson: IP risks aren’t just about patents—they include embedded software, libraries, and third-party tech.

4. Structuring Cross-Border Payments Carefully

Cross-border payments can trigger:

• Bank delays

• Currency conversion risks

• Sanctions issues if buyers are in restricted countries

We set up the payment to go through an escrow agent, releasing funds only upon confirmation of export clearance and goods acceptance.
This protected the client from losing money if the deal collapsed mid-transaction.

Lesson: Don’t rely solely on standard invoices when large international payments are involved.

5. How Due Diligence Prevented a Bad Deal

Because of these checks:

• The client secured all necessary licenses.

• The contract covered legal risks clearly.

• Payment structures reduced financial exposure.

Most importantly, when political tensions increased between the two countries months later, the client was protected by the well-drafted force majeure and dispute clauses.
Other companies in the same situation lost millions—ours didn’t.

How to Conduct Legal Due Diligence for Your Tech Exports

Here’s a checklist based on what worked:

• Classify your product under export control lists (e.g., dual-use).

• Review the exporter’s and importer’s compliance obligations.

• Draft a clear, protective export contract.

• Verify IP ownership and licensing for international use.

• Set up secure, conditional payment systems.

• Build in flexibility for political or regulatory changes.

Tip: Work with a legal advisor familiar with international trade and technology law.

Conclusion

Legal due diligence for tech exports isn’t just a box to tick—it’s the foundation of a safe and profitable deal.
Without it, you risk regulatory penalties, financial losses, or expensive disputes.
By taking the time to carefully check your compliance, contracts, IP, and payment terms, you can confidently expand your tech business across borders.