Dual-Use Compliance: The Hidden Cost of Getting It Wrong in Aerospace and Defense

For European aerospace and defense companies, dual-use compliance is business survival. One export control error can freeze shipments, cancel contracts, and trigger penalties in the millions. With regulations tightening across the EU following geopolitical shifts, companies handling items with both civilian and military applications face unprecedented scrutiny.

The costs of getting compliance wrong extend far beyond fines, creating ripple effects through operations, reputation, and market access. Let's look at why forward-thinking organizations are discovering that robust compliance can be a competitive edge.

Short on Time? Here's a Brief Overview  

• Dual-use items account for 2.5% of total EU exports, valued at approximately €147 billion annually.

• A single documentation gap can trigger investigations and penalties even when physical exports were properly licensed.

• Sanctions violations can result in fines of up to 5% of worldwide turnover or fixed penalties up to €40 million.

• Modern PLM systems reduce compliance processing time while minimizing the risk of non-compliance.

The Risks of Non-Compliance

According to the European Commission's official statistics, dual-use items account for roughly 2.5% of total EU exports, with a value of approximately €147 billion in 2021. The same report indicates that the EU processed applications for dual-use trade valued at €45.5 billion, with 568 applications being denied despite the reported high approval rate. 

With dual-use items being such a significant part of trade, there's a careful balance that regulators must maintain between facilitating legitimate trade and enforcing security controls.

1. Fines and legal penalties
Under EU Directive 2024/1226, companies breaching sanctions face fines of 1% to 5% of total worldwide turnover or fixed penalties between €8 million and €40 million. Intentional embargo violations result in at least one year of imprisonment, while negligent export restriction violations can incur fines up to €500,000.

2. Operational impact
There are repercussions to consider beyond potential fines. When compliance flags appear, shipments stop completely. For aerospace manufacturers in just-in-time supply chains, even a one-week customs hold can trigger contract penalties and production halts across the network.

Defense procurement increasingly favors suppliers with robust, digitally enabled compliance systems. So companies without verifiable compliance trails find themselves eliminated early from bidding processes, regardless of their technical capabilities or competitive pricing.

Once flagged for compliance issues, rebuilding trust becomes exceptionally difficult. The aerospace and defense sector operates within small networks where reputation travels quickly. A compliance failure with one customer can lock you out of entire market segments.

Real-World Compliance Failures

However important, not all companies have succeeded in implementing it correctly. These recent real-world examples bring the importance of getting dual-trade right:

• ΡTX (formerly Raytheon) reached a $200 million settlement with the US State Department for violations involving employees traveling with laptops containing sensitive military program data to sanctioned countries.

• 3D Systems faced a $2.77 million penalty for unlicensed exports of controlled aerospace technology. The violations included emailing military electronics design drawings to a Chinese subsidiary and storing controlled technology on a server in Germany.

• A 2024 case in Germany saw individuals sentenced to seven years in prison for exporting battlefield electronics to Russia via intermediaries. The court ordered the profit confiscation of €2.1 million from one individual and €3 million from a related Swiss company.

Evolving EU/NATO Standards

Dual-use regulations are continuously changing, driven by geopolitical tensions and technological advancements.

The European Commission adopted a significant update to the EU dual-use export control list in September 2024, while recent EU sanction packages targeting Russia have removed exemptions for dual-use items that could enhance military capabilities. This means that companies are now required to implement more sophisticated monitoring of end-users and end-uses.

But also regulatory authorities have moved from periodic reporting to expectations of continuous compliance readiness. Annual self-certifications are giving way to audit-ready systems that can demonstrate compliance at any moment.

Why Traditional Systems Can't Keep Up

Many aerospace companies still rely on compliance approaches designed for a different era, creating serious vulnerabilities.

Spreadsheets, shared drives, and email approvals introduce unacceptable risks. Manual classification and tracking processes inevitably produce inconsistencies as products, regulations, and teams change.

When regulators request audit trails, these fragmented systems often can’t produce the coherent evidence needed. And when engineering, compliance, and logistics operate in separate systems, critical handoffs become vulnerability points.

Design changes may not trigger compliance reviews, and compliance teams may approve configurations without visibility into recent engineering modifications.

Building Compliance into the Workflow With PLM

Product Lifecycle Management (PLM) systems transform compliance by embedding it directly into product development and management processes. Here’s how:

Compliance by design
With a modern PLM system like Siemens Teamcenter, compliance becomes an integral part of the product lifecycle. Classification and export control parameters become attributes of the product record itself, ensuring visibility at every stage from design to delivery.

Aerospace and defense companies can implement role-based access controls, ensuring only authorized personnel can view, modify, or transfer controlled information. The system maintains comprehensive audit trails of all product-related activities, creating verifiable records of who accessed information, when, and what changes were made.

Automated classification and change management
Advanced PLM systems automate much of the compliance burden through rules-based classification. When engineers modify designs, the system automatically flags potential compliance implications. And when export control regulations change, these updates can be systematically applied across the product portfolio.

Oil and gas leader Optime Subsea experienced this benefit when it implemented a PLM solution with CLEVR. Its unique engineering-to-order business model required meticulous recordkeeping and history tracking. CLEVR helped it establish uniform business processes and agile integration that streamlined supplier collaboration while ensuring data security—important for companies dealing with dual-use technology.

Single source of truth for audit readiness
The most significant advantage of PLM-enabled compliance is creating a single, authoritative source of truth for all product information. This centralized repository becomes the definitive record for regulatory documentation, component histories, and material compositions.

Nexans, one of the world's largest cable suppliers, turned to CLEVR to move its processes onto Siemens Teamcenter. With 25,000 employees in 40 countries, its previous systems often contained unreliable data that needed double-checking. Through its PLM implementation, the company improved data quality and standardized working methods—allowing staff to work faster, with greater accuracy, while maintaining compliance.

The CLEVR Approach: Compliance Without Bottlenecks

Implementing compliance-focused PLM requires both technological expertise and a deep understanding of aerospace regulatory requirements. CLEVR specializes in helping A&D companies implement Siemens Teamcenter and other PLM solutions that embed compliance into everyday workflows.

CLEVR integrates compliance requirements directly into engineering and operational processes, ensuring teams work efficiently while maintaining audit readiness. Engineering, quality, procurement, and legal departments can all work with one traceable system.

For companies operating under multiple regulatory frameworks (ITAR, EAR, EU dual-use regulations), CLEVR's implementation expertise ensures PLM systems accommodate these overlapping requirements while navigating both NATO and EU requirements.

Turn Compliance From a Cost into a Competitive Edge

Forward-thinking aerospace companies recognize that compliance excellence represents a strategic opportunity.

When properly implemented, advanced compliance capabilities become a competitive edge. Prime contractors increasingly favor suppliers who can demonstrate robust compliance systems, both to minimize their own risk exposure and to simplify their supply chain management. For tier-one and tier-two suppliers, documented compliance excellence can open doors to higher-value contracts and strategic partnerships.

Companies with mature, PLM-enabled compliance capabilities can also respond more quickly to new business opportunities. When RFPs arrive, they can immediately determine classification requirements and licensing timelines, allowing for more accurate bidding and delivery commitments.

For more information on PLM solutions for A&D, get in touch with CLEVR today.

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