The move has been prompted by an exclusive report by the Independent on Sunday in June that the subsidiary, Royal Ordnance, is exporting RDX, an ingredient commonly used in landmines, to the United States.
Royal Ordnance has a five-year contract worth $88m (pounds 55m) to be the US Army's sole supplier of RDX and is exporting 40 per cent of the explosives from its factory at Bridgwater in Somerset.
Royal Ordnance also has a 25-year contract to operate the Army ammunition plant in Holston, Tennessee, the only American plant capable of manu- facturing RDX and the source of explosives used in millions of American mines.
The Landmines Act, passed by Parliament last year, makes the manufacture of anti-personnel mines or their components an offence punishable by up to 14 years in jail and/or an unlimited fine. Avon and Somerset Police have already forwarded a file for investigation by Customs and Excise after a complaint from the Campaign Against the Arms Trade, the leading organisation opposed to the production and use of landmines.
Nick Harvey, MP, the Liberal Democrats' campaign and communications chair, who has criticised BAe for failing to make it clear that RDX was not to be used in the production of landmines, said: "BAe is entirely at the mercy of US policy. They're in a bind and the fact that they're having afterthoughts suggests they recognise that. If the Americans don't agree [to a new clause] I think BAe will have to cancel the contract."
A spokesman for the US Army said it and Royal Ordnance "are addressing any potential problems the UK constraints may have".
"In the interim," he said, "the US Army has agreed to identify the end- use for bulk explosives ... to assure Royal Ordnance that any conflict with the UK restrictions is not being created."
A BAe spokesman added: "We are in discussion with the US Army who are well aware of our obligations under the Ottawa Convention and the UK Landmines Act. We will not break the law."