21 August 2008

Export Restrictions Can Now be Imposed on a Broader Range of Entities

The following was reported on in the 21 August 2008 edition of “WorldTrade Interactive”.

A broader range of entities is now subject to U.S. export restrictions under a Bureau of Industry and Security [BIS] final rule that, effective Aug. 21, expands the scope of reasons for which parties may be added to the Entity List. The rule also amends the Export Administration Regulations [EAR] to state explicitly that a party on the Entity List has a right to request that its listing be removed or modified and to establish procedures for addressing such requests.

Exports and re-exports of items subject to the EAR to parties identified on the Entity List may require a license from the BIS for various reasons. In addition to the reasons already set forth in the regulations, this rule creates a new provision that authorizes the BIS to add to the Entity List those entities (or those acting on their behalf) that it has reasonable cause to believe, based on specific and articulable facts, have been, are or pose a risk of being involved in activities that are contrary to U.S. national security or foreign policy interests. These activities include:

• supporting persons engaged in acts of terror;

• actions that could enhance the military capability, or the ability to support terrorism, of governments designated by the State Department as having repeatedly provided support for acts of terrorism;

• transferring, developing, servicing, repairing or producing conventional weapons in a manner contrary to U.S. national security or foreign policy interests or enabling such activities by supplying parts, components, technology or financing;

• preventing the accomplishment of an end-use check conducted by or on behalf of the BIS or State’s Directorate of Defense Trade Controls by precluding access to, refusing
to provide information about or providing false or misleading information about parties to the transaction or the item to be checked (a nexus between the conduct of the party to be listed and the failure to produce a complete, accurate and useful check is required, even though an express refusal by the party to be listed is not required); and

• engaging in conduct that poses a risk of violating the EAR when such conduct raises sufficient concern that prior review of exports or re-exports involving the party and the possible imposition of license conditions or license denial enhances the BIS’ ability to prevent EAR violations.

It is important to note that an entity may be added to the Entity List for any of these actions even if they do not involve items or activities subject to the EAR. Under this final rule, the BIS can modify the license requirements, license exception availability or license application review policy that applies to any entity on the Entity List.

As export controls continue to focus not just on countries but also on individual customers or entities, the BIS believes this rule will allow it to focus its export control efforts more closely on problematic recipients of regulated items who do not meet the previous criteria for designation on the Entity List. This will enable the BIS to tailor license requirements and the availability of license exceptions for shipments to specific entities without imposing additional requirements that apply broadly to entire destinations or items, thus minimizing costs and avoiding the disruption of legitimate trade. The rule will also reduce the need to issue general orders that impose license requirements on specific parties, which will decrease the number of provisions that exporters must review to determine license requirements under the EAR.