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Improved Oversight of Exports to Unverified Parties is Aim of BIS Rule

Wednesday, September 11, 2013
Sandler, Travis & Rosenberg Trade Report

The Bureau of Industry and Security is proposing to amend the Export Administration Regulations regarding the Unverified List. BIS states that these changes will enhance its ability to verify the bona fides of parties to exports, reexports or transfers (in-country) of items subject to the EAR and provide increased visibility into such transactions involving persons whose bona fides cannot be verified. Comments on this proposal are due no later than Oct. 11.

The UVL lists persons in foreign countries who were parties to past export transactions with respect to which pre-license checks or post-shipment verifications could not be conducted for reasons outside the control of the U.S. government, including lack of cooperation by the host government authority, the end user or the ultimate consignee. Persons may also be added to the UVL if (a) BIS is not able to verify the existence or authenticity of the end user, intermediate consignee, ultimate consignee or other party to an export transaction or (b) they are affiliated with a person on the UVL by virtue of ownership, control, position of responsibility, or other affiliation or connection in the conduct of trade or business. The participation of a person listed on the UVL in any proposed transaction raises a red flag for purposes of the “Know Your Customer” guidance, thereby imposing an affirmative duty on exporters to inquire, verify or otherwise satisfy themselves that the transaction does not violate the EAR.

The proposed rule would make the following changes.

- Lack of cooperation by a foreign party would be removed as a basis for revising the UVL; instead, foreign parties whose lack of cooperation prevents the accomplishment of an end-use check could be added to the Entity List.

- The criteria for listing persons on the UVL, including examples of actions that could result in such listing, would be included in the EAR. Such examples include (a) the subject of the check is unable to demonstrate the disposition of items during an end-use check, (b) the existence or authenticity of the subject of an end-use check cannot be verified because the subject cannot be located or contacted, or (c) lack of cooperation by the host government authority.

- Affiliation with a person on the UVL would no longer be considered as a basis for adding foreign persons to the UVL without further substantiation (e.g., conduct of an end-use check at the affiliate).

- Before proceeding with exports, reexports and transfers (in-country) involving items that are subject to the EAR but do not require a license (NLR), exporters, reexporters and transferors would have to obtain from a party or parties to such transaction who are listed on the UVL a statement in which that party certifies the end use, end user and country of ultimate destination of those items and consents to an end-use check by the U.S. government, which may cover any transaction to which that person was a party for items subject to the EAR in the last five years.

- Exporters would be required to file an Automated Export System record for all exports subject to the EAR involving a party or parties to the transaction who are listed on the UVL. Currently an AES filing is only required if an export license is also required or if the transaction is above a certain value.

- License exceptions would not be available for exports, reexports, and transfers (in-country) involving a party or parties to the transaction who are listed on the UVL.

- The UVL and the procedures to request removal or modification of a UVL entry would be added to the EAR.

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