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Complying with U.S. Export Controls Virtual Seminar April 28-29, 2021

BIS Logo 01042012 72dpi CopyApril 28-29, 2021 Complying with U.S. Export Controls

 

This two-day on-line virtual program is led by BIS's professional counseling staff and provides an in-depth examination of the Export Administration Regulations (EAR). The program will cover the information exporters need to know to comply with U.S. export control requirements on commercial goods and some less sensitive military items. We will focus on what items and activities are subject to the EAR, how to determine your export control classification number (ECCN), steps to take to determine the export licensing requirements for your item, when you can export or reexport without applying for a license, export clearance procedures, and record keeping requirements.


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Pakistan has a nuclear program and a missile program that are subject to end-use and end-user restrictions pursuant to Part 744 of the Export Administration Regulations (EAR) (15 C.F.R. Parts 730-774).

Accordingly, this guidance highlights:

  1. 1.The supplemental licensing requirements applicable to exports, reexports, and transfers (in-country) of items subject to the EAR that may be destined to nuclear or missile activities; and
  2. 2.Best practices for screening customers in Pakistan to prevent diversion of items subject to the EAR to unauthorized end uses and end users.

EAR Overview

Persons (both U.S. and non-U.S. persons, including individuals, entities, corporations) engaged in exports, reexports, and transfers (in-country) subject to the EAR, must determine whether a license is required prior to proceeding with such transactions. In addition to Commerce Control List (CCL)-based licensing requirements determined by the export control classification number (ECCN) of your product(s) and their destination(s), you should review Part 744 (Control Policy: End-User and End-Use Based) and Part 746 (Embargoes and Other Special Controls) of the EAR.

The supplemental licensing requirements found in Part 744 of the EAR may apply to items designated “EAR99” (i.e., subject to the EAR but not listed on the CCL), as well as to CCL items not otherwise subject to a license requirement based on the country of destination. You must also follow the “Know Your Customer” Guidance in Supplement No. 3 to Part 732 of the EAR. To facilitate your compliance with Part 744 and Supplement No. 3 to Part 732 of the EAR, BIS is publishing this guidance.

Restrictions on Exports and Reexports to Certain Nuclear- and Missile-Related Activities

In 1992, BIS imposed end-use restrictions on items not specifically listed on the CCL when destined for certain missile-related activities in certain destinations, including Pakistan.[1] In 1998, Pakistan detonated a nuclear explosive device. In response, BIS imposed supplemental licensing requirements on certain entities in Pakistan determined to have been involved in nuclear or missile activities and added such entities to the Entity List (Supplement No. 4 to Part 744 of the EAR).[2] The Entity List imposes supplemental licensing requirements on foreign entities involved in activities contrary to U.S. national security and foreign policy.

Recently, BIS has added additional entities in Pakistan to the Entity List, such as: [3]

  • Engineering and Commercial Services, based on its involvement in supplying a Pakistani nuclear-related entity on the Entity List.
  • Solutions Engineering, has been involved in the procurement of U.S.-origin items on behalf of nuclear-related entities in Pakistan that are already listed on the Entity List.

BIS has also added entities located in other countries to the Entity List, such as: [4]

  • Techcare Services FZ LLC, located in the U.A.E., and UEC (Pvt.) Ltd., located in Pakistan, Saudi Arabia, and the U.A.E., made multiple attempts to acquire U.S.-origin commodities ultimately destined for Pakistan’s unsafeguarded nuclear program.

Furthermore, BIS Office of Export Enforcement (OEE) investigations have revealed schemes to export items subject to the EAR to nuclear- and missile-related entities in Pakistan listed on the Entity List without the required licenses.[5]

In addition to the restrictions set forth in Section 744.11 of the EAR that apply to entities listed on the Entity List, any item subject to the EAR, whether or not subject to a CCL-based licensing requirement, may require a license if destined to certain nuclear- or missile-related activities. These end-use-based licensing requirements apply to items designated EAR99, as well as items listed on the CCL:

  • Pursuant to Section 744.2 of the EAR, a license is required to export, reexport, or transfer (in-country) to or within any country not listed in Supplement No. 3 to Part 744 of the EAR, any item subject to the EAR if you know at the time of the contemplated transaction that the item will be used, directly or indirectly, in a nuclear explosive activity, unsafeguarded nuclear activity, or certain nuclear fuel cycle activities, whether or not subject to International Atomic Energy Agency safeguards.

  • Pursuant to 744.3 of the EAR, a license is required to export, reexport, or transfer (in-country) to or within a country listed in Country Group D:4 (Supplement No. 1 to Part 740 of the EAR), which includes Pakistan, any item subject to the EAR if you know that the item will be used: in the design, development, production, or use of a missile or UAV for the delivery of chemical, biological, or nuclear weapons; or in the design, development, production, or use of a missile or UAV capable of a range of at least 300 kilometers. In addition, a license is required to export, reexport, or transfer (in-country) to or within a country listed in Country Group D:4 any item subject to the EAR if you know that the item will be used in the design, development, production, or use of a missile or UAV, but you cannot determine the range of such systems or whether they will be used for the delivery of chemical, biological, or nuclear weapons.  

  • In addition, BIS may inform persons that a license is required for a contemplated export, reexport, or transfer (in-country) pursuant to Sections 744.2(b) or 744.3(b) of the EAR due to an unacceptable risk of use in, or diversion to, the activities described above. BIS may provide specific (individual) notice or amend the EAR to provide general notice to the public of such licensing requirements.

Due Diligence/Best Practices

To ensure compliance with these provisions of the EAR, in addition to screening customers against the U.S. Government’s Consolidated Screening List (CSL)[6], which includes BIS’s Entity List, exporters, reexporters, and transferors (in-country) of items subject to the EAR are also advised to conduct additional due diligence to identify and resolve red flags associated with transactions potentially destined to nuclear- or missile-related activities, in accordance with the “Know Your Customer” Guidance set forth in Supplement No. 3 to Part 732 of the EAR.

  • Thoroughly research any new or unfamiliar customers: Exporters should exercise increased due diligence when vetting new customers. Exporters are advised that the following fact patterns should prompt additional scrutiny:
  1. oA new customer places an unexpected and/or high-value order for sophisticated equipment.
  2. oThe customer is a reseller or distributor. In such cases, you should always inquire who the end user is.
  3. oThe customer has no website or social media and is not listed in online business directories.
  4. oThe customer’s address is similar to an entity listed on the CSL, or the address indicates the customer is located close to end users of concern, including co-located with an entity listed on the Entity List.
  5. oYour customer places an order ex works and makes all shipping arrangements through a freight forwarding service. In such cases, request that the freight forwarder provide you a copy of the Electronic Export Information (EEI) filing to ensure the information is accurate.

  • Thoroughly assess the potential applications of your products. Whenever you identify red flags indicating a potential concern about your customer, or if you are unable to confirm the bona fides (i.e. legitimacy and reliability) of your customer, you should consider potential dual-use applications of your products. For example, if your products are commonly used in the power generation industry and some of your customers are nuclear power plants, you should consider whether your items might be destined for a nuclear power plant in Pakistan, which may be subject to Entity List-based licensing requirements, as noted below.

  1. oBIS has identified a number of items subject to the EAR but not listed on the CCL (EAR99 items), or listed on the CCL but controlled only for Antiterrorism reasons, which have been sought by nuclear- or missile (including UAV)-related entities, including certain:
  • Connectors designated EAR99
  • Electromechanical relays designated EAR99
  • Gas measurement equipment designated EAR99
  • Global positioning satellite (GPS) systems described in ECCN 7A994
  • Power supplies designated EAR99
  • Reflectometers designated EAR99
  • Vacuum pumps not described in ECCN 2B231

  • Determine the full scope of entity listings. Exporters are reminded to thoroughly screen all exports to Pakistan against the Entity List, one of the lists included in the CSL. It has come to BIS’s attention that in some cases, automated screening may not be sufficient to identify entities listed on the Entity List and manual review may be necessary.
  1. oFor example, the Entity List entry for the Pakistan Atomic Energy Commission (PAEC) extends to all nuclear reactors, including power plants. Although they are not specifically identified on the Entity List, PAEC operates two nuclear power plants that are subject to Entity List licensing requirements.
  • Karachi Nuclear Power Plant (KANUPP), a.k.a., Karachi Nuclear Power Complex, located at Paradise Point, Karachi, Pakistan.
  • Chashma Nuclear Power Plant (CHASNUPP), a.k.a., Chashma Nuclear Power Complex, located near Chashma Colony, Kundian Town, Mianwali District, Pakistan.

  • File true, accurate, and complete export control information. True, accurate, and complete EEI must be filed in accordance with Sections 758.1 and 758.2 of the EAR, as well as the Foreign Trade Regulations (15 C.F.R. Part 30). In the case of exports made under the terms of a letter of credit (LoC), BIS has noticed that the parties to an export transaction may be inadvertently misrepresented on EEI filings due to differences between commercial document requirements and EEI requirements.
  1. oAlthough the terms of a LoC may require transportation documents, such as air waybills and bills of lading, to list the issuing financial institution in the “ship to” or “consign to” field, the financial institution should not be listed as the ultimate consignee on an EEI filing unless it is located abroad and actually receives the export.
  2. oThe party located abroad that actually receives the goods, often listed as the “notify party” under the terms of a LoC, should be reported as the ultimate consignee pursuant to 15 C.F.R. Sections 30.1(c) and 30.6(a)(3).

If you are unable to resolve any red flags identified in a prospective export, reexport, or transfer (in-country), you should either refrain from participating in the transaction, submit a license application, or submit an advisory opinion request to BIS. License applications can be filed via SNAP-R (https://snapr.bis.doc.gov) and advisory opinions can be requested by using the online form on the BIS Website (https://www.bis.doc.gov/index.php/component/rsform/form/22-contact-the-regulatory-policy-division?task=forms.edit). To report suspicious purchase inquiries to BIS, contact your local OEE Field Office (https://www.bis.doc.gov/index.php.enforcement/oee/investigations), or contact the BIS Enforcement Hotline at 1-800-424-2980 or by using the form on the BIS Website (https://www.bis.doc.gov/index.php/component/rsform/form/14-reporting-violations-form?task=forms.edit).



[1] 57 Federal Register 26773 (June 16, 1992)

[2] 63 Federal Register 64322 (November 19, 1998)

[3] 83 Federal Register 12475 (March 22, 2018)

[4] 83 Federal Register 44821 (September 4, 2018)

   
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