In consideration of the ongoing situation in Crimea, BIS has imposed export restrictions targeted at Russia’s energy and defense sectors. For example, in August 2014, BIS implemented restrictions on exports of certain items destined for Russian deep water, Arctic offshore, or shale energy exploration or production. See: 79 FR 45675 (August 6, 2014) (

http://www.gpo.gov/fdsys/pkg/FR-2014-08-06/pdf/2014-18579.pdf). Subsequently, BIS expanded its military end use and end user controls to impose a license requirement on various items that may not otherwise require a license if the exporter has knowledge that such items may be used by military end users or for military end uses in Russia. See: 79 FR 55608 (September 17, 2014) (http://www.gpo.gov/fdsys/pkg/FR-2014-09-17/pdf/2014-22207.pdf). In addition, BIS has expanded controls on certain microprocessors for military end uses and end users in Russia (as well as other D:1 countries). See 79 FR 75044 (December 17, 2014) (http://www.gpo.gov/fdsys/pkg/FR-2014-12-17/pdf/2014-29450.pdf).

BIS remains concerned about efforts by front companies and other intermediaries, who are not the true final end users, to transship or reexport U.S.-origin items to the Russian Federation in violation of these measures and other export controls. Even prior to the imposition of restrictions based on the situation in Crimea, front companies and other intermediaries obtained U.S.-origin items that may require a license to Russia through intermediate countries subject to a more favorable licensing policy under the Export Administration Regulations (EAR). A salient example is Wassenaar Arrangement dual-use items controlled under the EAR for National Security (NS) reasons.

Therefore, BIS is providing additional guidance to U.S. exporters to prevent unauthorized reexports to Russia, especially for transactions involving NS-controlled items or items listed in Supplement No. 2 to Part 744 of the EAR, which lists items that are subject to the military end use license requirement. As described in Supplement No. 3 to Part 732 of the EAR, whenever a person who is clearly not going to be using the item for its intended end use (e.g., a freight forwarder) is listed as an export item’s final destination, the exporter has an affirmative duty to inquire about the end use, end user, and ultimate destination of the item to ensure the transaction complies with the EAR. In addition, the exporter should pay attention to any information that may indicate an unlawful diversion is planned. This may include discrepancies in the destination country and the country from which an order is placed or payment is made.

When inquiring into the ultimate destination of the item, an exporter should consider e-mail address and telephone number country codes and languages used in communications from customers or on a customer’s website. The exporter should also research the intermediate and ultimate consignees and purchaser, as well as their addresses, using business registers, company profiles, websites, and other resources.

Exporters should always screen their customers against the U.S. Government’s consolidated export screening list (http://export.gov/ecr/eg_main_023148.asp). An interactive tool for searching this list based on entity name and address is also available (http://internationaltradeadministration.github.io/explorer/#/consolidated-screening-list-entries).

Furthermore, exporters should pay attention to the countries a freight forwarder serves, as well as the industry sectors a distributor or other non-end user customer supplies. The exporter should then determine whether a license is required based on the likely country of ultimate destination and end use and end user. The exporter should consider not only the list-based license requirements specified in Supplement No. 1 to Part 738 of the EAR (the Commerce Country Chart) in conjunction with item’s classification specified in Supplement No. 1 to Part 774 of the EAR (the Commerce Control List), but also the end use and end user controls in Part 744 and the embargoes and special controls in Part 746. If the exporter continues to have any doubts or concerns surrounding the end use, end user, or country of ultimate destination after exercising due diligence, the exporter should present all relevant information to BIS in the form of a license application or refrain from the transaction.

Export controls are a shared responsibility between government and industry. If you have any concerns about suspicious inquiries that come to your firm, you are encouraged to contact your local BIS Export Enforcement Office (https://www.bis.doc.gov/index.php/enforcement/oee/investigations#OEEFieldOffice) or use BIS’s online tip form (https://www.bis.doc.gov/index.php/component/rsform/form/14-reporting-violations-form?task=forms.edit).

If you have any questions about export licensing requirements or submitting a license application, you may contact BIS’s Office of Exporter Services at (202)482-4811. If contacting the Office of Exporter Services via e-mail, please include a telephone number to facilitate BIS’s response to your request. (https://www.bis.doc.gov/index.php/about-bis/contact-bis).

Details Category:  Compliance & Training

As mentioned in BIS’s previous guidance on exporting items subject to the Export Administration Regulations (EAR) to Hong Kong, which can be found at Hong Kong Import/Export License Requirements (http://www.bis.doc.gov/index.php/policy-guidance/foreign-import-export-license-requirements/hong-kong), Hong Kong and Mainland China are treated as two separate destinations under U.S. law for export control purposes.  Certain items subject to the EAR that do not require an individual validated license for export from the United States to Hong Kong will require a license for re-export from Hong Kong to China.  BIS is providing additional guidance on possible red flags to prevent unauthorized transshipments/reexports.

When inquiring about the end user of an item procured through a Hong Kong company, an exporter should consider specific factors, including, but not limited to:

  • ·         Whether the company is registered with the Hong Kong Companies Registry.  All companies in Hong Kong are required to have company secretaries under the Hong Kong Companies Ordinance. While directors and shareholders do not need to be Hong Kong residents, the company secretary must ordinarily reside in  Hong Kong or be a body corporate having its registered office or place of business in Hong Kong.  While companies usually appoint an individual person as the company’s secretary, some companies engage the services of company secretarial firms who handle various administrative functions for their clients. Many secretarial firms offer a wide range of services, including registered office services for offshore clients. Shipments of controlled items to secretarial firms can be destined for transshipment/reexport.

  • Whether the company has received an import/export license issued by Hong Kong (see http://www.tid.gov.hk/eindex.html) for a control list item, or is aware of Hong Kong license requirements (if dealing with a company with a contact person outside of Hong Kong, this person could be less likely to be aware of Hong Kong license requirements). Exporters are reminded that most multilaterally controlled (i.e., National Security (NS), Nuclear Proliferation (NP), Missile Technology (MT), and Chemical Biological (CB)) items on the Commerce Control List, under Hong Kong’s export control regulations, require an import license even if such items are authorized for export from the United States to Hong Kong under License Exception or the designation No License Required (NLR).  Moreover, reexports of such multilaterally controlled items from Hong Kong require an export license from Hong Kong’s Trade and Industry Departmenteven if, under the Export Administration Regulations (EAR), the destination country of the end user is eligible for authorization for such reexports under License Exception or the designation NLR.

  • ·         Whether there is a legitimate consumer or company in Hong Kong for your product.

  •  

  • ·         Whether the consignee knows the end user and end use are in Hong Kong. Of note, License Exception GBS (740.4) can only be used when a party in Country Group B, which includes Hong Kong, is the ultimate destination.  The exporter should pay attention to discrepancies in the destination country and the country from which an order is placed or payment is made.
     

  • ·         Where the Hong Kong importer is not the end user, whether the importer is willing to provide the purchase order or confirmation of such purchase from the end user. The provision of documents from both the importer and purchaser may reduce the chance of counterfeit documents (e.g., falsified importer letterhead and company stamps).
     

  • ·         Whether the Hong Kong party has an actual business in Hong Kong.  If the party has no actual business in Hong Kong, then whether the service of a logistics service provider is being used to send the consignment to an address which is neither the importer’s nor the end-user’s (e.g., the buyer sends an item to a storage unit of a storage company rather than taking possession of the item or send it to the end-user).

  • ·         Whether documents, particularly end-use statements, are incomplete or contain suspicious information, such as addresses that do not exist, first names only for contact persons (often, generic Western names), persons who cannot be linked to a company or university directory, or end-user names with no accompanying signatures.

  • ·         Whether the location of the end user’s point of contact is in Hong Kong, based on a review of the country code of the contact’s telephone number (i.e., Hong Kong’s country code is 852). A different country code may show some other intended destination country of the product.

Pursuant to Supplement No. 3 to Part 732 of the EAR, red flags must be resolved prior to shipment.  Exporters must not self-blind and ignore relevant information in any export transaction and need to be particularly sensitized to exports to Hong Kong. Exporters should always screen their customers against the U.S. Government’s consolidated export screening list (http://2016.export.gov/ecr/eg_main_023148.asp). An interactive tool for searching this list based on entity name and address is also available.

Export controls are a shared responsibility between government and industry. If you have any concerns about suspicious inquiries that come to your firm, you are encouraged to contact your local BIS Export Enforcement Office or use BIS’s online tip form.

If you have any questions about export licensing requirements or submitting a license application, you may contact BIS’s Office of Exporter Services at (202)482-4811. If contacting the Office of Exporter Services via e-mail, please include a telephone number to facilitate BIS’s response to your request.

E-Commerce


You will not find the term“E-Commerce” within the Export Administration Regulations (EAR); however, commerce transacted electronically may be subject to the EAR, the same as transactions that are not electronically facilitated.

 

The EAR apply to the conduct of business communication and transactions over networks and through computers and with the non-electronic buying and selling of goods and services and the transfer of funds. Your export (or deemed export)/reexport (or deemed reexport)/transfer transactions and other services may be subject to the EAR. Some transactions and activities specific to the E-Commerce environment where you should determine if you are subject to the EAR include:

  • Orders processed using the internet with tangible delivery of goods;
  • Intangible downloads and releases of technology and software.
  • The various services performed during transactions; and
  • Transfer of funds to certain entities and prohibited activities.

     

Related E-Commerce Links and FAQs
Links:

Assistant Secretary Darryl W. Jackson Opening Keynote Address ACI 3rd
National Forum on International Technology Transfers, San Francisco, CA, January
27, 2007 http://www.bis.doc.gov/news/2007/jackson02012007.htm

FAQs:

Am I required under the EAR to actively screen for terrorist-supporting destinations?

In your business practice, it is prudent to use a standard of care to ensure that you will not violate any of the prohibition identified in the EAR. The EAR does not require a person posting software on the Internet to implement screening procedures for the terrorist countries. The "Know Your Customer" guidance in Supplement No. 3 to Part 732 provides companies with guidelines on how to comply with their responsibilities under the EAR. Related E-Commerce Links and FAQs

 

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Guidance on Actions Exporters Can Take to Prevent Illicit Diversion of Items to Support Iran’s Nuclear Weapons or Ballistic Missile Programs

It is the policy of the United States to counter Iran’s pursuit of technology that could enable it to develop nuclear weapons and missiles capable of delivering them. In support of this effort, the United States maintains comprehensive economic sanctions on Iran.

IRAN’S ILLICIT PROCUREMENT EFFORTS

  • Iran is currently trying to procure items for its uranium enrichment centrifuge program. For this program, Iran will need to procure items on the Commerce Control List (CCL) such as carbon fiber (controlled under Export Control Classification Numbers (ECCNs) 1A002, 1C010, 1C210, 1C990) and filament winding machines (ECCNs 1B001, 1B101, 1B201), as well as items classified as EAR99, such as epoxy resin. Epoxy resin and related hardening/accelerator agents are necessary to bind the carbon fibers used in both uranium centrifuge and missile structures. Thus, U.S. manufacturers of such items should be particularly vigilant.
  • As outlined in International Atomic Energy Agency (IAEA) Director General El Baradei’s report of February 22, 2008, Iran has admitted to attempting to evade international sanctions to procure sensitive items, using deceptive procurement tactics to obtain items that can contribute to its weapons of mass destruction (WMD) programs.
  • Specifically, Iranian entities form front companies in other countries for the sole purpose of exporting dual-use items, including U.S. origin items, to Iran that it can use in its nuclear and missile programs. These companies appear to be procuring dual-use items for commercial activities and enable Iran to obtain materials that would typically be prevented by export control restrictions in supplier countries. They make it difficult for businesses to know that the end-user is in Iran. Furthermore, these front companies are often in third countries where U.S. companies have strong trading relationships.

EXPORTER DILIGENCE

  • Not all items that Iran could use for weapons of mass destruction-development activities are listed on the CCL. Therefore, exporters must be vigilant on the potential end-use of all items exported from the United States. (e.g., epoxy resin).
  • The exportation of any item that is subject to the EAR (including an EAR99 item) to Iran without a license is prohibited under regulations maintained by the Department of the Treasury's Office of Foreign Assets Control (OFAC). This includes any exports to a third country if the exporter knows or has reason to know that the item will be reexported to Iran.
  • Exporters should screen parties to a transaction against the Denied Persons List, Entity List, Unverified List, BIS General Orders, and the Specially Designated Nationals and Blocked Persons List.
  • Exporters should take note of any abnormal circumstances in a transaction that indicate that the export may be destined for an inappropriate end-use, end-user, or destination. For example:
    • unusual quantity requests;
    • paying above market prices or using unusual payment methods;
    • waivers of normal installation, training or maintenance agreements; and
    • requests for delivery to one country with original orders from a second country or direct delivery to a freight forwarder.
  • When such "red flags" arise, you should check out the suspicious circumstances and inquire about the end-use, end-user, or ultimate country of destination.
  • If you encounter “red flags” that you are unable to resolve with reasonable inquiry, contact BIS.
  • Companies should have in place compliance and/or business procedures to be immediately responsive to theft or unauthorized delivery.
  • If you believe a previous shipment has been diverted and may have gone to an end user in Iran, we encourage you to report it to BIS.

SUMMARY OF STEPS U.S. EXPORTERS CAN TAKE TO PREVENT UNAUTHORIZED EXPORTS TO IRAN

  • Remain vigilant and know your customer. 
  • Understand “Red Flag” indicators.
  • Be cautious of customers operating in transshipment countries or free trade zones.
  • Be familiar with U.S. Government screening lists.
  • Contact BIS if something does not seem right about the transaction or if you suspect a shipment may have been diverted to Iran.
  • Subscribe to the Department of the Treasury, Office of Foreign Assets Control’s service to receive notifications of changes to the List of Specially Designated Nationals and Blocked Persons.
   
© BIS 2016