Comments on: BIS Publishes Final Rules Expanding Grounds for Entity List Designation http://www.exportlawblog.com/archives/382 Latest News on DDTC, BIS, OFAC, and other export law matters Thu, 11 Mar 2010 17:15:53 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Mike Deal http://www.exportlawblog.com/archives/382/comment-page-1#comment-20310 Mike Deal Mon, 25 Aug 2008 23:19:51 +0000 http://www.exportlawblog.com/?p=382#comment-20310 Mr. Turner's informed and authoritative comments as an official with responsibility for and knowledge of the origins of this rulemaking prove that this new rule is nothing more than an end-run around around due process, the requirements of 50 USC 1701 requiring a declaration of a national emergency before imposing new controls under IEEPA (a requirement that the government recognized in Regan v. Wald, which is why the government resorted to the grandfather provisions of TWEA rather than IEEPA in that case), and the specific requirements of the APA requiring prior notice and an opportunity to respond before having a sanction imposed, even if not entitled to a 5USC554 hearing on the record. This rule is invalid as a matter of law. Mr. Turner’s informed and authoritative comments as an official with responsibility for and knowledge of the origins of this rulemaking prove that this new rule is nothing more than an end-run around around due process, the requirements of 50 USC 1701 requiring a declaration of a national emergency before imposing new controls under IEEPA (a requirement that the government recognized in Regan v. Wald, which is why the government resorted to the grandfather provisions of TWEA rather than IEEPA in that case), and the specific requirements of the APA requiring prior notice and an opportunity to respond before having a sanction imposed, even if not entitled to a 5USC554 hearing on the record. This rule is invalid as a matter of law.

]]> By: Mike Turner http://www.exportlawblog.com/archives/382/comment-page-1#comment-20255 Mike Turner Fri, 22 Aug 2008 13:32:30 +0000 http://www.exportlawblog.com/?p=382#comment-20255 Clif - You raise good points. The original concept behind expansion of the Entity List was to cover activities similar to those involving Mayrow General Trading in tne UAE, where BIS had evidence that EAR99 electronic components being exported to Mayrow, were ending up in improvised explosive devices (IEDs) being used against Coalition Forces troops in Iraq and Afghanistan. There wasn't sufficient evidence to mount an enforcement action (such as a temporary denial order); ultimately, BIS found the only action it could take was the imposition of General Order No 3, requiring a license for exports to Mayrow. The expanded Entity List was envisioned as the vehicle to address future such issues. Inclusion of the various categories, including the 4th category regarding End Use Checks, and the 5th "catch all" category, were made to comprehensively cover various scenarios in which BIS might want to impose a license requirement as an alternative to enforcement actions. The proof, now, will be in the application of the new Entity List. It will be interesting to see what entities BIS now begins to put on the list, and for what reasons. My hunch is that to the extent possible, BIS will still opt for enforcement actions where it can, as opposed to use of the EL, if only to avoid the interagency review process involved with the EL. It will also be interesting to see how BIS uses category 4 for EUCs, as opposed to the Unverified List; or if there is any move downstream to fold the Unverified List into the EL. Again, the EL requires interagency review, where the Unverified List does not, so BIS may want to leave its options open to continue to use the Unverified List. I agree with your guidance on affiliates - until BIS gives more definitive guidance, better to treat affilications as a red flag and either resolve the question, refrain from the transaction or seek a license. It is always technically possible that BIS would review a license application related to an affiliate and conclude that no license is required for the transaction - although it would be interesting to know how many times in the past BIS may have taken such action; I am not aware of any. Clif -

You raise good points. The original concept behind expansion of the Entity List was to cover activities similar to those involving Mayrow General Trading in tne UAE, where BIS had evidence that EAR99 electronic components being exported to Mayrow, were ending up in improvised explosive devices (IEDs) being used against Coalition Forces troops in Iraq and Afghanistan. There wasn’t sufficient evidence to mount an enforcement action (such as a temporary denial order); ultimately, BIS found the only action it could take was the imposition of General Order No 3, requiring a license for exports to Mayrow. The expanded Entity List was envisioned as the vehicle to address future such issues.

Inclusion of the various categories, including the 4th category regarding End Use Checks, and the 5th “catch all” category, were made to comprehensively cover various scenarios in which BIS might want to impose a license requirement as an alternative to enforcement actions.

The proof, now, will be in the application of the new Entity List. It will be interesting to see what entities BIS now begins to put on the list, and for what reasons. My hunch is that to the extent possible, BIS will still opt for enforcement actions where it can, as opposed to use of the EL, if only to avoid the interagency review process involved with the EL.

It will also be interesting to see how BIS uses category 4 for EUCs, as opposed to the Unverified List; or if there is any move downstream to fold the Unverified List into the EL. Again, the EL requires interagency review, where the Unverified List does not, so BIS may want to leave its options open to continue to use the Unverified List.

I agree with your guidance on affiliates – until BIS gives more definitive guidance, better to treat affilications as a red flag and either resolve the question, refrain from the transaction or seek a license. It is always technically possible that BIS would review a license application related to an affiliate and conclude that no license is required for the transaction – although it would be interesting to know how many times in the past BIS may have taken such action; I am not aware of any.

]]>