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In an ambitious display of extraterritorial overreach, the Bureau of Industry and Security (“BIS”) last week amended the Export Administration Regulations (“EAR”) to expand the scope of the regulations to cover in-country transfers to companies and individuals on the agency’s Entity List.
Most readers should be familiar with that list, but for those that may not be, the Entity List is a list of several hundred, well, entities in foreign countries. The companies and individuals have been placed on the list because of the U.S. government’s concern about their activities in nuclear proliferation, missile technology, chemical warfare agent development or other areas of foreign policy concern. The result of an Entity List designation is to require licenses for the export or re-export of specified items to the designated entity. In most cases the list indicates that the items which require licensing are “all items subject to the EAR,” which is BIS-ese for items with specified amounts of U.S. content. These need not be sensitive dual-use items listed on the Commerce Control List but include, for example, a U.S. flag (assuming it wasn’t made in China). And in most cases the Entity List indicates that there is a presumption of denial for license requests.
Under the new rules, a license would be required not only for exports of an item from the United States to the designated “entity” or exports of the item from a foreign country to the entity (“re-exports”) but also for in-country transfers to the designated entity. To understand the impact of the amendment, consider this example. The first entity on the list is one Ali Bakshien, a resident of Toronto, Canada. Ali’s mother goes to the American Apparel Store on College Street in Toronto and buys some trendy, and American-made, shirts, underwear and socks as a birthday gift for Ali. Unless she asks BIS for permission to give these shirts, socks and briefs to Ali, she becomes subject to a civil penalty of $250,000 under U.S. law when gives Ali his birthday present. And, if she knew that Ali was on the Entity List and knew that prohibited the unlicensed birthday present to Ali, did she commit a felony in giving him the items?
So what is BIS going to do? Send Ali’s mother a charging letter? If BIS thinks Ali’s mom knew about the Entity List designation and the in-country transfer restrictions, is it going to have the Department of Justice request extradition? (You don’t have to have a very vivid imagination to figure out what Canada’s likely response would be to an extradition petition in this situation, particularly if you picture a pounding hammer and a box of sand.) Will they arrest her at JFK if she takes a trip to catch a few Broadway shows?
Needless to say, I don’t believe the U.S. has jurisdiction, either under international or U.S. law, over this conduct simply because it involved a t-shirt made in LA shipped by the manufacturer to Canada where it was then bought and given to another Canadian. But U.S. export agencies — DDTC included — have continued to insist that jurisdiction can be hung on such a weak thread. And this recent amendment of the entity list rules continues down this misguided path.
In my 
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The exquisitely-monikered and equally notorious Monsieur Jacques Monsieur (or Mister Mister as he is affectionately known here)(pictured on the left) was nabbed last Friday when he arrived in New York and then sent to Mobile, Alabama, to face charges that he conspired to export F-5 jet engines and parts to Iran. In February 2009, Monsieur allegedly contacted an undercover U.S. agent looking for F-5 engines and parts. He then met with the undercover in both Paris and London.The indictment alleges that after those meetings, in July 2009, Monsieur wired $110,000 to an account in Mobile, Alabama, in payment for F-5 parts, and the rest, as they say, is l’histoire.
