Lists of Parties of Concern - Bureau of Industry and Security That said, if a designated item will be exported with knowledge that the distributor/system integrator intends to reexport or transfer that item for a military end use, a license would be required. 7 to part 744 Military End User (MEU) List. Modes of Transportation. (2) Requests for removal from or modification of 'Military End User' (MEU) List and Entity List. Other government intelligence . Companies are unlikely to obtain a license for the exports given BISs policy of denying such exports. This means that companies selling mass market software into China need to consider who their end users are in China, even though the software may be widely available. Previously, the definition only applied to items exported for the purpose of use, development or production of military items. application why it is not a "military end user" or involved in "military end uses." Finally, while BIS only identified 57 Chinese companies and 45 Russian companies as "military end users" for this initial tranche, it has reserved a category for Venezuela under the destinations listed for parties identified on the MEU List. Ms. Lis has extensive experience advising companies on US laws relating to exports and reexports of commercial goods and technology, defense trade controls and trade sanctions including licensing, regulatory interpretations, compliance programs and enforcement matters. =QzGku{:nv6AgVsOi,5_3{:fg55f|7mv}#;T8Kv~v6_O~mCzO~j77Wv/._nuk]|>Oz=#_]O_?w~oO|w~}[w/Vw'i}?}mm>y~7?_}/&!i?g_|} For more than a decade, the United States has issued a plethora of sanctions against Venezuela in response to activities of the Venezuelan government and Venezuelan individuals, including designations tied to alleged corruption, human rights abuses, terrorism, drug trafficking and more. FY 2019 was an active year for BISs utilization of the Entity List, with the agency adding 154 entities and at the top of the list: Huawei Technologies Co., Ltd. (Huawei) for involvement in activities contrary to U.S. national security or foreign policy interests. You must exercise due diligence to determine whether the parent or subordinate entitys military activities is relevant to the specific end users activities and that knowledge should be taken into account along with information regarding the specific end user. China, Russia, and Venezuela. Sale of mass-market items to the general market, which may include military end users, does not in itself make the seller a military end user absent some other facts indicating that the seller is a traditional MEUser or other MEUser. The absence of BIS notification does not excuse the exporter from compliance with the license requirements of paragraph (a) of this section. End User. 1 to part 774), you may not export, reexport, or transfer (in-country): We provide below a (a) General prohibition. (2) Any item subject to the EAR without a license if, at the time of the export, reexport, or transfer (in-country), you have knowledge, as defined in 772.1 of the EAR that the item is intended, entirely or in part, for a 'military end use,' as defined in paragraph (f) of this section, in Belarus or Russia, or a Belarusian or Russian 'military end user,' as defined in paragraph (g) of this section, wherever located. The MEU rule defines "military end user" to include national armed services (army, navy, marine, air force, or coast guard), the national guard and national police, government intelligence or reconnaissance organizations, and any other end user whose activities are intended to support "military end uses." Certain exemptions from filing found in both the EAR and Foreign Trade Regulations (see 758.1(c) of the EAR), such as for personally-owned baggage, are retained in this rule. The U.S. government has recently imposed controls pertaining to "Communist Chinese Military Companies" (CCMCs or "1237 entities"); Chinese "Military End Users" (MEUs); and Chinese "Military-Intelligence End Users" (MIEUs). BIS confirms that licenses for the export of designated items to military end users may be issued, notwithstanding the license review policy of presumption of denial, if the application demonstrates exclusive civil end use that is consistent with US national security interests. The end user is the last entity to take ownership of the l oose part. These entities will be subject to broader licensing requirements of new EAR section 744.22 (the MIEU rule). "M*c$b&;,amj ->a`2 Ow hbbd```b``vI Q DHH&u, That means they could also get on the Entity List, which identifies foreign businesses, universities, or individuals that are prohibited from receiving some or all items subject to the EAR unless getting a license first due to concerns tied to weapons proliferation, terrorism and national security. Military End Users: A particularly challenging dimension of Part 744.21 for exporters of Supp. BIS may inform you either individually by specific notice, through amendment to the EAR published in the Federal Register, or through a separate notification published in the Federal Register, that a license is required for specific exports, reexports, or transfers (in-country) of any item because there is an unacceptable risk of use in or diversion to a 'military end use' in Belarus, Burma, Cambodia, China, the Russian Federation, or Venezuela, or for a Belarusian, Burmese, Cambodian, Chinese, Russian, or Venezuelan 'military end user,' wherever located. Generally, applications to export or reexport .y items in ECCN 9x515 and 600 series categories to China, Russia, or Venezuela will be reviewed on a case-by-case basis; however, when destined to China, items classified under any 9x515.y ECCN will be subject to a policy of denial. License requirement for parties to the transaction. The maximum limits for these penalties include: To ensure compliance with the MEU and to avoid both statutory penalties and attendant non-compliance complications, your organization must master EARs various ECCN classifications. ECCN 5D992 controls mass market software (for example, software sold to the public at retail without restriction). If BIS ultimately decides that your organization does not need a license, then its decision is sufficient for allowing you to move forward with the export at issue. BIS Issues New FAQs Regarding the Expansion of the Military End Use If a firm is identified as a military end user, then exports, re-exports or transfer of any covered item to that user requires a license. software and technology, of the operation, installation, maintenance, repair, I love that the questions are scenario based. 7 to part 744 of the EAR) identifies foreign parties that are prohibited from receiving items described in Supplement No. 135 0 obj <>stream Your organization will likely have to develop compliance strategies around the Military End-User (MEU) Rule, which is part ofthe Export Administration Regulations (EAR). Identifying exposure to military end users can be challenging where an end user is a subsidiary or affiliate that sits within a corporate structure with multiple tiers of ownership that obfuscate the connections of a company to the military, as well as in situations where trade intermediaries are involved in indirectly acquiring goods and technology for military end users. Additional prohibition on those informed by BIS. Military End User (MEU) List - Bureau of Industry and Security Further, BIS confirms in FAQ 17 that the definition of military end user applies to national police only and not to provincial or municipal police departments. Applications to export, reexport, or transfer (in-country) items described in paragraph (a)(2) of this section will be reviewed with a policy of denial except for food and medicine designated as EAR99, which will be reviewed under a case-by-case review policy, unless otherwise stated in the license review policy column on the Entity List (supplement no. Here, BIS broadened the definition of military end use so that any element of the defined term use (including operation, installation, maintenance, repair, overhaul, and refurbishing) triggers the military end-use definition. I recommend it to anyone in the financial crime detection and prevention profession. 7 to Part 744 of EAR and periodically updated in the Federal Register. EU Regulation on deforestation-free products set for entry into force on 29th June 2023, EU Regulation on deforestation-free products to enter into force on 29 June 2023, Tomorrow's supply chain - The SHIP Act: U.S. Takes Aim at Iran's Oil Trade and China's Role in the Middle East, Tomorrows supply chain database created to track trade digitalization progress, Commerce Department broadens military end use and end user restrictions on China, Venezuela and Russia, Tax, Private Client Services and Executive Compensation, Commerce Tightens Restrictions on Technology Exports to Combat Chinese, Russian and Venezuelan Military Circumvention Efforts, Modern Slavery and Human Trafficking Statement, BIS expanded the licensing requirements to China for certain low-sensitivity items. (i.e., designated items); changing Violators may also be subject to the denial of their export privileges as further described below. The new rule broadens the list of items covered by military end use licensing requirements and expands the definition of military end use to cover broader categories of activity. Exporters, reexporters, and transferors are responsible for determining whether transactions with entities not listed on supplement no. 2 to 15 C.F.R. unless the shipment is eligible for license exception GOV. The update puts more pressure on the depth and accuracy of due diligence and ensuring that operations trading with these regions ask the right questions to determine what form of knowledge, or lack thereof, is at play. SUMMARY: In this final rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to revise and clarify U.S. licensing requirements and licensing policy on exports and reexports of items to the People's Republic of China (PRC). New Commerce Department FAQs Require Due Diligence by Exporters to As described in more detail in our blog post of April 30, 2020, the MEU rules significantly expand and strengthen the existing military end use/user restrictions set out in Part 744.21 of the Export Administration Regulations (EAR) by, inter alia: The vetting of end users 744.21 Restrictions on certain 'military end uses' or 'military end users'. 5 to this partProcedures for End-User Review Committee Entity List and 'Military End User' (MEU) List Decisions. All such requests, including reasons therefor, must be in writing and sent to: Chair, End-User Review Committee, Bureau of Industry and Security, U.S. Department of Commerce, 14th Street and Pennsylvania Avenue NW, Room 3886, Washington, DC 20230; or by email at ERC@bis.doc.gov. MIEU Definition. The listing of entities under supplements no. Any entity listed on the MEU List or Entity List pursuant to this section may request that its listing be removed or modified. Administrative monetary penalties can reach up to $300,000 per violation or twice the value of the transaction, whichever is greater. She also advises clients on the extra-territorial application of trade compliance-related regulations in cross-border transactions. Violations of the EAR may be subject to both criminal and administrative penalties. As indicated above, BIS does not provide much guidance on the nature and scope of the due diligence expected of exports of designated items to China, Russia, or Venezuela other than noting in FAQ 15 that BISs, In FAQ 20, BIS clarifies that the addition to U.S.'s New Military End Use and End User Regulations to - Lexology In FAQs issued alongside the final rule, BIS used variations of two questions to determine if an end user is a military end user: BIS specifically applied this test to questions regarding the determination of military end user status using military hospitals, military-related universities, and subordinate agencies of defense ministries as examples, but the test can presumably be applied against other entities to determine if it is a military end user. Unpacking Expanding Export Controls and Military-Civil Fusion - CSIS The item is for incorporation into military items described: Any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, development, or production of military items described on the USML or an ECCN ending in A018 or a, National armed services, including armies, navies, marines, air forces, and coast guards, Government intelligence or reconnaissance organizations, Persons or entities whose actions or functions are intended to support military end uses as described in the rule, Criminal penalties of up to 20 years of imprisonment, up to $1 million in fines per violation, or both, Administrative monetary penalties of either up to $308,901 per violation as adjusted for inflation or twice the value of the transaction, whichever is greater, Denial of export privileges for any transaction governed under EAR. As part of Chinas emphasis on modernizing its military, the country has implemented a strategy of military-civil fusion to tap into Chinas civilian economy for the benefit of its defense industry, obscuring the distinction between civilian and military end users. Review your content's performance and reach. New export regulations highlight the risk of military end users in China. The definition of military end user covers two categories of end users: In FAQ 3, BIS clarifies that other MEUsers covers other foreign national governmental organizations, as well as state-owned enterprises, or other specific entities that. How many types of knowledge can there be you ask? of military items goes beyond incorporation into a military item to mean direct New Designations of Chinese Entities Impose Varying Restrictions With respect to agencies and entities of the Ministry of Defense of China, Russia, or Venezuela, BIS notes in FAQs 5-7 that an exporter would have to conduct due diligence to determine whether the agency/entity in question, For example, prior to shipment of designated items to a military hospital in China, Russia, or Venezuela, BIS advises that due diligence would be required to determine if the hospital, In applying this two-prong test, BIS has narrowed the definition of military end user, at least to the extent that military ownership/control would not appear to automatically result in the entity being a military end user for purposes of the MEU rules. Military end users include a countrys national armed services, such as the army, navy, air force, as well as the national guard, national police, and government intelligence and reconnaissance organizations, and other military end users, according to the regulations. addition to military end users in Russia and Venezuela); expanding As amended, the definition of "military end use" will include any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, "development," or "production," of military items described on the United States Munitions List (International Traffic in Arms Regulations (22 CFR 126.1)), or items class. Given the consequences at play, it would be natural to wonder what types of end uses would fall under the rules purview. Paula A. Salamoun Reed Smith Client Alerts. designated items to military end users may be issued, ' Notably, this suggests that an end user that engages in any degree of activities in support of military end uses, however minimal and sporadic, will be considered a military end user. On June 26, 2020, the US Commerce Departments Bureau of Industry and Security (BIS) issued 32 Frequently Asked Questions(FAQs) to clarify the military end use/user (MEU) rules that were published on April 28, 2020 and took effect on June 29, 2020. Furthermore, it is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the EAR with a denied person. In FY 2019, BIS intensified its efforts to implement policies and engage in enforcement activities that address strategic national security threats, including threats related to Irans attempts to obtain U.S. technology and commodities, Chinas military-civil fusion efforts, and Chinese corporations activities that were contrary to U.S. national security or foreign policy interests, according to the annual report. exports to China, Russia, or Venezuela; and. Such Burmese, Cambodian, Chinese, or Venezuelan 'military end users' may be added to supplement no. Lizbeth Rodriguez-Johnson The definition of "military end use" was broadened to cover any item that "supports or . Understand your clients strategies and the most pressing issues they are facing. Decisions by the ERC for purposes of the MEU List and Entity List will be made following the procedures identified in this section and in supplement no. Scope of Military End Use: BIS clarified that "any item that supports or contributes to," as used in the definition of military end use, "goes beyond incorporation into a military item to mean direct facilitation, such as installation, inspection, or test equipment and related software and technology, of the operation, installation, maintenance,. The End-User Review Committee (ERC), composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy and, where appropriate, the Treasury, makes all decisions regarding additions to, removals from, or other modifications to the MEU List and Entity List. (ii) License requirement for parties to the transaction. If the end user meets the definition of a "military end user" under paragraph (g) of Section 744.21, the export, reexport, or transfer (in-country) of any ECCN listed in Supplement No. The Military End User List (Supplement No. A denial of export privileges prohibits a person from participating in any way in any transaction subject to the EAR. The EAR's current definition of military end users includes the army, navy, air force, marines and coast guard, plus the national guard/police, government intelligence and reconnaissance organizations; this rule does not modify . Control Policy: End-User and End-Use Based Part 744 page 1 In doing so, consider obtaining an end-use statement or end-use certificate from your transactional partners. All rights reserved. ", "It's a vigorous exam. (2) Applications may be reviewed under chemical and biological weapons, nuclear nonproliferation, or missile technology review policies, as set forth in 742.2(b)(4), 742.3(b)(4), and 742.5(b)(4) of the EAR, if the end use may involve certain proliferation activities. Military End User (MEU) List - Bureau of Industry and Security 4 under this part is not an exhaustive listing of 'military end users' in those countries. 7 to this part 'Military End-User' (MEU) List. 4 to this part 744 with a footnote 3 designation. national security interests. users is likely to pose considerable challenges and significantly Copyright 2023 Sanctions & Export Controls Update, Canada Imposes Additional Sanctions Against Haitian Elites: 4 Individuals Targeted, Blog Series: Sanctions Enforcement Around the World, the Belgian Perspective, OFAC Issues Updated Guidance Relating to the Provision of Humanitarian Assistance to Combat COVID-19 and Extends Certain Related General Licenses, Canada Amends Iranian Sanctions Regulations: 7 Individuals Targeted, BIS Updates Policy to Incentivize Voluntary Self-Disclosures of Significant EAR Violations and Disclosures of EAR Violations by Others, US Government Announces Human Rights and Export Control Measures, BIS, DOJ, and OFAC Publish Compliance Note Warning Public of Russian Evasions of Export Controls and Sanctions. Military end user means the national armed services (e.g., army, navy, marine, air force, or coast guard ), as well as the national guard and national police, government intelligence or reconnaissance organizations, or any person or entity whose actions or functions are intended to support a military end-use. national security and support U.S. foreign policy interests, according to its latest annual report. This is excerpted from Kharons recent publication The New Military End Use and End User Regulations: A Guide for Identifying Risk. BIS will also implement a presumption of denial in their review of license applications of items not specified in Supplement No. Commerce Department broadens military 'end use' and 'end user Content is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. 85 0 obj <> endobj Corresponding Change to Existing `Military End Use' and `Military End User' Controls `Military-intelligence end users,' as defined in new 744.22(f)(2) of the EAR are a subset of the "government intelligence and reconnaissance organizations" already included in the definition of `military end user' in 744.21(g) of the EAR. transfers of certain designated items to military end users in China (in If use of privately owned automobile is authorized or if no Government-furnished automobile is available. Further, BIS confirms in FAQ 17 that the definition of military end user applies to national police only and not to provincial or municipal police departments. Since identifying military end users can be challenging where an end user is a subsidiary or affiliate; BIS clarifies that there are two types of military end users. Previously, BIS implemented a case-by-case review to determine whether the export, reexport, or transfer would make a material contribution to the military capabilities of the PRC, Russia, or Venezuela, and would result in advancing the country's military activities contrary to the national security interests of the United States. 4 to this partEntity List and will be listed with a footnote 3 designation. Since their publication in late April, industry has been awaiting guidance from BIS regarding the application of some of the key aspects of the MEU rules. Suppose your organization is involved in exporting certain goods, software, or technology, which may be useful in any number of applications, to specified countries. 2 to Part 744 by expanding the range of items under existing categories (for example, materials, specific processing equipment, vessels and marine systems, and aircraft and related commodities), as well as adding new Export Control Classification Numbers (ECCNs) in the categories of materials processing, electronics, telecommunications, information security, sensors and lasers, marine-related items, and aircraft and propulsion. Manasi Venkatesh. 'Military end users' located outside of Burma, Cambodia, China, or Venezuela are limited to entities identified on the 'Military End-User' (MEU) List under supplement no.