BIS Removes 33 Parties from Unverified List, Highlights Importance of End-Use Checks in Export Compliance

Sept. 5, 2023
By: Marvin E. McPherson

Any exporter knows the importance of reviewing entities on the Bureau of Industry and Security (BIS) entity list. It is also important to review entities on BIS’s unverified list, which in most cases is a precursor to the entity list. However, BIS has removed 33 parties from the Unverified List. Among these, 27 are based in the People's Republic of China (PRC), with the remainder located in Indonesia, Pakistan, Singapore, Turkey, and the United Arab Emirates. This move by BIS underscores the pivotal role that understanding your end-user plays in ensuring export compliance and timely exports.

While much attention has been given to the responsibilities of experienced exporters and newcomers alike in reviewing and verifying their end-users, less frequently discussed is the process by which BIS themselves checks for end-use. This process is outlined in Section 744.15 of the Export Administration Regulations (EAR). Under this section, foreign individuals or entities involved in exports, reexports, and transfers (in-country) subject to the EAR may find themselves added to the Unverified List if BIS or federal officials, acting on behalf of BIS, cannot substantiate the “legitimacy and reliability” of the end use and end user of EAR-regulated items. This can occur when an end-use check cannot be completed for reasons beyond the control of the U.S. government.

The EAR provides three specific examples of situations that meet this standard, one including, a lack of cooperation from the host government authority. In cases where a foreign government hinders the execution of such checks, it can have severe consequences for the foreign company’s access to U.S. commodities, software, and technology. This can also hinder the U.S. exporter causing increased risk and increase compliance measures prior to exporting.

It is crucial to note that exports, reexports, and transfers (in-country) involving a party listed on the Unverified List are not eligible for license exceptions, which they might otherwise qualify. Additionally, they must adhere to specific Electronic Export Information reporting requirements. Consequently, foreign companies receiving requests for an end-use check must act promptly, arranging for the check to take place within a 60-day timeframe. Failure to do so may result in their placement on the Unverified List.

The recent delisting of 33 parties from the Unverified List, highlights BIS’s increased participation from foreign governments and private entities. Performing proper due diligence prior to a transaction with an unverified entity is a must in order to be in compliance with BIS’s end use checks. If you have any questions relating to the requirements of end- user verification or end – use checks, please contact any attorney at Barnes Richardson and Colburn.