Denied Party Digest

Valuable information about denied party screening

New Commerce and OFAC Sanctions Lists Include Communist Chinese Military Companies, Entity List Expanded

In separate, but related, December actions, the Department of Commerce's Bureau of Industry and Security (BIS) and the Department of the Treasury's Office of Foreign Assets Control (OFAC) published new sanctions lists largely aimed at companies tied to the Chinese military.

The new lists build on the 2020 releases of the Department of Defense list of Communist Chinese military companies.  When first released, the presence of a company on that list was a “red flag,” but not a direct export restriction.  The use of the list by the Departments of Commerce and Treasury changes that.


Commerce Military End User List - NEW ADDITION UNDER SUPPLEMENT #7 OF EAR!

On December 23, 2020, BIS published a rule (85 FR 83793) adding the Military End User (MEU) List to the Export Administration Regulations (EAR).  The list identifies 102 entities, fifty-seven in China and forty-five in Russia, that have been identified by the U.S. government as “military end users” subject to EAR §744.21.  §744.21 restricts the export, reexport, or transfer (in country) of items identified in Supplement No. 2 to part 744 to military end users in China, Russia, and Venezuela.  The restriction takes the form of a license requirement with a presumption of denial.  License exceptions other than GOV may not be used for those entities.

While long-awaited and very helpful for exporters, the MEU List is not an exclusive list of parties subject to the restrictions of §744.21.  Careful evaluation of potential exports to China, Russia, and Venezuela is advised as even business entities may be considered “military end users” which are defined broadly to include “any person or entity whose actions or functions are intended to support ‘military end uses.’”  In the event that a member of the Department of Defense list of Communist Chinese military companies is not included on the MEU list, it should be considered a “red flag” for export compliance review.

The new list is located at Supplement No. 7 to Part 744 of the EAR. 


 OFAC Chinese Military Companies Investment Ban

On November 12, 2020, the President issued Executive Order 13959 (85 FR 73185) titled “Addressing the Threat From Securities Investments That Finance Communist Chinese Military Companies,” prohibits trading in securities of any “Communist Chinese military company” effective January 11, 2021.

The order includes an annex listing Communist Chinese military companies based on the Department of Defense list and provides for expanding the list in the future.  As of January 8, 2021, the list reflects the three 2020 releases of the Department of Defense list.

To implement the order, OFAC has established the Non-SDN Communist Chinese Military Companies List (NS-CCMC) and has been regularly issuing FAQs on the topic.


Seventy-Seven MORE Added to Entity List

In another notable update, on December 22, 2020, BIS published a rule (85 FR 83416) which added seventy-seven entities to the EAR’s Entity List.  The new entries are located in the People's Republic of China (China), Bulgaria, France, Germany, Hong Kong, Italy, Malta, Pakistan, Russia, and the United Arab Emirates (U.A.E.).  The bulk of the new entries (60) are located in China.  The rule also removed four entities in Israel and the U.A.E. and revised two entries.  The Federal Register Notice contains the rationale for the additions, typically activity that is considered “contrary to the national security interests of the United States.”

BIS also issued a press release and a statement from Secretary Ross with additional background on the new Chinese entries.


Continuous Screening Recommended ACT NOW!

With the new Military End User List and the continued expansion of the Entity List, denied party screening requires the ongoing attention of export compliance personnel and programs.  Customers, as well as intermediate parties and end users must be screened before an export can take place.  With sanctions lists being updated on a nearly daily basis, continuous screening of those parties is the best way to keep up to date with changes.