Denied Party Digest

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BIS Revises Unverified List, Links to Entity List

On October 13, 2022, the Department of Commerce, Bureau of Industry and Security (BIS) published a rule (87 FR 61971) effective October 7, 2022, revising the Unverified List and linking obstruction of end use checks to the criteria for addition to the Entity List.  The Unverified List, which is found in the Export Administration Regulations (EAR), Supplement No. 6 to Part 744, identifies parties for which the US Government was unable to verify the bona fides (legitimacy and reliability) in an end-use check.

First, the rule added thirty-one entities in China to the Unverified List.  Parties listed on the Unverified List are ineligible to receive items subject to the EAR through license exceptions.  Transactions that do not require a license – i.e., EAR99 or No License Required (NLR) – require an Unverified List (UVL) statement from the listed party. The requirements for this statement are detailed in EAR §744.15 and include name and contact information, an agreement to comply with the EAR, an end-use declaration, and agreement to cooperate with end-use checks. An Automated Export System (AES) filing is also required for exports to parties on the Unverified List.

Second, the rule removed nine entities, also all in China, from the Unverified List following successful verification of their bona fides by BIS.  Parties may be removed from the Unverified List after a subsequent successful end-use check on the listed party. Listed parties may request removal in writing directly to BIS.

Third and finally, the EAR §744.11(b) criteria for revising the Entity List now includes "sustained lack of cooperation by the host government to schedule and facilitate the completion of an end-use check of entities identified on the Unverified List."  The Entity List includes both individuals and entities involved in “activities that are contrary to the national security or foreign policy interests of the United States.” (EAR §744.11).  Listed entities are subject to license requirements for EAR-controlled items (including EAR99 or other items that would otherwise be shipped No License Required, or NLR), typically with a presumption of denial.  The new criteria could allow an entity on the Unverified List to be moved to the more restrictive Entity List based on the host government's lack of cooperation--giving more teeth to BIS end use checks and preventing host governments from shielding entities with activities that are contrary to the national security or foreign policy interests of the United States.