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March 07, 2005 

BIS Issues Licensing Policy for Transactions to Entities Subject to State Department Sanctions

Today the Bureau of Industry and Security (BIS) published in the Federal Register an interim final rule amending the Export Administrating Regulations (EAR) by specifying BIS's licensing policy regarding transactions involving entities sanctioned by the State Department under three statutes, imposing a new license requirement for certain entities sanctioned by the State Department, and identifying one specific entity subject to this new license requirement. The interim rule is effective today, March 7, 2005, and all comments on the interim rule must be submitted to BIS by May 6, 2005.

Specifically, the interim rule amends the EAR by adding new section 744.19 in order to set forth BIS's licensing policy regarding entities sanctioned by the State Department under the authority of three statutes. Specifically, new section 744.19 provides that BIS's policy is to deny any export or reexport license application if the applicant, other party authorized to receive the license, purchaser, intermediate consignee, ultimate consignee, or end-user is subject to:
(1) A sanction issued pursuant to the Iran-Iraq Arms Nonproliferation Act of 1992 (Pub. L. 102-484) that prohibits the issuance of any license for any export by or to the sanctioned person or,
(2) a sanction issued pursuant to the Iran Nonproliferation Act of 2000 (Pub. L. 107-178) that prohibits the granting of a license for the transfer to foreign persons of items, the export of which is controlled under the Export Administration Regulations, or
(3) a sanction issued pursuant to section 11B(b)(1)(B)(ii) of the Export Administration Act of 1979, as amended (also known as the Missile Technology Control Act of 1990), that prohibits the issuance of new licenses for exports to the sanctioned entity of items controlled pursuant to the Export Administration Act of 1979.

In addition, section 744.19 states that it is BIS's policy to deny any export or reexport application for items listed on the Commerce Control List with missile technology (MT) listed as a reason for control if any entity subject to a sanction issued pursuant to section 11B(b)(1)(B)(i) of the Export Administration Act of 1979, as amended, is a party to the transaction.

This interim rule also adds new section 744.20 to the EAR to provide that BIS may impose, as new foreign policy controls, license requirements on exports and reexports of items subject to the EAR to entities sanctioned by the State Department. Such license requirements are in addition to those imposed by other provisions of the EAR. Decisions to impose such license requirements will be made on a case-by-case basis. In determining whether to impose license requirements pursuant to section 744.20, BIS will consider the nature of the action that led to the State Department sanction and whether, because of that action, such sanctioned parties would not be reliable parties to export or reexport transactions subject to the EAR. License requirements pursuant to section 744.20 will be imposed by adding the sanctioned entity to the Entity List (Supplement No. 4 to part 744).

Finally, this rule imposes a license requirement under new section 744.20 for exports or reexports to Tula Instrument Design Bureau of the government of the Russian Federation (Tula) for all items subject to the EAR having a classification other than EAR99, prohibits use of any License Exception for such exports or reexports, and imposes a general policy of denial for all license applications to export or reexport to Tula. The rule also adds Tula to the Entity List (Supplement No. 4 to part 744 of the EAR). This measure was taken because the State Department determined that Tula was specifically involved in the transfer of lethal military equipment to a country determined by the Secretary of State to be a state sponsor of terrorism.

The text of the interim rule can be found at the following link:



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