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August 21, 2008 

BIS Publishes Final Rule Expanding Scope of Parties on Entity List

The Bureau of Industry and Security (BIS) published a final rule in today's Federal Register amending the Export Administration Regulations to modify the designation of parties included on the Entity List. The Entity List, contained at Supplement Number 4 to Part 744 of the EAR, provides notice to the public of the export licensing requirements applicable to exports to the parties included on the list.

The final rule modifies the Entity List in two ways. First, the final rule expands the criteria for inclusion on the Entity List to include when:

There is reasonable cause to believe, based on specific and articulable facts, that the entity has been involved, is involved, or poses a significant risk of being or becoming involved in activities that are contrary to the national security or foreign policy interests of the United States and those acting on behalf of such entities.
The final rule contains an illustrative list of five types of activities that may be deemed to be "contrary to the national security or foreign policy interests of the United States":
  1. Supporting persons engaged in acts of terror.
  2. Actions that could enhance the military capability of, or the ability to support terrorism of governments that have been designated by the Secretary of State as having repeatedly provided support for acts of international terrorism.
  3. Transferring, developing, servicing, repairing or producing conventional weapons in a manner that is contrary to United States national security or foreign policy interests or enabling such transfer, service, repair, development, or production by supplying parts, components, technology, or financing for such activity.
  4. Preventing accomplishment of an end use check conducted by or on behalf of BIS or the Directorate of Defense Trade Controls of the Department of State by: precluding access to; refusing to provide information about; or providing false or misleading information about parties to the transaction or the item to be checked.
  5. Engaging in conduct that poses a risk of violating the EAR when such conduct raises sufficient concern that the End-User Review committee believes that prior review of exports or reexports involving the party and the possible imposition of license conditions or license denial enhances BIS's ability to prevent violations of the EAR.
Second, the final rule amends the EAR to provide that a party listed on the Entity List has a right to request that its listing be removed or modified and sets forth procedures for addressing such requests and for conducing periodic reviews of the parties named on the Entity List.

Specifically, the final rule provides that in order to ensure that the parties on the Entity List are reviewed periodically, BIS's End-User Review Committee will conduct "a systematic review of the Entity List for the purpose of identifying and implementing any needed corrections and updates at least annually." The End-User Review Committee procedures are included in new Supplement No. 5 to Part 744. BIS expects that the first review under these new procedures will be completed no later than August 21, 2009.

Finally, BIS notes in the final rule that it "intends to publish guidance in the near future on dealing with entities related to those on the Entity List."




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