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August 24, 2009 

BIS Imposes $70,000 Civil Penalty on NY Freight Forwarder for Entity List Violation

Yet another company has been fined by the Bureau of Industry and Security (BIS) for an export-related violation involving a party on the Entity List.

Today BIS posted the settlement documents involving Eastways Shipping Corporation, a New York City-based freight forwarder. Eastways agreed to pay a $70,000 civil penalty ($23,333 per violation) for allegedly arranging for the export of scrap metal worth $95,335 to Allied Trading Company, a company in Karachi, Pakistan that is included on the Entity List. The scrap metal involved in these transactions was classified as EAR99.

As a result of its actions, BIS charged Eastways with three counts of aiding and abetting an act prohibited by the Export Administration Regulations (EAR) since the scrap metal was apparently exported to Pakistan without the required export licenses.

The Entity List, established in 1997 and modified periodically, is found in Supplement No. 4 to Part 744 (pdf) of the EAR. The Entity List includes non-U.S. businesses, research institutions, government and private organizations, individuals, and other types of entities whose activities are contrary to U.S. national security and/or foreign policy interests.

The inclusion of a party on the Entity List notifies exporters that certain exports and reexports to parties identified on the Entity List require an export license from BIS and that the availability of License Exceptions in such transactions is limited. The Entity List also includes the license review policy for each part listed. In some cases, there is a presumption that an export license will not be granted.

In this case, the Entity List states that for Allied Trading Company the license review policy is "case-by-case for all items listed on the CCL" and that there is a "presumption of approval for EAR99 items." Because the scrap metal was classified as EAR99, it appears likely that BIS would have approved the export license application submitted by the exporter in this case. BIS has yet to post the civil penalty against the exporter that attempted to sell the scrap metal to Pakistan.

This case once again demonstrates the need for all parties in U.S. export transactions to screen all of the customers and end-users against the Entity List and the other restricted party lists maintained by the U.S. Government.

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