Date: August 25, 2016
By: Anna Sayre, Legal Content Writer, SanctionsAlert.com
The US has one of the most complex national systems of sanctions enforcement in the world. This system derives from the number of agencies that are empowered to initiate actions against violators of US sanctions. Because each US agency maintains a different “Do Not Touch” list, organizations and individuals on the various lists may overlap. It is not uncommon for three or four US agencies to take action jointly, thus exposing a business to multiple investigations and varying penalties.
This article is the second in a series of articles on the role US agencies play in sanctions enforcement. The series focuses on the role departments and agencies have in the enforcement, administration and investigation of sanctions violations.
Article two of the series deals with the Department of Commerce and its role within sanctions related affairs. Though the Department of Commerce has only one main office that handles sanctions related enforcement, it plays a vital role in sanctions enforcement and often works in conjunction with other US agencies to implement and enforce US sanctions policy.
The Bureau of Industry and Security (BIS), in contrast to the Department of State’s Directorate of Defense Trade Controls that monitors defense trade, enforces the export of so-called “dual-use” items, including software and technology as well as less sensitive military items. Dual-use items are commodities, technology and software that have both civilian and military or proliferation applications.
The BIS develops export control policies, issues “do not touch” and “regulated items” lists, and issues export licenses for particular goods on a case-by-case basis according to its Export Administration Regulations (EAR). The EAR primarily regulates items designed for commercial purposes, such as computers or software, but also includes hardware and technology that could have military applications.
List of regulated items
BIS publishes a list of regulated items, called the Commercial Control List (CCL), which can be seen by clicking here. The CCL contains 10 broad categories, such as “Nuclear & Miscellaneous”, “Materials, Chemicals, Microorganism and Toxins”, and “Sensors and Lasers”. Each category is subdivided into five product groups, including “Systems, Equipment, and Components”, “Software” and “Technology”. Individual dual-use items used for export control purposes are identified by an Export Classification Numbers (ECCN) included on the CCL. An ECCN consists of a five-character alpha-numeric designation, e.g. 3A001, and is a key factor in determining whether a license must be obtained in order to export a dual-use item. If the item you intend to export has been given an ECCN, the CCL offers a wealth of information about the item, including: the reasons for control of that item, such as, national security, anti-terrorism, or crime control; indications as to which transactions may require an export license based on the country of destination; and also information regarding which license exceptions, if any, may apply. For further details on how to determine if your export needs a license, click here.
In addition to ECCN classification, exporters have the opportunity to self-classify their items using BIS’s online resources and their own technical understanding of the item. Exporters can then submit an official request for a classification of the item by BIS. For more information on self-classification, click here.
BIS also regulates civilian items, not identified on the CCL, called “EAR99” items. Generally, and depending on the facts of the transaction, EAR99 items may be shipped without a license. If an EAR item is exported to an embargoed or sanctioned country by the Office of Foreign Assets Control (OFAC), or to an end-user of concern or in support of a prohibited end-use, you may be required to obtain an export license.
Lists of persons and entities
BIS also issues “do not touch” lists with individuals or entities. Depending on which list the match was found, a match indicates either: there is a strict export prohibition; a specific license requirement; or the presence of a “red flag”.
Denied Persons List: A list of individuals and entities that have been denied export privileges. Any dealings with a party on this list that would violate the terms of its denial order are prohibited.
Entity List: A list of foreign parties that are prohibited from receiving some or all items subject to the EAR unless the exporter secures a license. Those persons present a greater risk of diversion to weapons of mass destruction (WMD) programs, terrorism, or other activities contrary to US national security or foreign policy interests.
Unverified List (UVL): A list of parties whose bona fides BIS has been unable to verify. No license exceptions may be used for exports, reexports, or transfers (in-country) to parties on this list. A statement must be obtained from such parties prior to shipping items not subject to a license requirement.
The Consolidated Screening List (CSL) is a list of parties for which the United States Government maintains restrictions on certain exports, reexports or transfers of items. The list is a consolidation of multiple export screening lists of the Departments of Commerce, State and the Treasury.
BIS’s Export Enforcement (EE) Unit enforces export controls. It’s mission is “to protect US national security, homeland security, foreign policy, and economic interests through a law enforcement program focused on: sensitive exports to hostile entities or those that engage in onward proliferation; prohibited foreign boycotts; and related public safety laws”. EE accomplishes its mission through preventative and investigative enforcement activities and then, pursuing appropriate criminal and administrative penalties against export and sanctions violators.
EE is made up of the Office of Export Enforcement (OEE), Office of Enforcement Analysis (OEA), and the Office of Anti-Boycott Compliance (OAC). These offices work together to impose civil money penalties and, when applicable, deny export privileges. Namely, the OEE has the authority to make arrests, execute search warrants, serve subpoenas, and seize goods about to be illegally exported.
Close connections with other US agencies
EE works in close connection with other US agencies in order to enforce global sanctions policy. For cases concerning criminal sanctions violations, BIS often works closely with the Department of Justice, and similarly, with the FBI and Department of Homeland Security with regard to foreign investigations.
BIS also frequently works in conjunction with the Department of Treasury’s OFAC to implement sanctions policy. If exports are to be made to a sanctioned country, such as Cuba or Burma, BIS and OFAC will share licensing jurisdiction for exports to these countries based on the type of item or activity. BIS will handle licenses for exports of items subject to the EAR, whereas OFAC will handle licenses for travel, financial activities, services, and other specially designated items. For some countries, such as Iran and Sudan, BIS will even have a specific list of “deemed exports”.