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Volume XII, Number 272

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Verify, Then Trust: Commerce Adds 33 Parties in China to Unverified List

  • BIS added 33 Chinese companies to the Unverified List.

  • The UVL places lesser restrictions designees than an Entity List or Sanctions designation

  • BIS may not have been able to verify the entities because of new Chinese laws restricting compliance with extraterritorial laws; creating a potential conflict of laws for these and other companies.

On February 8, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published a Final Rule amending the Export Administration Regulations to add 33 Chinese parties, to the Unverified List (UVL) pursuant to § 744.15(c) of the EAR.[1] The companies represent a range of industries from electronics, to biotech, to chemical, to automation.

In its press release, BIS indicated that these parties were added to the UVL because BIS “is unable to establish the bona fides[2] of these parties for reasons outside of the U.S. Government’s control, which may include an inability to contact or locate the party, failure by the party to appropriately demonstrate the disposition of items subject to the EAR, or lack of cooperation by a host government with BIS’s conduct of end-use checks.”

Entities listed on the Unverified List are ineligible to receive items subject to the EAR by means of a license exemption.[3] In addition, exports, reexports, or transfers to UVL parties that do not require a license must include a UVL statement, and the exporters or reexporters to the transaction must maintain a record of this statement.[4]

The UVL is one of several lists, including the Entity List[5] and the Military End User List,[6] administered and maintained by BIS. In a sense, the Unverified List designation is less restrictive than an Entity List designation, because UVL parties may still receive items subject to the EAR. However, as outlined above, exporting to the UVL party would require more compliance steps.

Items eligible for export, reexport, or transfer without a license or pursuant to a license exception before this regulatory action may be exported from the United States, reexported, or transferred before March 11, 2022 to the UVL listed persons under the previous license exception eligibility, as long as the shipments (i) are on dock for loading, on lighter, laden abroad an exporting carrier, or en route abroad a carrier to a port of export on February 8, 2022 and (ii) are made pursuant to actual orders. Any items not actually exported, reexported, or transferred before midnight on March 10, 2022 are subject to the requirements in 15 C.F.R. § 744.15.

U.S. regulations provide a process for requesting removal of a person on the Unverified List.


FOOTNOTES

[1]       The UVL is available at Supplement No. 6 to Part 744.

[2]       Including legitimacy and reliability relating to the end use or end user of items subject to the Export Administration Regulations (EAR).

[3]       See 15 C.F.R. §740.2(a)(17).

[4]       See 15 C.F.R. § 744.15(b).

[5]       Supplement No. 4 to part 744.

[6]       Supplement No. 7 to part 744.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 46
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About this Author

Julien Blanquart International Trade Lawyer Sheppard Mullin Law Firm
Associate

Julien Blanquart is an International Trade associate in the Government Contracts, Investigations & International Trade in the firm's Brussels and London offices.

Areas of Practice

Julien's practice focuses on compliance counseling, training and investigations in the areas of export controls, economic sanctions, anti-corruption (FCPA and Sapin II), customs, and foreign investment reviews (CFIUS).

Over the course of his education he has acquired the legal skills and experience to assist the International Trade team in matters involving EU, U.S., and...

+32.02.290.7916
Reid Whitten, partner, Sheppard Mullin Law Firm
Partner

Reid Whitten works with clients around the world to plan, prepare, and succeed in global business transactions.

In the areas of U.S. and international sanctions, export and defense export controls, and anti-corruption regulations, he supports clients in detecting and deterring potential compliance issues as well as conducting and defending investigations and enforcements. Mr. Whitten also advises on anti-dumping, anti-money laundering, and anti-boycott regulations.

Mr. Whitten is a thought leader on cross-border business regulations. He teaches a seminar on The Law of...

202-469-4968
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