It’s impossible to conduct a meaningful transactional export compliance process without running into the alphabet soup of restricted party lists. Here’s an overview of the lists most likely to come up and how they’re used.
Entity List
What’s affected: Exports, reexports and transfers of items subject to the Export Administration Regulations (EAR)
Where to find it: Entity List (Supplement No. 4 to Part 744 of the EAR)
Administered by: Bureau of Industry and Security (BIS), via the chair of its End-User Review Committee (ERC), which also includes the departments of Defense, Energy, State and Treasury
Who’s on it: Non-U.S. entities
Enabling regulation: EAR 744.11
Background: Related to the Enhanced Proliferation Control Initiative (EPCI) of 1990, the Entity List was created in 1997 to identify non-U.S. entities involved with the proliferation of weapons of mass destruction (WMD). The earliest entities on the list were primarily government-affiliates in Israel, Russia, China, India and Pakistan.
BIS greatly expanded the grounds for placing an organization on the Entity List in 2008 to include activities “contrary to the national security or foreign policy interests of the United States…”
Entities can be placed on the list based on the relatively low standard of “reasonable cause to believe” involvement in activities of concern. At the beginning of 2022, the list contained more than 1,700 parties, with much of its recent growth concentrated in China and Russia.
What to know: The Entity List identifies parties to which exports are limited or prohibited without a license—even for items that would otherwise be uncontrolled to the destination country. It specifies the license requirements imposed on each listed party. In most cases, but by no means all, presence on the Entity List means a license requirement for all items subject to the EAR, regardless of classification. Those requirements are independent of, and in addition to, any license requirements imposed elsewhere in the EAR.
“For example, if you want to export, reexport or transfer (in-country) an EAR99 item to a listed entity and the license requirements for that person as specified in the ‘License Requirement’ column of the Entity List state ‘all items subject to the EAR,’ you would have to obtain a license before exporting, reexporting or transferring (in-country) the item, even if the EAR99 item could otherwise be sent to the country of destination without a license…”
Source: BIS policy guidance
As it continues to grow larger and contain more economically significant businesses and other organizations, the Entity List has become an essential place to look for potential restrictions on exports, reexports and transfers of any item subject to the EAR.
Denied Persons List (DPL)
What’s affected: Exports, reexports and transfer of items subject to the EAR; related participation in these transactions; acting to facilitate certain activities by denied persons
Where to find it: Denied Persons List
Administered by: BIS via the Director of the Office of Export Enforcement; also Assistant Secretary for Export Enforcement for temporary denial orders
Who’s on it: U.S. and non-U.S. entities and individuals
Enabling regulation: Rules for getting on and off the list are found in the administrative enforcement section of the EAR—Part 766. There are two paths for inclusion on the list:
- Administrative action denying export privileges: EAR 766.25
- Temporary denials: EAR 766.24
- BIS overview document
Background: Exporting, reexporting and transferring items subject to the EAR is considered a privilege, not a right. Violations of export regulations for items subject to the EAR can result in fines, prosecution and – for parties on this list – revocation of export privileges.
What to know: BIS may deny for up to 10 years the export privileges of any person who has been convicted of violating the Export Control Reform Act (the primary legislative authority for the EAR) as well as certain other federal statutes, such as the Arms Export Control Act (AECA) and the International Emergency Economic Powers Act (IEEPA).
Privileges can also be denied as a protective measure for entities that are deemed likely to violate the rules in the future. In this scenario, a temporary denial of privileges expires after 180 days but can be renewed an unlimited number of times. Denial orders are generally standardized, but can vary somewhat from case to case; the particulars can always be found in the pertinent Federal Register notice.
The list has proven useful in aligning export policy with fast-changing foreign policy. As an example, several Russian airlines that operate planes subject to the EAR have been placed under temporary denial orders since the further invasion of Ukraine in 2022.
The DPL is shorter than the Entity List and isn’t used as frequently. It’s worth emphasizing that the DPL is the only BIS restricted party list that includes U.S. as well as non-U.S. persons.
Unverified List (UVL)
What’s affected: Exports, reexports and transfers of items subject to the EAR
Where to find it: Supplement No. 6 to Part 744 of the EAR
Administered by: BIS
Who’s on it: Non-U.S. entities
Enabling regulation: EAR 744.15
Background: BIS engages in routine end-use monitoring to ensure that recipients of U.S. goods are using them in accordance with the EAR. These checks can be conducted before an export license is granted, or after a shipment has been completed. Exporters may not use license exceptions when sending items subject to the EAR to parties on the Unverified List.
What to know: Entities typically get on the list for failing to respond or cooperate with BIS end-use checks. In some cases it may reflect malintent on the part of the entity, but it can also result from poor training or sloppy recordkeeping by the exporter or end-user.
Unlike the most common Entity List and DPL scenarios, the UVL doesn’t prohibit all exports subject to the EAR for a named entity. Rather, it prohibits using license exceptions. Items eligible to be exported NLR (see related post: NLR Authorization and Exporting Without a License) can still be shipped to an entity on the UVL with the additional requirement that a special UVL Statement of end-use is provided by the receiving party.
The overall intent is to assure that entities which haven’t provided adequate transparency in the past receive extra scrutiny in future transactions.
Recently, many additions to the UVL have been entities for whom the host government, such as Russia or China, prevents end-use verification.
Military End-User (MEU) List
What’s affected: Exports, reexports and transfers of items subject to the EAR (or sometimes a specified subset of items subject to the EAR)
Where to find it: Supplement No. 7 to Part 744 of the EAR
Administered by: BIS via ERC
Who’s on it: Non-U.S. entities
Enabling regulation: EAR 744.21
Background: Created in 2020, the MEU List is a byproduct of the MEU Rule, which provides that items subject to the EAR which wouldn’t ordinarily need a license do, in fact, require a license when being sent to military end-uses and military end-users in Belarus, Burma, Cambodia, China, Russia or Venezuela. (For Belarus and Russia, the license requirement applies to everything subject to the EAR. For the other countries, it only applies to the items identified in Supplement No. 2 to Part 744.) Under this rule, military end-users include, but are not limited to, the entities identified on the MEU List.
Since the invasion of Ukraine, new rules have resulted in Russian and Belarusian military end-users being moved to the Entity List with footnote 3 designations. As of November 2022, all parties on the MEU were related to China.
What to know: Exporters are supposed to parse the definitions of “military end-use” and “military end-user” on their own. But the regulation includes expansive language, such as “any person or entity whose actions or functions are intended to support ‘military end-uses’.”
Exporters struggle with the lack of specifics, so BIS now compiles military end-users as they are identified. What that means is the MEU – unlike the other lists – isn’t definitive. Just because an entity isn’t named on the MEU doesn’t guarantee it’s not a military end-user. It’s still up to the exporter to identify potential MEUs to the best of their knowledge.
Debarred Parties List
What’s affected: Participation in exports and other activities regulated by the International Traffic in Arms Regulations (ITAR)
Where to find it: Debarred Parties
Administered by: Directorate of Defense Trade Controls (DDTC)
Who’s on it: U.S. and non-U.S. entities and individuals
Enabling regulations: ITAR 127.7
Background: The ITAR analogy to the BIS Denied Persons List, the Debarred Parties List contains statutorily debarred entities convicted of violating or conspiring to violate the AECA. As such, they are prohibited from participating in the export of defense articles and defense services and any other activities which come under the jurisdiction of the ITAR.
A somewhat separate, seldom-used process provides for administrative debarments for persons who haven’t necessarily been convicted of a crime, but who have committed a civil violation of the ITAR and that DDTC believes “cannot be relied upon to comply” with export regulations. This list contains only four entities, the last of which was added in 2014.
What to know: Debarment doesn’t allow for the use of exemptions. BIS often places persons convicted of AECA violations on the DPL as well. In a way, the Debarred Parties List is incomplete, as ITAR 120.16 states that persons who have been convicted of (or even just charged with) violating several federal statutes, or who have been debarred from contracting with any federal agency, or who are ineligible to receive an export license from another agency (e.g. on the DPL), are “generally ineligible” under the ITAR—a status similar to formal debarment.
Specially Designated Nationals and Blocked Persons List (SDN)
What’s affected: In general, transactions – including exports – and other activities by U.S. persons
Where to find it: SDN List
Administered by: Office of Foreign Assets Control (OFAC)
Who’s on it: Non-U.S. entities, groups, individuals, vessels and aircraft
Background: The SDN is essentially the bad-actors list of non-U.S. parties that have been sanctioned for any number of reasons, including drug trafficking and arms dealing; terrorism; human rights violations; and association with Russia, Iran and other targeted governments. U.S. persons are generally prohibited from doing business with any entity on the SDN list, or facilitating such transactions. Banks, insurers and other financial institutions worldwide – including many non-U.S. institutions – tend be very wary of participating in transactions with SDNs.
What to know: This list is extensive and fast-changing. U.S. businesses and individuals should not export or undertake other international business activities without checking the SDN List. Per OFAC’s 50 percent rule, entities owned 50 percent or more in the aggregate by one or more blocked persons are effectively sanctioned as well. OFAC maintains a number of other sanctions lists as well, but the SDN is the most important of these. All sanctions lists can be searched through the Sanctions List Search maintained by OFAC.
Consolidated Screening List
What’s affected: Varies, based on source list
Where to find it: http://www.trade.gov/consolidated-screening-list
Aggregated by: International Trade Administration
Background: This “list of lists” aggregates data from several federal agencies’ own screening lists that identify parties of concern—including all the lists discussed in this article. It’s accessible for download in multiple formats, via an API, and through a simple web-based search engine.
What to know: It’s free to use and updated daily, so it’s a helpful resource in any export compliance check.
The list doesn’t readily integrate with enterprise business systems, so high-volume exporters, such as software companies, aren’t able to make it part of automated fulfillment processes without additional effort.
It also doesn’t offer a full analysis for all export controls that may apply. So it’s helpful in finding named entities, but it doesn’t bypass the need for exporters to understand the meaning of the source lists and maintain and follow their own compliance processes.
Do you have questions about the various restricted party lists discussed above? Visit 1ow.8855aa.com to learn about our company, our faculty, our staff and our esteemed Export Compliance Professional (ECoP®) certification program. To find upcoming e-seminars, live seminars and live webinars and browse our catalog of 80-plus on-demand webinars, visit our ECTI Academy. You can also call the Export Compliance Training Institute at 540-433-3977 for more information.
Scott Gearity is President of ECTI, Inc.