Sanctions Licensing Processes at OFAC and Commerce BIS

Sanctions Licensing Processes at OFAC and Commerce (BIS) The Licensing Process at BIS Amelia Schmidt Kaiser. Dillon PLLC

BIS Jurisdiction • The U. S. government regulates exports, reexports, and transfers of: • Items • Technology • Services • BIS regulates commercial and dual-use exports under the Export Administration Regulations (EAR), 15 C. F. R. Part 730 et seq.

Other Agencies’ Jurisdictions • OFAC sanctions programs (15 C. F. R. § 734. 2(b)(1)) • State Department regulates all military exports under the International Traffic in Arms Regulations (22 C. F. R. Part 120). • Nuclear Regulatory Commission (15 C. F. R. § 734. 2(b)(1)(iii)) (commodities related to nuclear reactor vessels (10 C. F. R. part 110)) • Department of Energy (15 C. F. R. § 734. 2(b)(iv)) (production of ( special nuclear materials (10 CFR part 810)) • Patent and Trademark Office (15 C. F. R. § 734. 2(b)(v)) (any ( “patent application or an amendment, modification, or supplement thereto or division thereof” (37 CFR part 5))

Overlapping Jurisdictions “Items and activities subject to the EAR may also be controlled under exportrelated programs administered by other agencies. Items and activities subject to the EAR are not necessarily exempted from the control programs of other agencies. Although BIS and other agencies that maintain controls for national security and foreign policy reasons try to minimize overlapping jurisdiction, you should be aware that in some instances you may have to comply with more than one regulatory program. ” (15 C. F. R. § 734. 2(b))

What’s an Export? • Under the EAR, exports include: Shipping or transmitting any item out of the United States (15 C. F. R. § 734. 13(a)) • Sharing technology with non-U. S. persons (15 C. F. R. § 734. 13(b)) (the “deemed export” rule) Other terms to know: Reexports: shipments or transfers of items or technology from one country outside the U. S. to another outside the U. S. (15 C. F. R. § 734. 14) Transfers: shipments or transfers of items or technology within a country outside the U. S. (15 C. F. R. § 734. 16)

Does the Export Need a License? (1) How is it classified? (2) Where is it going? (3) Who will have access to it? (4) How will it be used?

How Is It Classified? • Is it subject to U. S. jurisdiction? (15 C. F. R. §§ 734. 2 -734. 4) • Is it military or commercial/dual-use? • Can self-classify or submit commodity jurisdiction request • If it’s commercial or dual-use, how is it classified on the Commerce Control List (CCL)? (15 C. F. R. Part 774, Supplement No. 1) • Export Control Classification Numbers (ECCNs) – Each ECCN will describe specific controls in place for items with that ECCN. • EAR 99 – No license required, with some exemptions. • Can self-classify or submit commodity classification request (CCATS) • Is it subject to any other agency or agencies’ jurisdictions?

Where Is It Going? Commerce Country Chart – 15 C. F. R. Part 738, Supplement No. 1 15 C. F. R. Part 744, “End-User and End. Use Based” 15 C. F. R. Part 746, “Embargoes and Other Special Controls”

Who Will Have Access to It? Any export, reexport, or transfer of technology to a foreign person or foreign national is considered an export to that person’s most recent foreign country of citizenship or permanent residency (15 C. F. R. §§ 734. 13(b), 734. 14(b)) Part 744, including: – Entity List (Supplement No. 4) – Unverified List (Supplement No. 6) Denied Persons List: https: //www. bis. doc. gov/index. php/thedenied-persons-list

How Will It Be Used? 15 C. F. R. Part 742, “CCL-Based Controls” – Chemical and biological weapons (CB) – Nuclear non-proliferation (NP) – National security (NS) – Missile technology (MT) – Regional stability (RS) – Firearms convention (FC) – Crime Control (CC) – Anti-Terrorism (AT) 15 C. F. R. Part 744, “End-User and End-Use Based” 15 C. F. R. Part 746, “Embargoes and Other Special Controls”

BIS License Exceptions Part 740, “License Exceptions” Exceptions may include: – Humanitarian items (GFT) – Replacing parts and equipment (RPL) – Consumer communications devices (CCD) Exceptions still depend on country of destination

BIS Licensing Authorities and Process Part 748 of the EAR Register and submit via SNAP-R: https: //www. bis. doc. gov/index. php/licensing/simplifiednetwork-application-process-redesign-snap-r/snap-rinformation Track application on STELA: https: //snapr. bis. doc. gov/stela/ BIS contacts: https: //www. bis. doc. gov/index. php/2011 -09 -1215 -57 -11/contact-us

Applying for a License from BIS • Who? • Screen all parties to the transaction: https: //www. trade. gov/consolidated-screening-list • Use fuzzy search terms • Search not just for names, but for addresses and any other identifying details • • • What? (List all items/data being exported) Where? (List everywhere the export is going) When? (Convey urgency as needed) Why? (Be specific about the intended use) How? (Be specific about safeguards)

Potential Violations In preparing an application for a transaction, you may uncover evidence of a potential violation that happened in the past or is ongoing. If that happens, stay calm, carry on, but don’t ignore what you’ve learned. – Investigate the potential violation(s) – Consider whether to prepare a voluntary disclosure in conjunction with the application (15 C. F. R. § 764. 5) See also recent guidance from DOJ regarding disclosures: https: //www. justice. gov/nsd/ces_vsd_policy_2019/download

BIS Licensing Guidance FAQs: https: //www. bis. doc. gov/index. php/policyguidance/faqs Guidance for exports to individual foreign nationals: https: //www. bis. doc. gov/index. php/documents/dee med-exports/709 -guidelines-foreign-nationallicense-applications/file Advisory opinions: https: //www. bis. doc. gov/index. php/policyguidance/advisory-opinions

BIS License Processing • BIS regularly consults with other agencies, including OFAC • Delay is common: FOLLOW UP • Appeal if license is denied (15 C. F. R. Part 756) • Do not proceed with the transactions while the license application is pending

License Is Approved! Now What? Comply with recordkeeping requirements – Generally 5 -year retention period for all licenses (15 C. F. R. § 762) Changes to the license (15 C. F. R. §§ 750. 7, 750. 10) – 750. 7(c) – Lists non-material changes that don’t require a replacement license – 750. 10 – Transfer of licenses to another party Track items being shipped against the license Have written policies and procedures in place

Enforcement Actions Failures to obtain licenses for exports to individuals or entities on the Entity List: – Mohawk Global Logistics Corp. (https: //efoia. bis. doc. gov/index. php/documents/exportviolations/export-violations-2018/1193 -e 2561/file) (Aug. 6, 2018) (failure to screen entity’s full name and supervisor overrode red flag) Engaging in export transactions while applications for licenses for those transactions were still pending – Intevac (https: //efoia. bis. doc. gov/index. php/documents/exportviolations/export-violations-2014/922 -e 2365/file) (Feb. 14, 2014) Acquiring assets of company engaged in BIS violations – Litzler (https: //efoia. bis. doc. gov/index. php/documents/exportviolations/export-violations-2014/929 -e 2371/file) (Apr. 24, 2014)

Questions? Amelia Schmidt aschmidt@kaiserdillon. com