List of Unverified Persons in Foreign Countries, Guidance to Exporters as to “Red Flags”

AGENCY:

Bureau of Industry and Security, Commerce.

ACTION:

Notice.

SUMMARY:

As part of its preventive enforcement efforts, the Bureau of Industry and Security (“BIS”) conducts pre-license checks (“PLC”) and post-shipment verifications (“PSV”) on certain export transactions. This notice sets forth a list of persons in foreign countries who were parties in past transactions where PLCs or PSVs could not be conducted for reasons outside the control of the U.S. Government. This notice also advises exporters that the involvement of a listed person as a party to a proposed transaction constitutes a “red flag” as described in the guidance set forth in Supplement No. 3 to 15 CFR part 732. Under that guidance, the “red flag” requires heightened scrutiny by the exporter before proceeding with a transaction in which a listed person is a party.

DATES:

This notice is effective June 14, 2002.

FOR FURTHER INFORMATION CONTACT:

Thomas W. Andrukonis, Office of Enforcement Analysis, Bureau of Industry and Security, Telephone: (202) 482-4255.

SUPPLEMENTARY INFORMATION:

Background

In administering export controls under the Export Administration Regulations (15 CFR parts 730 to 774) (EAR), BIS carries out a number of preventive enforcement activities with respect to individual export transactions. Such activities are intended to assess diversion risks, identify potential violations, verify end-uses, and determine the suitability of end-users to receive U.S. commodities or technology. In carrying out these activities, BIS officials, or officials of other federal agencies acting on BIS's behalf, selectively conduct pre-licence checks (“PLCs”) to verify the bona fides of the transaction and the suitability of the end-user or ultimate consignee. In addition, such officials sometimes carry out post-shipment verifications (“PSVs”) to ensure that U.S. exports have actually been delivered to the authorized end-user, are being used in a manner consistent with the terms of a license or license exception, and are otherwise consistent with the EAR.

In certain instances BIS officials, or other federal officials acting on BIS's behalf, have been unable to perform a PLC or PSV with respect to certain export control transactions, for reasons outside the control of the U.S. Government (including a lack of cooperation by the host government authority, the end-user, or the ultimate consignee). This notice sets forth a list of certain foreign end-users and consignees involved in such transactions. The list is called the “Unverified List.”

The inability of BIS to verify the nature of the activities, or suitability, of any end-user or consignee involved in an export transaction can raise concerns about the bona fides of such person, and that person's suitability for participation in future transactions subject to the EAR. Accordingly, this notice also advises exporters that the participation of a person on the Unverified List in any proposed transaction will be considered by BIS to raise a “red flag” for purposes of the “Know Your Customer” guidance set forth in Supplement No. 3 to 15 CFR part 732. Under that guidance, whenever there is a “red flag,” exporters have an affirmative duty to inquire, verify, or otherwise substantiate the proposed transaction to satisfy themselves that the transaction does not involve a proliferation activity prohibited by part 744, and does not violate other provisions of the EAR.

The listing of a person on the Unverified List does not equate to a licensing requirement such as that imposed on persons included on the Entities List in 15 CFR part 744. If an exporter can satisfy himself that the transaction does not involve a proliferation activity and does not violate any other provision of the EAR, the exporter may proceed with the transaction notwithstanding the inclusion of the person on the Unverified List. If an exporter continues to have reasons for concern after the inquiry, the exporter should refrain from such transaction or submit all relevant information to BIS in the form of an application for a license or a request for an advisory opinion.

Periodically, BIS will add persons to the Unverified List based on the criteria set forth above, and remove the names of persons from the Unverified List when warranted. Moreover, BIS may add to the Unverified List names of persons that BIS discovers are affiliated with a person on the Unverified List by virtue of ownership, control, position of responsibility, or other affiliation or connection in the conduct of trade or business. Any person on the Unverified List may request that BIS review its inclusion on the Unverified List by filing an appeal in accordance with 15 CFR part 756.

The “Unverified List” is set forth below.