TRADE ALERT: New Regulations for the Unverified List

By Michael Jones (michael.jones@tsiglobalconsulting.com)

Effective January 21 of this year, new trade restrictions will be implemented by the U.S. government against those on the Department of Commerce’s Unverified List.  The Unverified List is a list of foreign companies that were involved in transactions with American companies in the past but could not have their existence verified by the U.S. government.  The purpose of this list was to set up a “red flag” to encourage thorough background research by U.S. exporters to verify compliance.  However, the “red flag” merely served as a warning for exporters to use caution.

Citing concerns that the current list is too lax and the potential consequences surrounding violation of the EAR are too great, the Bureau of Industry and Security (BIS) has made alterations to the Export Administration Regulations (EAR) with respect as screening and authorization for exporting to companies on the Unverified List.  These new regulations can essentially be boiled down to three main changes.  The first, and perhaps the most important, of these changes, is the suspension of the use of ALL license exceptions for transactions involving a company on the Unverified List. 

The other changes are smaller and more procedural in nature.  Exporters will now be required to file and AES record when exporting products/software/technology subject to the EAR even in cases were a license is not required. Yes, EAR99 items will required an AES filing if there is a party to the transaction listed on the UVL.    Finally, effective January 21, 2014, U.S. companies shipping to companies on the Unverified List will need to obtain a special written end user statement from the unverified entity that confirms that they will not violate any terms or conditions subject to the EAR.

While these changes to U.S. law may help to keep goods out of the hands of unfriendly entities and unfriendly countries, it is important that U.S. companies be made aware of them.  As usual, violations of the EAR could lead to fines and penalties so be sure to be in compliance with the new rules effective January 21st.  Please visit http://www.bis.doc.gov to check the Unverified List and all of the other parties of concern lists prior to doing business with any foreign entities.  For details on the new regulations surrounding firms listed on the Unverified List we encourage you to contact TSI Global Consulting at 210-757-0618.

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