Document ID: BIS-2020-0027-0001
Agency: bis
Document Type: Rule
Title: Clarification of Entity List Requirements for Listed Entities When Acting as a Party to the Transaction Under the Export Administration Regulations
Posted Date: 2020-08-20T04:00Z

[Federal Register Volume 85, Number 162 (Thursday, August 20, 2020)]
[Rules and Regulations]
[Pages 51335-51337]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17908]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 744

[Docket No. 200810-0211]
RIN 0694-AI19

Clarification of Entity List Requirements for Listed Entities 
When Acting as a Party to the Transaction Under the Export 
Administration Regulations (EAR)

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Final rule.

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SUMMARY: In this final rule, the Bureau of Industry and Security (BIS) 
is clarifying the supplemental license requirements for parties listed 
on the Entity List pursuant to the Export Control Reform Act of 2018 
(ECRA). Specifically, this final rule clarifies the Entity List's 
supplemental licensing requirements to state that these end-user 
controls apply to any listed entity when that entity is acting as a 
purchaser, intermediate or ultimate consignee, or end-user as defined 
in the Export Administration Regulations (EAR).

DATES: This rule is effective August 17, 2020.

FOR FURTHER INFORMATION CONTACT: Chair, End-User Review Committee, 
Office of the Assistant Secretary for Export Administration, Bureau of 
Industry and Security, Department of Commerce, Phone: (202) 482-5991, 
Fax: (202) 482-3911, Email: ERC@bis.doc.gov.

SUPPLEMENTARY INFORMATION:

Background

    The Entity List (Supplement No. 4 to part 744 of the Export 
Administration Regulations (EAR)) identifies entities for which there 
is reasonable cause to believe, based on specific and articulable 
facts, that the entities have been involved, are involved, or pose a 
significant risk of being or becoming involved in activities contrary 
to the national security or foreign policy interests of the United 
States. The EAR (15 CFR parts 730-774) impose additional license 
requirements on, and limit the availability of most license exceptions 
for, exports, reexports, and transfers (in-country) to listed entities. 
The license review policy for each listed entity is identified in the 
``License review policy'' column on the Entity List and the impact on 
the availability of license exceptions is described in the relevant 
Federal Register notice adding entities to the Entity List. BIS places 
entities on the Entity List pursuant to part 744 (Control Policy: End-
User and End-Use Based) and part 746 (Embargoes and Other Special 
Controls) of the EAR.
    The End-User Review Committee (ERC), composed of representatives of 
the Departments of Commerce (Chair), State, Defense, Energy and, where 
appropriate, the Treasury, makes all decisions regarding additions to, 
removals from, or other modifications to the Entity List. The ERC makes 
all decisions to add an entry to the Entity List by majority vote and 
all decisions to remove or modify an entry by unanimous vote. The ERC 
approved the clarifications of the Entity List requirements in this 
rule, which will apply to all current entities on the Entity List and 
subsequent additions and modifications to the Entity List.

Clarification of Entity List Requirements

    As referenced above, Sec.  744.11(a) of the EAR sets forth 
supplemental license requirements applicable to exports, reexports, and 
transfers (in-country) to entities listed on the Entity List, which 
have been involved, are involved, or pose a significant risk of being 
or becoming involved, in activities contrary to the national security 
or foreign policy interests of the United States. In contrast to other 
provisions of the EAR (i.e., Sec. Sec.  740.2(a)(17), 744.15(b), and 
758.1(b)(8)) that set forth restrictions applicable to exports, 
reexports, and transfers (in-country) to which a person listed on the 
Unverified List (See: Supplement No. 6 to part 744 of the EAR) is a 
party to the transaction, Sec.  744.11(a) imposes supplemental license 
requirements on exports, reexports, and transfers (in-country) to 
entities listed on the Entity List. Prior to publication of this final 
rule, Sec.  744.11 did not explicitly address circumstances in which a 
listed entity may be playing a role other than consignee or end-user in 
the transaction, e.g., a purchaser or intermediate consignee.
    However, since the first set of additions pursuant to Sec.  744.11 
on September 22, 2008 (73 FR 54503), Entity List rules published 
through 2019 typically included a sentence in the Background section of 
the rules that described the Entity List license requirements and 
limitations on the use of license exceptions. The purpose of this 
sentence was to alert exporters, reexporters, and transferors that BIS 
intended these requirements to apply to those listed entities when 
acting as any party to the transaction. The sentence specified that,

    The license requirements apply to any transaction in which items 
are to be exported, reexported, or transferred (in-country) to any 
of the persons or in which such persons act as purchaser, 
intermediate consignee, ultimate consignee, or end-user.

    Since 2019, BIS has evaluated how to revise the EAR to better 
clarify that Entity List license requirements, as specified on the 
Entity List, are intended to apply to listed entities regardless of 
their role as a party to a transaction.
    This final rule amends the regulatory text to clarify that Entity 
List license requirements apply to entities on the Entity List, not 
only when they are party to a transaction as either an ultimate 
consignee or end-user, but also when they are party as a purchaser or 
intermediate consignee.
    Consistent with the authority granted under Sec.  4812(c) of ECRA, 
BIS is amending Sec. Sec.  744.11 and 744.16 of the EAR and the 
introductory text of the Entity List in Supplement No. 4 to part 744 to 
specify that the Entity List

[[Page 51336]]

requirements apply to all entities involved in a transaction subject to 
the EAR as described in Sec.  748.5(c)-(f) of the EAR. These changes 
will make clear for exporters, reexporters, and transferors the scope 
of the Entity List's licensing requirements to effect the purpose of 
the Entity List.
    As BIS has noted in the answers to frequently asked questions on 
its website, freight forwarders and other ``intermediate consignees'' 
may have access to items subject to the EAR, which creates a risk of 
diversion when such entities are listed on the Entity List. Similarly, 
a ``purchaser'' may coordinate all aspects of the purchase of items 
subject to the EAR from specifying the exporter, reexporter, or 
transferor, including designating the ultimate consignee who will 
receive the goods, to specifying the logistical arrangements made to 
effect delivery of the items to the ultimate consignee. Accordingly, 
when a person is listed on the Entity List, that person's participation 
as a purchaser or intermediate consignee in an export, reexport, or 
transfer (in-country) of items subject to the EAR presents a risk that 
the person's involvement in a transaction may circumvent the basis for 
their inclusion on the Entity List.
    These clarifications to the Entity List requirements align with 
other end-user controls under the EAR. Specifically, as noted above, 
this language revision is consistent with EAR controls pursuant to 
Sec.  744.15(b), which set forth restrictions applicable to exports, 
reexports, and transfers (in-country) involving persons listed on the 
Unverified List. BIS has determined that aligning the language of the 
Entity List and Unverified List requirements should ease the compliance 
burden on exporters, reexporters, and transferors because it will 
eliminate any confusion in interpretation of these two end-user control 
lists.

Changes Made to the EAR

    In this final rule, BIS is revising Sec.  744.11(a) of the EAR to 
specify that supplemental license requirements for entities included on 
the Entity List apply regardless of the role that the listed entity has 
in the transaction (i.e., purchaser, intermediate consignee, ultimate 
consignee or end-user). The definitions of ``purchaser,'' 
``intermediate consignee,'' ``ultimate consignee,'' and ``end-user'' 
are defined in Sec.  748.5(c)-(f) and part 772 of the EAR.
    Also in Sec.  744.11(a), BIS is removing text indicating that the 
scope of the license requirements apply only to an entity listed on the 
Entity List ``in an entry that contains a reference to this section.'' 
BIS is removing this text because it is not consistent with the current 
practice of including references in Entity List entries to other parts 
of the EAR that set forth the scope of the supplemental license 
requirements and license review policies applicable to those entities. 
This final rule also makes conforming changes to the remainder of Sec.  
744.11.
    BIS is also revising Sec.  744.16(a) of the EAR, which similarly 
clarifies that the supplemental license requirements applicable to 
exports, reexports, and transfers (in-country) to entities listed on 
the Entity List, including on the basis of other sections of parts 744 
(e.g., Sec. Sec.  744.2, 744.3, and 744.4) and 746. In keeping with the 
revision to Sec.  744.11(a) described above, BIS is also clarifying 
that the license requirement described in Sec.  744.16(a) applies 
whenever an entity listed on the Entity List is a party to the 
transaction as defined in Sec.  748.5(c)-(f) of the EAR.
    Finally, BIS is replacing the reference to ``items listed in an 
entry on the Entity List'' in Sec.  744.16(a) of the EAR with a 
reference to the License Requirement column on the Entity List. BIS is 
making this change because the License Requirement column describes 
which items subject to the EAR require a license when an entity 
involved in a transaction is listed on the Entity List.

Export Control Reform Act of 2018

    On August 13, 2018, the President signed into law the John S. 
McCain National Defense Authorization Act for Fiscal Year 2019, which 
included the Export Control Reform Act of 2018 (ECRA), 50 U.S.C. 4801-
4852. ECRA provides the legal basis for BIS's principal authorities and 
serves as the authority under which BIS issues this rule.

Rulemaking Requirements

    1. Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been determined to be not significant for 
purposes of Executive Order 12866. This rule is not an Executive Order 
13771 regulatory action because this rule is not significant under 
Executive Order 12866.
    2. Notwithstanding any other provision of law, no person is 
required to respond to nor be subject to a penalty for failure to 
comply with a collection of information, subject to the requirements of 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), unless 
that collection of information displays a currently valid Office of 
Management and Budget (OMB) Control Number. This regulation involves 
collections previously approved by OMB under control number 0694-0088, 
Simplified Network Application Processing System, which includes, among 
other things, license applications and carries a burden estimate of 
42.5 minutes for a manual or electronic submission. BIS expects this 
rule will slightly increase the number of license applications required 
to be submitted to BIS each year by clarifying that the existing Entity 
List requirements apply to exports, reexports, and transfers (in-
country) in which an entity listed on the Entity List acts as any party 
to the transaction, which will now include when the listed entity is a 
purchaser or intermediate consignee. BIS estimates the total number of 
additional license applications will not exceed 25 per year, for a 
total increase in public burden under OMB control number 0694-0088 of 
no more than 17 hours and 40 minutes per year. Any comments regarding 
the collection of information associated with this rule, including 
suggestions for reducing the burden, may be sent to Jasmeet K. Seehra, 
Office of Management and Budget (OMB), by email to 
Jasmeet_K._Seehra@omb.eop.gov, or online at https://www.reginfo.gov/public/do/PRAMain.
    3. This rule does not contain policies with Federalism implications 
as that term is defined in Executive Order 13132.
    4. Pursuant to Sec.  1762 of the Export Control Reform Act of 2018 
(50 U.S.C. 4801-4852), which was included in the John S. McCain 
National Defense Authorization Act for Fiscal Year 2019, this action is 
exempt from the Administrative Procedure Act (5 U.S.C. 553) 
requirements for notice of proposed rulemaking, opportunity for public 
participation, and delay in effective date.
    5. Because a notice of proposed rulemaking and an opportunity for 
public comment are not required to be given for this rule by 5 U.S.C. 
553, or by any other law, the analytical requirements of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., are not applicable. 
Accordingly, no

[[Page 51337]]

regulatory flexibility analysis is required and none has been prepared.

List of Subjects in 15 CFR Part 744

    Exports, Reporting and recordkeeping requirements, Terrorism.

    Accordingly, part 744 of the Export Administration Regulations (15 
CFR parts 730-774) is amended as follows:

PART 744--CONTROL POLICY: END-USE AND END-USER BASED

0
1. The authority citation for part 744 is revised to read as follows:

    Authority:  50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50 
U.S.C. 1701 et seq.; 22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a; 22 
U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. 12058, 43 FR 20947, 3 CFR, 
1978 Comp., p. 179; E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 
608; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 13026, 
61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13099, 63 FR 45167, 3 
CFR, 1998 Comp., p. 208; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., 
p. 783; E.O. 13224, 66 FR 49079, 3 CFR, 2001 Comp., p. 786; Notice 
of September 19, 2019, 84 FR 49633 (September 20, 2019); Notice of 
November 12, 2019, 84 FR 61817 (November 13, 2019).

0
2. Section 744.11 is amended by revising paragraph (a) to read as 
follows:

Sec.  744.11  License requirements that apply to entities acting 
contrary to the national security or foreign policy interests of the 
United States.

* * * * *
    (a) License requirement, availability of license exceptions, and 
license application review policy. A license is required, to the extent 
specified on the Entity List, to export, reexport, or transfer (in-
country) any item subject to the EAR when an entity that is listed on 
the Entity List is a party to the transaction as described in Sec.  
748.5(c) through (f). License exceptions may not be used unless 
authorized in the Entity List entry for the entity that is party to the 
transaction. Applications for licenses required by this section will be 
evaluated as stated in the Entity List entry for the entity that is 
party to the transaction, in addition to any other applicable review 
policy stated elsewhere in the EAR.
* * * * *

0
3. Section 744.16 is amended by revising paragraph (a) to read as 
follows:

Sec.  744.16   Entity List.

* * * * *
    (a) License requirements. In addition to the license requirements 
for items specified on the Commerce Control List (CCL), you may not, 
without a license from BIS, export, reexport, or transfer (in-country) 
any items included in the License Requirement column of an entity's 
entry on the Entity List (supplement No. 4 to this part) when that 
entity is a party to a transaction as described in Sec.  748.5(c) 
through (f) of the EAR. The specific license requirement for each 
listed entity is identified in the license requirement column on the 
Entity List in Supplement No. 4 to this part.
* * * * *

0
4. Supplement No. 4 to part 744 is amended by revising the introductory 
text of the supplement to read as follows:

Supplement No. 4 to Part 744--Entity List

    This Supplement lists certain entities subject to license 
requirements for specified items under this part 744 and part 746 of 
the EAR. License requirements for these entities include exports, 
reexports, and transfers (in-country) unless otherwise stated. A 
license is required, to the extent specified on the Entity List, to 
export, reexport, or transfer (in-country) any item subject to the 
EAR when an entity that is listed on the Entity List is a party to 
the transaction as described in Sec.  748.5(c) through (f). This 
list of entities is revised and updated on a periodic basis in this 
Supplement by adding new or amended notifications and deleting 
notifications no longer in effect.
* * * * *

Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 2020-17908 Filed 8-17-20; 2:30 pm]
BILLING CODE 3510-33-P