BIS proposes rule requiring more compliance from exporters
The U.S. Bureau of Industry and Security (BIS), part of the Department of Commerce, has issued a proposed rule that requires increased compliance from all exporters of goods, and also broadens the liability of exporters and their exposure to enforcement actions for non-compliance with U.S. export control requirements.
The proposal would amend the Export Administration Regulations (EAR) by lowering the threshold for determining when an exporter has 'knowledge' that an export transaction may violate the EAR. The current definition of 'knowledge' in Section 772.1 of the EAR encompasses 'not only positive knowledge that a circumstance exists or is substantially certain to occur, but also an awareness of a high probability of existence or future occurrence. Such awareness is inferred from evidence of the conscious disregard of facts known to a person, and is also inferred from a person's willful avoidance of facts.'
'This proposed rule would amend the definition of 'knowledge' in four ways, incorporating a 'reasonable person' standard, replacing the phrase 'high probability' with the phrase 'more likely than not,' adding the phrase 'inter alia' to the description of the facts and circumstances that could make a person aware of the existence or future occurrence of a fact, and eliminating the phrase 'known to the person,' ' BIS said in a statement.
That will place a greater compliance burden on exporters, holding them to a higher 'reasonable person' standard to ensure their shipments are not diverted to a proscribed or inappropriate end-user.
The proposal would also increase from 12 to 23 the number of circumstances regarding an export transaction that are identified as presenting a 'red flag.' The new rule expands the scope of red flags to include typical export elements, such as if a trading company is listed as the ultimate consignee, or has a post office box as an address.
In addition, the new BIS proposal would establish another regulatory hurdle by creating a 'safe harbor' provision that would require exporters to seek advice from BIS regarding any potential red flag, and then wait 45 days for BIS review. Only by doing so will an exporter be protected from any enforcement action that might arise from a red flag export. Otherwise, the exporter would be deemed to have had 'knowledge' that the export violated the EAR.
An exporter cannot apply for a license 'relating to the same situation' during the 45-day review period. 'Such license applications will be returned without action,' said BIS, which could further delay the export of goods.
The public has until Nov. 12 to comment on the proposed BIS rule. Comments can be sent to the federal e-rulemaking portal, https://www.regulations.gov, and must include regulation identification number 0694-AC94.
For more information, contact William Arvin in the BIS office of exporter services, at (202) 482-2440 or warvin@bis.doc.gov.
BIS proposes rule requiring more compliance from exporters
