Industry News

End-User and End-Use Restrictions 101

Apr. 4, 2024
By: Marvin E. McPherson

Navigating the EAR can be very complex, there are many controls depending on the ECCN and destination that need to be reviewed prior to every export, re-export and transfer. However, there are also catch-all controls that may apply to some or all items subject to EAR, as well as specific activities of U.S. persons.

Catch-all controls are controls that impose a license requirement on the export of certain items to specific end users or for specific end uses when such items do not otherwise require a license based on their ECCN and country of destination.

General Prohibitions Five, Nine, and Ten, as well as Sections 744.2 to 744.23, covers restrictions on exports, reexports, and transfers of certain items to designated end users and for specific end uses.

    General Prohibition Five provides that an exporter “may not, without a license, knowingly export or reexport     any item subject to the EAR to an end-user or end-use that is prohibited by part 744 of the EAR.”

    General Prohibition Ninestates that an exported “may not ... violate any order issued under or made a part of     the EAR.”

    General Prohibition Ten provides that an exporter “may not sell, transfer, export, reexport, finance, order, buy, remove, conceal, store, use, loan, dispose of, transport, forward, or otherwise service, in whole or in part, any item subject to the EAR and exported     or to be exported with knowledge that a violation of the EAR, the Export Administration Act or any order, license, License Exception, or other authorization issued thereunder has occurred, is about to occur, or is intended to occur in connection with the item.”

To comply with the restrictions set forth in the general prohibitions, the EAR requires exporters to screen all parties to a transaction. Screening includes the BIS entity list, as well as eleven OFAC-administered sanctions program lists. The rule also restricts the availability of license exceptions under the EAR and establishes a presumption of denial license review policy for such transactions.

Additional to the end – user checks, the EAR requires a license for the exportation of a wide range of items with potential “dual” commercial and military use, or otherwise of strategic value to the United States (but not made to military specifications). The licenses requirements on the exports, reexports, or transfers (in-country) of all items subject to the EAR for specified end-uses in connection with the following:

    § 744.3 Restrictions on certain rocket systems (including ballistic missiles, space launch vehicles and sounding rockets), and unmanned aerial vehicles (including     cruise missiles, target drones and reconnaissance drones) end-uses.

    § 744.4 Restrictions on certain chemical and biological weapons end-uses.

    § 744.5 Restrictions on certain maritime nuclear propulsion end-uses.

    § 744.7 Restrictions on certain exports to and for the use of certain foreign vessels or aircraft.

    § 744.9 Restrictions on exports, reexports, and transfers (in-country) of certain cameras, systems, or related components.

    § 744.17 Restrictions on certain exports, reexports and transfers (in-country) of microprocessors and associated “software” and “technology” for “military end uses”     and to “military end users.”

    § 744.21 Restrictions on certain “military end uses” or “military end users.”

    §744.22 Restrictions on exports, reexports, and transfers (in-country) to certain military-intelligence end uses or end users.

    §744.23 “Supercomputer,” “advanced-node integrated circuits,” and semiconductor manufacturing equipment end use controls.

Exports, reexports, or transfers to ultimate consignee with the above end-use controls without a license, are likely to result in hefty fines, a ban of exports, and jail time.

When navigating the EAR, it is important to review not only each control listed within an ECCN, but also each catch-all control as well. Ensuring the proper order of review for each transaction ensures compliance with the EAR regulations. If your company needs assistance to navigate the complexities of export, reexport, and transfer activities subject to the specified prohibitions and license requirements, please contact any attorney at Barnes Richardson and Colburn.