The Nuclear Option: BIS's Power to Deny Export Privileges

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Jun. 18, 2024
By: Marvin E. McPherson

BIS is clearly educating and warning exporters that it has and will use its export denial powers for those that do not follow the EAR or for national security reasons. As exampled in BIS’s new published final rule and USGoBuy LLC’s denial order.

BIS published a final rule that adds further restrictions to Russian and Belarusian industry sector sanctions. Within the final rule BIS confirmed criteria used when revising, suspending, or revoking EAR license exceptions. The rule emphasized that BIS may revise, suspend, or revoke a license exception, in whole or in part, without notice. Specifically, the final rule adds specific examples to the EAR of transaction that may give rise to a license revocation such as: 

1.     A particular foreign airline that changes its ownership structure to circumvent the national security and foreign policy objectives underlying the restrictions on the use of License Exception AVS for temporary sojourns to Russia.

2.     A company under investigation for fraudulent use of license exceptions on export control documents to avoid scrutiny of its shipments.

3.     Transactions involving countries as exampled by Hong Kong (85 FR 45998, July 31, 2020), Burma (86 FR 1373, March 8, 2021).  

The examples continue with USGoBuy LLC, BIS imposed a three-year denial order against the Portland, Oregon company. The denial order revokes USGoBuy LLC’s ability to participate in all exports under BIS jurisdiction from the United States. 

The denial order stems from noncompliance of a settlement order that USGoBuy entered into in 2021.  The settlement order alleges that USGoBuy exported riflescopes classified under ECCN 0A987.a from the U.S. to United Arab Emirate (UAE) and Chine without a license. Under the denial order, BIS alleges that USGoBuy continued to commit violations under the EAR and failed to adhere to the terms within its settlement agreement.

The examples from BIS make it clear, violations of the EAR, a settlement and national security risk may and can result in a denial order of export rights under the EAR. While § 764.3(a)(2) has been on the books for a while, BIS is really looking to this sanctions authority to add more bite for those egregious offenders.

If you have any question or need assistance in navigating the EAR, please contact any attorney at Barnes Richardson and Colburn.