New EAR restrictions on SDNs; OFAC designates German entities

//  Beachten Sie zum Thema auch den ausführlichen Beitrag von Alexandra López-Casero sowie Christopher D. Grigg und David F. Crosby (Nixon Peabody LLP)

BIS’s revision of part 744
BIS’ final rule makes changes to part 744 of the EAR to add and expand end-user controls on specific persons designated by OFAC under a total of 14 of OFAC’s sanctions programs. With this final rule, effective on March 21, BIS revises part 744 of the EAR by introducing licensing restrictions on the export, reexport, and transfer (in-country) involving all items subject to the EAR in which persons designated under specified OFAC sanctions programs are party to the transaction. Further, it consolidates already existing licensing requirements regulated in part 740 and part 746 in a single section under § 744.8. It also removes a total of four end-user control provisions under part 744, namely §§ 744.12, 744.13, 744.14, and 744.18, and adds their substance to § 744.8.

§ 744.8 will apply to any reexport or transfer (in-country) transaction that is not subject to regulation by OFAC, including due to the fact that the transaction does not involve U.S. persons or the U.S. financial system. These new license requirements will apply broadly to all items subject to the EAR. There will also be a prohibition on the use of any license exceptions, although the EAR authorization requirements will take into account OFAC general licenses and exemptions.

This means that if OFAC issues a general license or specific license that authorizes a transaction with or involving a person blocked under the applicable OFAC regulations or such transaction is otherwise exempt from OFAC’s regulations, then no additional BIS authorization is required. Applications will be reviewed under a restrictive presumption of denial review policy. Please note that a BIS license would still be required for exports, reexports, or transfers (in-country) that implicate other parts of the EAR, including parts 742 and 746, as well as supplement no. 4 to part 744 or other end-use or end-user controls.

For example, this means that a replacement part that, based on its EAR classification and HTS code, would normally not be controlled for the export to e.g., China, would require a BIS license if destined for a Chinese end-user designated on the SDN List, regardless of OFAC’s primary and secondary sanctions implications.

OFAC’s designation of an Iranian-German dual citizen

OFAC designated the Germany-based dual Iranian-German national Maziar Karimi on its SDN-list. Karimi has procured epoxy resin and other items for Iran’s IRGC ASF. Germany-based Mazixon GmbH and Co KG is majority-owned and directed by Karimi. Karimi is also the managing director and majority owner of the Germany-based firm Mazixon Verwaltungs GmbH. Karimi’s companies trade and broker industrial machinery, technical products, spare parts and other industrial products.

These new developments do not introduce major changes to the due diligence processes that most companies already have in place; however, it is important for everyone to understand that potential transactions involving specific SDN-designated persons will not only have primary or secondary sanctions implications under the OFAC sanctions programs but could also result in a violation of the EAR.