Temporary General License for BIS 50% Rule Is ‘Very Limited,’ Law Firm Says
The 60-day temporary general license in the Bureau of Industry and Security's new 50% rule (see 2509290017) is “very limited” and could push exporters to apply for licenses “on an expedited basis to avoid noncompliance,” Morgan Lewis said in a client alert.
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The firm noted that the license is generally available for certain transactions involving nations in Country Group A:5 or A:6, and it’s “under no circumstances available for exports, reexports, or transfers" involving Country Group E:1 or E:2, which includes Cuba, Iran, North Korea and Syria.
For all other exports, including for Country Group D:5 countries such as China or Country Group B countries such as Malaysia or Singapore, Morgan Lewis said the TGL “is only available where the 50% or more entity is ‘a joint venture with a non-listed entity headquartered in the United States or [a country in] Country Group A:5 or A:6 that is not [itself] owned 50 percent or more, directly or indirectly, individually or in [the] aggregate, by one or more listed entities on the Entity List or the MEU List or entities subject to [either Lists’] restricts based on [that entity’s] ownership.’”
This means, for example, that a non-listed Chinese subsidiary of an Entity Listed company -- which isn’t in a joint venture with a Western company -- isn’t eligible for the TGL, Morgan Lewis said. “Exports to that non-listed Chinese subsidiary now require an export license.”
“The bottom line is that, for entities caught by the new Affiliate Rule, this TGL is likely to be just as, if not more, limited in applicability as it is already limited in time,” the firm said. “Additionally, BIS reminds parties who might take advantage of this TGL that they must also comply with all other applicable provisions of the EAR.”