Law Firm: Questions Remain About BIS 50% Rule Diligence, License Decisions
The Bureau of Industry and Security's recently issued FAQs for its new Affiliates Rule (see 2509290017) are “helpful in clarifying the scope” of the rule, but they also leave some “burning” questions unanswered, ArentFox said in a client alert.
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The law firm said it’s still unclear about the “level of due diligence” that BIS expects when “exporters do not have any indication that they are dealing with an entity that has problematic ownership.” BIS has said only that if an exporter can’t calculate the exact ownership breakdown of a potential customer that it knows is minority-owned by a listed party, the exporter needs to look at other factors besides ownership, such as “overlapping board membership or other indicia of control,” that could present a red flag (see 2510020012).
ArentFox also asked how BIS will adjudicate export license applications if the agency -- like the applicant -- can’t determine the exact ownership percentages of an entity. BIS has said that if it can determine that the foreign entity is not owned 50% or more by a listed party, it will inform the applicant that a license isn’t required. It may also issue public guidance, including a FAQ on its website, “to advise other exporters of such determination,” the BIS rule says.
ArentFox said it's “hopeful for more guidance from BIS in the future.”
A BIS spokesperson didn’t respond to a request for comment.