Blocked person listings and the ownership rule, country programs and general licenses, specific license applications, export classification and jurisdiction, deemed exports, end-use screening, voluntary disclosure and penalties.
Defense articles and defense services described on the United States Munitions List at 22 CFR 121.1 are controlled under the International Traffic in Arms Regulations, administered under authority of 22 U.S.C. 2778. Items not described there may be subject to the Export Administration Regulations at 15 CFR 730 to 774. The order of review in 22 CFR 120.11 directs a reader to the munitions list first, and a commodity jurisdiction request resolves genuine doubt.
The export rules impose prohibitions that operate independently of an item's classification. Restricted party lists identify entities to which specified transactions require authorization or are denied outright. End-use prohibitions in 15 CFR Part 744 apply where an exporter knows or has reason to know that an item is intended for a prohibited use or user. Knowledge includes awareness of a high probability, so unresolved warning signs can supply the required state of mind.
Under the International Emergency Economic Powers Act at 50 U.S.C. 1701 to 1707 and the regulations in 31 CFR Chapter V, property and interests in property of a designated person that come within the United States or within the possession or control of a United States person are blocked. Blocked property may not be transferred, paid, exported, withdrawn or otherwise dealt in. Holders must report blocked property and rejected transactions within the periods the regulations fix.
Where no exemption or general authorization covers conduct that a sanctions program prohibits, the route is an application for a specific license under 31 CFR 501.801 and 501.802. The application must identify the parties, describe the transaction in full and attach supporting documentation, and the office may require further information before deciding. A license authorizes only the described activity, on the conditions stated, and does not excuse conduct that has already occurred.
Because property in which a blocked person has an interest is itself blocked, an entity owned fifty percent or more in the aggregate, directly or indirectly, by one or more blocked persons is treated as blocked even though it is not named on any list. Ownership interests held by several blocked persons are added together, and the rule passes down through chains of ownership. Control without ownership does not trigger the rule but carries substantial risk.
Under 15 CFR 734.13 an export includes releasing or otherwise transferring technology or source code to a foreign person in the United States. Section 734.15 defines release to include visual inspection that reveals the technology and oral or written exchange of information. The arms regulations treat a release of technical data to a foreign person in the United States as an export in the same way. The license requirement is assessed against the person's country rather than against any shipment.
Sanctions programs prohibit United States persons from approving, financing, facilitating or guaranteeing a transaction by a foreign person where that transaction would be prohibited if performed by a United States person. Some programs go further and apply directly to foreign entities owned or controlled by United States persons. A separate theory reaches any person, of any nationality, who causes a United States person to violate a prohibition.
Programs in 31 CFR Chapter V take two basic forms. A comprehensive program prohibits most trade and financial dealings involving a country or region, regardless of who the counterparty is, and permits activity only through general or specific authorizations. A list-based program prohibits dealings with designated persons and their majority-owned entities, leaving the rest of the economy open. Directives form a third design, prohibiting defined categories of dealing with named entities.
The first question is whether an item is subject to the Export Administration Regulations at all, which 15 CFR 734.3 answers by reference to location, origin, United States content and the direct product rules. If it is, the item either matches an entry on the Commerce Control List, giving it a control number, or it does not and is designated EAR99. The control number, read against the country chart, determines whether authorization is required.
A general license is an authorization published in the regulations that permits described conduct without an application. It operates automatically for transactions meeting its terms and not at all for anything outside them. Standard exclusions provide that a general license does not authorize dealings with blocked persons, debits to blocked accounts, or exports requiring authorization from another agency. Anyone relying on one must keep records sufficient to show that every condition was met.
The Economic Sanctions Enforcement Guidelines treat a voluntary self-disclosure as a significant mitigating factor and substantially reduce the base penalty amount where one is made. A disclosure is not voluntary if the government or a third party has already reported the conduct or an inquiry is under way. The export regulations at 15 CFR 764.5 and the arms regulations at 22 CFR 127.12 have their own disclosure procedures, each requiring prompt initial notification followed by a full account.
