Pandemic Continuing to Cause End-Use Check Challenges, Officials Say

Catherine Hamilton, the licensing director for the State Department’s Directorate of Defense Trade Controls, said companies in some countries still won't meet in person, which can sometimes be a necessary component of an end-use check. “Our embassy has been able to conduct some end-use monitoring, but folks aren't necessarily open to having folks come onto their factory floors and everything else,” Hamilton said during a Feb. 9 event hosted by Content Enablers. She said that has led to “some delays” in verifying end-users.

The agency may sometimes place a high importance on on-site checks for certain exports, she said, but other times phone interviews are sufficient. “We've had to deal with that for sure,” Hamilton said.

The Bureau of Industry and Security has faced some similar issues, including for end-use checks in China, said Matt Borman, BIS’s undersecretary for export administration. He said the agency typically places a request with the Chinese commerce ministry to conduct end-use monitoring and waits for the government to schedule the checks.

“In some cases there are various challenges, COVID and otherwise,” Borman said during the event. “Obviously, the COVID situation made doing those checks in person more challenging, but we’re continuing to work with” China to get those “in-person or on-site end-use checks scheduled and concluded.”

BIS this week added 33 entities to its Unverified List, which includes people, companies, universities and other parties that BIS hasn’t been able to verify as legitimate and reliable receivers of controlled U.S. exports (see 2202070012). Borman said BIS had “long-standing” requests to conduct end-use checks for the 33 entities -- all of which are based in China -- that never were fulfilled. “For a variety of reasons,” he said, “we were unable to conduct them.”

BIS officials and trade lawyers have recently stressed the importance of customer due diligence to exporters, especially for items subject to BIS's military end-use and end-user rules (see 2202030025). Borman said the agency expects exporters to look through open-source information or “any other indications that might suggest that the item or the product being requested might be for a military use,” either because of its capabilities or some “other indication” related to the customer.

“We recognize that there may be information available to the government that's not available to the public,” Borman said. But he said exporters should at least review the “specific capability of the item as well as the various facts around the transaction, including but not limited to open source information on the prospective customer.” The agency also has encouraged exporters to submit a license application or an advisory opinion request if they are unsure whether their export is subject to the MEU controls.

Borman and Hamilton also said they are closely monitoring tensions between Russia and Ukraine, including whether the agencies will be called upon to implement export control measures. Hamilton said she’s “trying to figure out what is next in that arena, if anything,” from a DDTC perspective. Borman said the administration is putting together an “export control part” of a broader sanctions package against Russia, which has been previewed by senior administration officials (see 2201250042).

Borman called the potential controls “the biggest outstanding issue” facing the agency, adding that the restrictions would cover “certain key sectors and do it in a way that not only covers direct exports, but exports from” other countries. “This would be quite an extensive expansion of export control restrictions for Russia,” he said.