‘We only deliver locally. This isn't a US issue.’
This way of thinking can be costly: In a BIS proceeding against a limited liability company based in Germany, the core allegation is that a group company in China facilitated/arranged 13 deliveries within China (‘in-country transfers’) of unlisted EAR99 goods (a total of approximately 884 items) to a recipient on the ‘US Entity List’. However, this was done without the approval of the competent authority in the USA, the BIS (Bureau of Industry and Security). The proceedings ended in a settlement with a civil fine of USD 1,500,000.
The key lesson from a compliance perspective
The BIS emphasises that the transactions were possible, among other things, because, in its opinion, the group-wide compliance controls did not sufficiently reflect the applicability of US export controls to in-country transfers by local suppliers/distributors.
Why this often goes wrong in practice
• Sanctions list screening is understood as a ‘tool issue’ rather than a process and role model.
• EU sanctions are checked, but US sanctions lists/triggers (e.g. ‘Entity List’) are not consistently integrated into project/purchasing processes.
• ‘Local sourcing’ is mistakenly seen as risk reduction, even though the question ‘subject to the EAR?’ may still be relevant.
Note: The above statements do not constitute legal advice, but are for general information purposes only.
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