BIS More Frequently Sending Is-Informed Letters, Lawyer Says

LONDON -- The Bureau of Industry and Security is increasingly sending out is-informed letters to warn companies that some of their currently unrestricted products need an export license before they can be shipped, said Nancy Fischer, a Pillsbury trade lawyer. Some companies receiving the letters view them as unfair, Fischer said, particularly because BIS doesn’t always send similar letters to their competitors.

“We're seeing more and more of this as a tool to try to get ahead of” BIS efforts to regulate emerging technologies, Fischer said during a defense industry conference last week hosted by SAE Media.

BIS typically sends the letters to companies to inform them that specific items they are exporting -- including items that weren’t subject to controls at the time of the letter -- present national security risks and now require a license. The agency may issue these letters in advance of a formal policy change, such as when it sent is-informed letters to chip companies last year ahead of its Oct. 7 rule that placed new license requirements on a host of chip-related exports and activities involving China (see 2209010059 and (see 2209160025).

“The challenge here is that none of these things that are coming out of the is-informed letters are on the Export Control List, and they're not being treated equally for everybody,” Fischer said, adding that they present “competitive challenges.”

“If you're a company that got this letter, and maybe your competitor didn't, you might actually be sitting in a situation where” your products are restricted from going to China but your competitor’s products aren’t, Fischer said. She added that the letters are specifically targeting sensitive exports to China, including technologies involved in the quantum and semiconductor space.

“I do think this is something industry needs to have a conversation or continue to have a conversation in a lot of the expert working groups with the government to make sure that we're right-sizing the rules,” Fischer said. A BIS spokesperson didn't comment.

The Semiconductor Industry Association has objected to the letters, which forced certain chip companies to stop certain sales before last year's Oct. 7 rules were announced (see 2211040051). A BIS official recently said the agency is looking at creative ways to restrict certain low-level microelectronics exports, including those that are designated under the Export Administration Regulations as EAR99 and don’t generally require a license (see 2310020061).

Fischer also touched on sanctions and export control due-diligence, stressing the importance of catching and acting on potential red flags. Compliance mistakes may happen, she said, but it’s “important to make sure that you just don't stick your head in the sand.”

There are going to be “errors,” and compliance departments may “miss things. There's only so much you can catch if somebody's trying to be very creative in getting around the rules,” Fischer said. “But if you have information and you don't use it … that's where the risk is.”