Adding Only Addresses to Entity List Could Cause Screening Challenges, Industry Says

A new strategy by the Bureau of Industry and Security to add a set of addresses -- instead of company names -- to the Entity List could lead to screening challenges for exporters, industry officials told the agency this week.

In its latest set of Russia-related export controls announced June 12 (see 2406120036), BIS added eight addresses in China to the Entity List for posing a “high diversion risk.” The agency said the addresses belong to service providers, such as temporary office spaces, that shell companies “repeatedly” use to illegally buy or ship export controlled items, and some of those addresses appear multiple times on the Entity List or Unverified List under different company names.

The change could lead to compliance hurdles, industry officials said during a June 18 Regulations and Procedures Technical Advisory Committee meeting. One official said their company would face difficulties screening for an address because the business doesn’t always collect that information at the point of a sale.

Mark Renfeld, senior export compliance manager at Hewlett Packard, said some compliance officers rely on the entity’s name, not the address, to trigger a match to a government denied party list.

“So now, when suddenly the address is the screening criteria, it requires every single order to be manually screened until we have an [information technology] solution,” he said during the meeting. “We're just trying to decide: Is this a temporary problem, or is this the shape of things to come, and we need to spend some money on an IT solution?”

Hillary Hess, director of the BIS regulatory policy division, said “it’s hard to tell.” She said the additions of addresses to the list are designed to “get at the shell company problem” -- companies that repeatedly change their names, or that set up shell businesses, to try to avoid being caught by strict Entity List license requirements.

“That's been a problem since I got here 36 years ago, and it'll probably be a problem” in the future, Hess said. “So in that sense, I would not consider it the end of it.”

In its June 12 Federal Register notice that added the addresses, BIS said it has traditionally avoided listing the names of the service providers because they usually don't appear on export control paperwork and may not be known to the seller of export-controlled items. "This rule is intended to address those situations by enabling BIS to publish high diversion risk addresses on the Entity List," the agency said, "thus triggering a license requirement for all entities who use that address."

Hess said BIS hadn’t yet received any formal industry feedback on this issue, but she encouraged companies to submit comments to her division at rpd2@bis.doc.gov.

“It's early yet. I think it is going to be an adjustment,” she said. “We’d be interested in hearing about the challenges.”