One of several lists administered by the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) is the lesser-known Unverified List (“UVL”). While persons may be added to BIS’s better known Entity List for involvement in activities that are contrary to U.S. national security or foreign policy interests, the regulatory reasons UVL additions are more innocuous in nature. Nevertheless, being added to the UVL can have significant repercussions for the targeted person’s ability to acquire any commodities, software, technology (“items”) that are subject to BIS’s Export Administration Regulations (“EAR”)—i.e., U.S.-origin items, including many controlled foreign-made items involving U.S.-origin goods or technology—and listed persons will presumably want to have their entry removed as soon as possible. A person on the UVL may also risk being later moved to BIS’s Entity List.  

Removals from the UVL do happen, as illustrated by BIS’s recent December 19, 2023 removal of 4 persons in China, and 33 persons on August 21, 2023 that were located in China, Indonesia, Pakistan, Singapore, and the U.A.E. BIS has procedures in place under the EAR for requesting removal of a person on the UVL, which basically boils down to verifying the person’s “bona fides,” as discussed below. This article provides an overview and certain practitioner tips on the administrative process for persons seeking removal from the UVL. 

Step 1—Investigate Why the UVL Addition Was Made

As with other administrative delisting petitions, including the Entity List, the initial step is to discern why the person was added to the UVL to begin with. In accordance with § 744.15(c)(1) of the EAR, foreign persons who are parties to an export, reexport, and transfer (in-country) of items subject to the EAR—i.e., purchasers, consignees, end-users—may be added to the UVL if BIS or federal officials acting on BIS’s behalf cannot verify the legitimacy and reliability related to the end-use and end-user of such items (a.k.a., the “bona fides”). In practice, U.S. foreign service officers based out of U.S. embassies and consulates around the world routinely conduct pre-license checks (“PLC”) and post-shipment verifications (“PSV”) on parties to a transaction that is otherwise subject to the EAR to ensure that everything that was licensed to be export, reexport, or transferred is going to or made it to where it was supposed to—e.g., a U.S. company is shipping or has shipped controlled goods to a distributor in the U.A.E., which is considered higher-risk of diversion to prohibited destinations or end-users. If the PLC or PSV cannot be completed satisfactorily for reasons outside of such U.S. officials control, then BIS will presume that the bona fides could not be verified, establishing a basis under the EAR to add the subject person to the UVL. 

An illustrative list in the EAR of circumstances in which a PLC or PSV cannot be completed satisfactorily include: 

• During the conduct of an end-use check, the subject of the check is unable to demonstrate the disposition of items subject to the EAR; 
• The existence or authenticity of the subject of an end-use check cannot be verified (e.g., the subject of the check cannot be located or contacted); or
• Lack of cooperation by the host government authority prevents an end-use check from being conducted (i.e., the government of the country in which an end-use check is to be conducted). 

As the last example indicates, a person can be added to the UVL not just because of their own actions or omissions, but because their own government somehow prevented a PLC or PSV from being satisfied by U.S. federal officials. On a side note, based on amendments made to the EAR on October 7, 2022, a sustained lack of cooperation by the host government to schedule and facilitate an end-use check of a person identified on the UVL is a new criterion for placing such persons on the Entity List. 

BIS doesn’t generally publish the specific reason(s) why a PLC or PSV could not be satisfactorily completed in the Federal Register notice announcing the addition of a person to the Entity List, or in any of the agency’s related press releases. In its published basis for an addition to the UVL, the agency will generally go no further than broadly stating that it was because BIS or its agents were unable to verify their bona fides through an end-use check. See e.g., 88 Fed. Reg. 87,897. Nevertheless, a person added to the UVL is very likely to at least have some knowledge themselves of attempts by the U.S. government to conduct an end-use check in relation to specified transactions they were involved in. 

Counsel for the listed person should thoroughly investigate the reasons for the subject person’s addition to the UVL by BIS to best strategize how to approach a removal request with the agency. This includes requesting all correspondence with BIS and its agents from the subject person. Counsel may also consider contacting any known federal officials that were responsible for the PCL or PSV. In addition, counsel should consider submitting a Freedom of Information Act (“FOIA”) request to BIS seeking the administrative record underlying its decision to make the UVL addition either before or simultaneously with initiation of the removal process. For any such FOIA requests, counsel shouldn’t be surprised if significant portions of the produced administrative record are redacted under various exemptions (e.g., classified, law enforcement sensitive, etc.), and should anticipate potential delays in obtaining the record. Depending on the specifics of a matter, such investigative efforts may be done before and/or after of the initiation of the removal process with BIS.

Step 2—Initiate the Removal Process with BIS

BIS’s procedures for requesting removal of a person from the UVL are set forth in § 744.15(d) of the EAR, stating in relevant part that all such requests must include information that verifies the bona fides of the listed person as an end user, consignee, or other party to exports, reexports, and transfers (in-country) of items subject to the EAR. Making the case for why a UVL listed person should be removed is much more straight forward than a petition for removal from the Entity List. Generally speaking, this is because the UVL listed person only needs to demonstrate its bona fides by completing the unfinished PLC or PSV that got it onto the UVL to begin with. In accordance with § 744.15(c)(2) of the EAR, if the PLC or PSV had not been completed due to lack of host government cooperation, an alternative bona fides verification process may be determined by BIS to be sufficient. 

Where a UVL listed person seeks removal, but is unable to verify its bona fides with BIS because it actually engaged in violations of the EAR for the relevant transactions (e.g., diverting goods to a prohibited destination, end-user, or end-use), then it will need to consider also self-disclosing such violations to BIS and/or the U.S. Department of Justice (“DOJ”)—if an investigation or enforcement action hasn’t already commenced by the U.S. government—either before or simultaneously with a request for removal from the UVL. The agency’s procedures don’t specifically contemplate such a scenario, but similar to an Entity List removal request the subject person should consider taking a cooperative stance with the agency by providing information and evidence as to why it should be considered a legitimate and reliable party to transactions subject to the EAR moving forward. For example, the subject entity may proactively or in agreement with BIS take relevant remedial measures—e.g., implementation of an export compliance program, corporation restructuring, etc.

Step 3—Waiting for a Decision

A written decision for removals from the UVL is made by the Deputy Assistant Secretary for Export Enforcement to the requesting party. In practice, the removal process can be rather lengthy in nature. Any decision on the request is considered a final agency action, meaning that it can’t be appealed further within BIS for reconsideration. However, a renewed application can be made if there is new (material) information that wasn’t previously included in the request. 

Step 4—Appealing a Denial Decision 

Since administrative remedies are exhausted in case of a denial by BIS, the UVL listed person’s only remaining avenue for relief is to pursue litigation in federal court seeking judicial relief. However, unlike judicial challenges related to additions of, or denials of removal petitions by, persons on the Specially Designated Nationals and Blocked Persons (“SDN”) List administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), there is much less precedent for similar challenges related to the Entity List or the UVL (if any even for the latter). See e.g., Changji Esquel Textile Co. v. Raimondo, 40 F. 4th 716 (D.C. Cir. 2022). Furthermore, since the enactment of the Export Control Reform Act of 2018 (“ECRA”)—which is the statutory authority for the EAR—judicial review of BIS’s actions related to the UVL, including removal determinations, would not be subject to the judicial review provisions of the Administrative Procedure Act (“APA”). See, Id.; 50 U.S.C. § 4821(a). 

The absence of any express cause of action under the APA’s judicial review provisions, such as allegation of an unlawful “arbitrary and capricious” agency action typically made against SDN-related decisions by OFAC, does not necessarily foreclose all possibilities of judicial review. For example, there may be legitimate claims under the Due Process Clause of the Fifth Amendment of the U.S. Constitution, or that any ECRA or EAR violations were ultra vires (i.e., beyond the agency’s legal authority). Nevertheless, without the APA the prospect of a successful judicial challenge to a UVL removal request denial is arguably less promising, especially since courts are very deferential in their review of agency actions when matters of foreign policy and national security are concerned. Fed Express Corp. v. U.S. Dept. of Commerce, 39 F.4th 756, (D.C. Cir. 2022).  

The author of this blog post is Kian Meshkat, an attorney specializing in U.S. economic sanctions and export controls matters. If you have any questions please contact him at [email protected].