This article was updated on October 10, 2024, but originally published on March 20, 2023. 

With so many entities being added to the Entity List lately, whether in China, Russia, or elsewhere, is it possible for them to ever be removed? After all, being identified on the U.S. Department of Commerce’s Bureau of Industry and Security’s (“BIS”) Export Administration Regulations’ (“EAR”) Entity List—Supplement No. 4 to 15 C.F.R. Part 744—imposes highly restrictive licensing requirements on the export, reexport, or transfer (in-country) of items subject to the EAR and involving the listed entity or individual (yes, individuals can also be identified on the Entity List). For example, the Chinese entity “Inspur Group Co., Ltd.” that was added to the Entity List along with 36 others by BIS on March 2, 2023, has a licensing requirement for all items subject to the EAR—which would even include any EAR99 items and certain renditions of the Foreign-Direct Product (“FDP”) Rules—while any license requests sent to BIS are subject to a presumption of denial. 

It goes without saying that unless the listed person no longer cares about procuring U.S.-origin items, including many controlled foreign-made items involving U.S.-origin goods or technology, they’re not going to want to stay on the Entity List if they can help it. This post provides a brief overview and certain practitioner tips on the administrative process for persons seeking removal of their listing from BIS. 

Step 1—Investigate Why the Entity List Addition Was Made

In assessing how to get off the Entity List, the initial step should be to discern why the listed person was added in the first place. In general, under § 744.11 of the EAR persons can be identified on the Entity List when there is reason to believe, “based on specific and articulable facts,” that they’re involved or have been involved, or pose a significant risk of being involved in, activities that are contrary to U.S. national security or foreign policy. The End-User Review Committee (ERC), which is composed of representatives from the departments of Commerce, State, Defense, Energy, and Treasury (when appropriate), makes decisions regarding additions to, removals from, or other modifications to the Entity List, and BIS is tasked with implementing them.

Each Entity List entry includes a citation to the Federal Register rule that initially added and/or later modified the respective persons listing. For example, the corresponding Federal Register rule for the same “Inspur Group Co., Ltd.” states that it was added, “…for acquiring and attempting to acquire U.S.-origin items in support of the China’s military modernization efforts…contrary to U.S. national security and foreign policy efforts.” Yes, there isn’t much detail here, but it should act as a starting point for counsel of the listed person to rely on in investigating and (hopefully) pinpointing the specific conduct that would have caused the U.S. government to arrive at such a conclusion. Although a listed person may want to initiate the removal process right away, it is important to have an effective understanding of why the listing was made in the first place as a key part of strategizing how to best approach the removal request with the ERC. 

Step 2—Initiating the Removal Process with the End-User Review Committee

When a listed person seeks removal from the Entity List, they’ll need to initiate their request in writing to the ERC pursuant to § 744.16(e) of the EAR. Either simultaneously or shortly thereafter, counsel should also submit a request for the administrative record underlying the ERC’s decision to add the listed person to the Entity List. In certain circumstances, counsel may want to obtain such a record prior to initiating the removal request as part of their overall investigation noted in Step 1. However, as it is less likely for the administrative record to be provided prior to formal initiation of the removal process under § 744.16, a Freedom of Information Act (“FOIA”) Request may be more appropriate in such circumstances. 

The formal written request to the ERC, including any follow-up submissions, will need to provide well-formulated reasons as to why the person should be removed from the Entity List. This typically plays out in the following ways, or some combination thereof, especially based on the findings of the investigation conducted in Step 1: 

• Asserting that the factual reasons for listing the person were materially incorrect/untrue, or legally insufficient, which is a hard hill to climb. Keep in mind that the applicable judicial review standard in this context is “rational basis,” which means that if ever before a court, the listed party would have to prove that “…there is no rational relationship between [the Entity List decision] and some legitimate governmental purpose.” See, Federal Express v. U.S. Dept. of Commerce, 486 F. Supp. 3d 69, 76 (D.D.C. 2020). Therefore, such assertions must be very (VERY) compelling.
• Asserting the circumstances that originally resulted in the ERC’s listing decision are no longer applicable—i.e.,all the original stated risks to U.S. foreign policy and national security—either because of events beyond the listed person’s control (e.g., death of the listed individual or a change in the relevant foreign government), or because all risks/reasons for its initial listing have indeed been remedied and not likely to reoccur (e.g., termination of responsible personnel and/or implementation of relevant compliance controls that were previously missing). 
• Taking a cooperative stance with the U.S. government by indicating that the listed person is prepared to address all risks/reasons for its listing by undertaking relevant corrective measures, including changes to its corporate structure and export compliance program that may be deemed necessary by the government. 

What makes taking any such approaches difficult for the petitioning party in an Entity List removal request is that in most instances they do so without knowing what the government knows, as receiving the administrative record can take a long time, and when it is received significant portions will be redacted in the interests of national security and other reasons. Therefore, once the petitioning party receives the administrative record, they may change their strategy and/or make new assertions in their attempts to convince the ERC that their identification on the Entity List is no longer warranted. 

Step 3—Wait for a Decision 

The removal process can be quite lengthy, and there will be some back and forth with the government until a decision is made, especially as the listed party receives the administrative record and/or any requests for information from the government. The ERC conducts its review and arrives at a decision in accordance with established procedures set forth in Supplement No. 5 to Part 744, and there isn’t much in there to assist listed entities and their counsel in discerning what the ERC may be looking for in a removal petition. Although the ERC is chaired by Commerce, and any decisions to remove must be by a unanimous vote of all representatives. BIS will be the one to convey the decision on the request to the listed person in writing, and a removal decision will require a formal notice published in the Federal Register. 

Step 4—Appealing a Denial Decision

Any decision on the request is considered a final agency action, meaning you can’t appeal it further within the ERC, BIS, or any other Federal government agency for reconsideration. See, 15 C.F.R. Part 744, Supp. No. 5, and § 756.2. Since administrative remedies are exhausted in case of a denial, the 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. 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 Entity List, 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 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].