On December 23, 2020, the US Department of Commerce, Bureau of Industry and Security (BIS) added its long-anticipated Military End User (MEU) List to the Military End Use/User Rule (MEU Rule) of the Export Administration Regulations (EAR). The initial tranche of parties included on the MEU List consists of 102 “military end users,” comprising 57 Chinese companies and 45 Russian companies. Exporters are now on notice that a license is required for exports, reexports, or transfers of any item subject to the EAR listed in Supplement No. 2 to Part 744 (MEU Item) if any of these newly-listed companies are the purchaser, intermediate or final consignee, or end user. License exceptions are generally not available for exports, reexports, or transfers of MEU Items to a MEU listed entity (unless authorized under License Exception GOV as specified). License applications for MEU Items will be reviewed with a presumption of denial.
The published MEU List is substantially revised from the draft that was previously leaked, and widely publicized a month earlier, which listed 117 companies (89 Chinese companies and 28 Russian companies).
The MEU List was published as part of a new final rule that amended the EAR’s MEU Rule, which requires licenses for shipments of MEU Items to “military end users” or for “military end uses” in China, Russia, or Venezuela. The MEU Rule places the onus on exporters to determine whether a transaction is to a military end user or for a military end use and therefore, requires a license. After the MEU Rule was amended and broadened in April 2020, exporters had requested further guidance from BIS to assist with determinations as to whether specific shipments would require licenses under the MEU Rule. BIS subsequently published FAQs that provided some additional guidance. The MEU List provides further guidance and clarification to exporters, by informing and providing notice to the public when an entity is considered by the US government to be a “military end user” for purposes of the MEU Rule.
In publishing the MEU List, BIS warned that it was “non-exhaustive and does not imply that other parties not included on the List are exempt from regulatory prohibitions.” In other words, exporters must continue to conduct due diligence to ensure that shipments of MEU Items are not made to unlisted “military end users,” or for “military end uses” in China, Russia, or Venezuela, even if no MEU Listed entity is part of the transaction or if there is risk of diversion to a military end user or for a military end use. As one example, BIS indicated that parties not included on the MEU List, but included on the list of “Communist Chinese Military Companies” published by the Department of Defense pursuant to section 1237 of the National Defense Authorization Act (DoD List), would raise a “red flag” under the EAR and would require additional due diligence by exporters, reexporters, or transferors to determine whether a license is required under the MEU Rule.
BIS also amended the EAR to provide clarity on the process it will follow to make changes to the MEU List. The End-User Review Committee (ERC), the interagency body composed of representatives of the Departments of Commerce, Defense, Energy, State, and, where appropriate, the Treasury, will have the authority to make additions to, removals from, or other modifications to the MEU List. The ERC already makes similar decisions with respect to parties on the Entity List under the EAR. Supplement No. 5 to Part 744, which provides the procedural framework for the ERC’s evaluation for additions to and requests for removal from the BIS Entity List, will now apply to the MEU List. Parties who have been added to the MEU List can file petitions with the ERC pursuant to Supplement 5 to Part 744 addressing why they are not military end users or involved in military end uses.