Not long ago we talked about the importance of end use awareness and best practices for evaluating end users. For exporters to Venezuela and Russia, a recent announcement from the Bureau of Industry and Security (BIS) means there’s an even greater obligation to understand and document intended end use and end users. Towards the end of 2014, the BIS revised its Export Administration Regulations (EAR) to impose new controls on certain exports to Venezuela and Russia. Items that previously didn’t need licenses are now restricted when intended for “military end use” or a “military end user.” This means more work for companies who will need to implement procedures to ensure their exports are not breaking the law. Items subject to new license requirements include:

  • Computers
  • Basic telecommunications equipment
  • Commercial GPS and aircraft navigation
  • Commercial aircraft and engines

Interestingly, the end-use/end-user controls for Russia and Venezuela are much more broad than those for China and Iraq (China doesn’t even have a military end-user control, just military end-use). This fact isn’t so surprising for Russia (unless you didn’t watch or read any news in 2014) but you may be wondering just what our beef with Venezuela is. The BIS explains the new restrictions as being a reaction to “the Venezuelan military’s violent repression of the Venezuelan people.” And that’s just the icing on the cake – there are already economic sanctions against the politically troubled nation. To make a long story short, enhancing the military capability of Venezuela did not make the U.S. government’s list of “Things We Want to Achieve in 2015.”

To get a sense of how broad the controls are, the EAR’s definition of military end users includes the army, navy, air force, marines and coast guard, plus the national guard/police, government intelligence and reconnaissance organizations. Military end use refers both to direct use (or parts, components or subsystems of weapons and other defense articles) and indirect use (weapon design and development, testing, repair and maintenance). Companies will need to be on their toes about restricted party screening, requesting end user statements, and providing license/regulatory conditions in writing. There’s no room for error; violations of the military end-use rules can lead to a slew of unfortunate potential consequences such as:

  • Criminal penalties of $1 million per violation and up to 20 years in prison
  • Civil penalties of $250,000 or twice the amount of the transaction involved in the violation
  • Multi-year export bans

Remember that the BIS typically consider each export or other transaction as a separate violation, and that means potential penalties in the millions. Just one more reason to keep up with regulatory changes and to ensure that when it comes to military end users and end use, your compliance team is completely in-the-know.