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Removal of Person From the Unverified List-Guidance as to “Red Flags” Under Supplement No. 3 to 15 CFR Part 732

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Bureau of Industry and Security, Commerce.




On June 14, 2002, the Bureau of Industry and Security (“BIS”) published a notice in the Federal Register that set forth a list of persons in foreign countries who were parties to past export transactions where pre-license checks (“PLC”) or post-shipment verifications (“PSV”) could not be conducted for reasons outside the control of the U.S. Government (“Unverified List”). The notice also advised exporters that the involvement of a listed person as a party to a proposed transaction constitutes a “red flag” as described in the guidance set forth in supplement no. 3 to 15 CFR part 732, requiring heightened scrutiny by the exporter before proceeding with such a transaction. The notice also stated that, when warranted, BIS would remove persons from the Unverified List. Recently, a PSV was completed at the facilities of S.B. Submarine Systems Co., Ltd., 1591 Hongqiao Rd., Bldg 15, People's Republic of China, (“S.B. Submarine”). Accordingly, by this notice, S.B. Submarine is removed from the Unverified List.


This notice is effective November 21, 2002.

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Thomas W. Andrukonis, Office of Enforcement Analysis, Bureau of Industry and Security, Telephone: (202) 482-4255.

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In administering export controls under the Export Administration Regulations (15 CFR parts 730 to 774) (“EAR”), BIS carries out a number of preventive enforcement activities with respect to individual export transactions. Such activities are intended to assess diversion risks, identify potential violations, verify end-uses, and determine the suitability of end-users to receive U.S. commodities or technology. In carrying out these activities, BIS officials, or officials of other federal agencies acting on BIS's behalf, selectively conduct PLCs to verify the bona fides of the transaction and the suitability of the end-user or ultimate consignee. In addition, such officials Start Printed Page 70210sometimes carry out PSVs to ensure that U.S. exports have actually been delivered to the authorized end-user, are being used in a manner consistent with the terms of a license or license exception, and are otherwise consistent with the EAR.

In certain instances BIS officials, or other federal officials acting on BIS's behalf, have been unable to perform a PLC or PSV with respect to certain export control transactions for reasons outside the control of the U.S. Government (including a lack of cooperation by the host government authority, the end-user, or the ultimate consignee). In a notice issued on June 14, 2002 (67 FR 40910), BIS set forth an Unverified List of certain foreign end-users and consignees involved in such transactions.

The June 14 notice also advised exporters that the participation of a person on the Unverified List in a proposed transaction will be considered by BIS to raise a “red flag” under the “Know Your Customer” guidance set forth in supplement no. 3 to 15 CFR part 732 of the EAR. Under that guidance, whenever there is a “red flag,” exporters have an affirmative duty to inquire, verify, or otherwise substantiate the proposed transaction to satisfy themselves that the transaction does not involve a proliferation activity prohibited in 15 CFR part 744, and does not violate other provisions of the EAR.

The Federal Register notice further stated that persons on the Unverified List would be removed from the list when warranted. BIS has now conducted a PSV in a transaction involving S.B. Submarine Systems Co., Ltd., 1591 Hongqiao Rd., Bldg. 15, People's Republic of China, (“S.B. Submarine”), a person included on the Unverified List. This notice advises exporters that S.B. Submarine is removed from the Unverified List, and the “red flag” resulting from S.B. Submarine's inclusion on the Unverified List is rescinded.

The Unverified List, as modified by this notice, is set forth below.

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Dated: November 15, 2002.

Michael J. Garcia,

Assistant Secretary for Export Enforcement.

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Unverified List as of November 21, 2002

The Unverified List includes names and countries of foreign persons who in the past were parties to a transaction with respect to which BIS could not conduct a pre-license check (“PLC”) or a post-shipment verification (“PSV”) for reasons outside of the U.S. Government's control. Any transaction to which a listed person is a party will be deemed by BIS to raise a “red flag” with respect to such transaction within the meaning of the guidance set forth in supplement no. 3 to 15 CFR part 732. The red flag applies to the person on the Unverified List regardless of where the person is located in the country include on the list.

NameCountryLast known address
Power Test & Research Institute of GuangzhouPeople's Republic of ChinaNo. 38 East Huangshi Road, Guangzhou.
Civil Airport Construction CorporationPeople's Republic of China111 Bei Sihuan Str. East, Chao Yang District, Beijing.
Xian XR Aerocomponents Co., LtdPeopole's Republic of ChinaXujiawen Beijiao, Xian, Shaanxi.
Shaanxi Telecom Measuring StationPeople's Republic of China39 Jixiang Road, Yanta District, Xian Shaanxi.
Beijing San Zhong Electronic Equipment Engineer Co., LtdPeople's Republic of ChinaHai Dian Fu Yuau, Men Hao1 Hao, Beijing.
Huabei Petroleum Administration Bureau Logging CompanyPeople's Republic of ChinaSouth Yanshan Road, Ren Qiu City, Hebei.
Yunma Aircraft Mfg.People's Republic of ChinaYaopu, Anshun, Guizhou.
Daqing Production Logging InstitutePeople's Republic of ChinaNo. 3 Fengshou Village, Sartu District, Daqing City, Heilongjiang.
Dee Communications MSDN. BHDMalaysiaG5/G6, Ground Floor, Jin Gereja, Johor Bahru.
Arrow Electronics IndustriesUnited Arab Emirates204 Arbift Tower, Benyas Road, Dubai.
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[FR Doc. 02-29680 Filed 11-20-02; 8:45 am]