So my firm’s client Mushko Electronics (Pvt) Ltd. (Mushko) was officially removed from the U.S. Department of Commerce Bureau of Industry & Security’s (BIS) Entity List yesterday. The change took will be published in the Federal Register on June 30. A copy of the final rule can be found here. I’m posting this here as companies in the MENA region and South Asia may have particular interest, given how many parties in these regions are on various BIS and OFAC lists.
Named to the Entity List in March 2018, Mushko is based in Pakistan and has been a well known name for decades, having been founded in 1948 and having served as Hewlett Packard’s (HP) longest-standing country rep in the world until it was added to the list. The naming resulted in an existential threat to the company’s 70+ year existence. Initially, being on the Entity List prohibited Mushko from selling and transferring virtually all items subject to the U.S. Export Administration Regulations (EAR), including non-sensitive items and those made outside the United States (many foreign-made products also fall under the EAR’s jurisdiction because of their significant U.S.-origin content). This prohibition was narrowed in November 2019 to only dual-use items.
This was our second removal, the first one being Technology Links (Pvt) Ltd., also of Pakistan, whose removal our firm Akrivis Law Group, PLLC secured in late 2019. This followed a period where scores of Pakistani companies were added to the list in 2018.
There are many takeaways here, but one is that many might feel that getting removed from the Entity List is an unsurmountable challenge. While every case has its own facts and circumstances, the examples of Mushko and Technology Links (as well as other companies that get removed) show that this is not necessarily the case.
Dubai-based Gulf Business published an short interview with Imelda Dunlop of the Pearl Initiative and Michael Adlem of Ernst & Young in the UAE regarding the spread of Anti-Corruption measures in the Persian Gulf region. For me, the fact that such a topic was getting press and the content of the interview itself presented a significant milestone of sorts. Working on sanctions compliance and fielding calls and clients alike in that part of the world, it’s very necessary to keep a finger on the region’s pulse when it comes to matters regarding trade and anti-corruption. As such, I see that the arguments made forth by the two interviewees made sense. Surely, the importance of compliance is rising.
It is unclear if strict local laws will be adopted. Until then the de facto standards for trade compliance may likely be guided by US and UK benchmarks. With respect to US practices, the need for robust compliance programs on sanctions, export controls, anti-money laundering, and foreign corrupt practices is increasingly recognized. Gulf operations of US companies often do not work in a vacuum, and with the imposition of secondary sanctions and wide-ranging grounds for jurisdiction of US law, the issue is becoming more tangible.
For American companies, the significance is quite clear – even many companies that have little business in the Gulf may use that region as a transit point for Africa, other points in MENA and South Asia. For local companies, as the Gulf Business interview hints, going global is increasingly on the minds of some. As such, compliance programs featuring preemptive measures (such as screening and reporting procedures) will be increasingly commonplace.
In the realm of sanctions, the impact is very much evident. On my most recent visit to the UAE earlier this year, my general impression was that the topic was much more salient than it was when I first started going to the region years ago.