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U.S. items overseas, and items produced overseas using U.S.-origin components or made using U.S. technology, may still be subject to the Export Administration Regulations. Certain activities of U.S. persons overseas may also be subject to these regulations.

Foreign-Produced Direct Product (FDP) Rule as it Relates to the Entity List §§ 734.9, 736.2(b)(3), and footnote 1 to Supplement No. 4 to part 744

Foreign-Produced Direct Product (FDP) Rule as it Relates to the Entity List §§ 734.9, 736.2(b)(3), and footnote 1 to Supplement No. 4 to part 744
Updated March 31, 2022
(This document is subject to amendment so check back frequently for updates.)

If a supplier doesn't mention their existing license when notifying a recipient of the Entity List FDP rule, does the recipient need to apply for a license to transfer the item to an end user, directly or indirectly, to a footnote 1 designated entity?

Yes. The recipient must obtain a Department of Commerce license for such a transfer. If a license is granted, the recipient should notify subsequent recipients and the footnote 1 designated entity of any license conditions.

Can Company X export Product Y to a footnote 1 designated entity without a license if it believes Product Y isn't subject to the EAR but includes foreign-produced components subject to the FDP rule, as confirmed by the component manufacturers?

Company X must have received a license or have confirmation that a license was obtained by the manufacturer of the foreign produced component(s) subject to the EAR under footnote 1.

If a supplier licenses an item for export to a footnote 1 Entity List entity, and it's subject to the FDP rule, must the recipient obtain a license to transfer it directly or cover subsequent transfers to the same entity?

The recipient can rely on the supplier’s license. The recipient must receive written confirmation of the license and any conditions relevant to the transaction prior to using it. The recipient should notify any subsequent recipients of the license conditions and direct them to further notify the next recipient.

Can a listed entity act as purchaser or freight forwarder to transport my shipment of items subject to the EAR to the ultimate consignee or end-user?

A BIS license is required prior to such a transaction. As stated in § 744.11(a), a license is required for the export, reexport, or transfer (in-country) of items subject to the EAR when an entity on the Entity List is a party to the transaction as described in § 748.5(c)-(f). Parties to the transaction may include purchasers, intermediate consignees (such as forwarding agents), ultimate consignees, and end-users. Any application for such a license will be reviewed in accordance with the License Review Policy associated with the listed entity on the Entity List.

Will license applications for non-telecom related items be reviewed under a case-by-case review or a presumption of denial?

A BIS license is required prior to such a transaction. As stated in § 744.11(a), a license is required for the export, reexport, or transfer (in-country) of items subject to the EAR when an entity on the Entity List is a party to the transaction as described in § 748.5(c)-(f). Parties to the transaction may include purchasers, intermediate consignees (such as forwarding agents), ultimate consignees, and end-users. Any application for such a license will be reviewed in accordance with the License Review Policy associated with the listed entity on the Entity List.

If a distributor has a license to provide products to a footnote 1 designated entity, does the supplier need to get a separate license to cover the reexport or transfer of our products to the distributor?

Because the distributor has a license to provide the final product to the footnote 1 designated entity, the license requirement of the Entity List FDP rule is fulfilled and does not apply to the supplier. The distributor should communicate the existence of a license to the 7 suppliers of the product and the suppliers should ensure they receive written confirmation of the license and any conditions.

Are integrated circuits, designed in the U.S. but manufactured and assembled abroad using U.S.-origin equipment, considered foreign direct products when a footnote 1 designated entity is involved in the transaction?

Yes, in two ways. Because they were designed using U.S.-origin technology, the integrated circuits would be captured by § 734.9(e)(1) of the Entity List FPD rule. In addition, because they were produced using a major component of a plant that is U.S.- origin, they would be captured by § 734.9(e)(2). For purposes of this question, BIS assumes the technology and major component are specified by one of the ECCNs listed in the Entity List FDP rule.

Does Company A need a license under the Entity List FDP rule if it sells items subject to FDP rules to Company B, which will use them in products not subject to FDP rules but some of which will be sent to a footnote 1 designated entity?

a. If Company A knows that its items are destined for incorporation into Company B’s products that will be sold to a footnote 1 designated entity, a license is required for the export from abroad, reexport, or transfer (in-country) of those items to Company B. b. If a percentage of Company A’s items are destined for incorporation into a Company B’s products that will be sold to a footnote 1 designated entity, a license is required for the export from abroad, reexport, or transfer (in-country) of the percentage of those items to Company B. c.
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