A website notice mysteriously appeared today in the advisory opinion section of the website for the Bureau of Industry and Security (“BIS”). Titled “Website Notice on Transfers of Licenses,” I’m not so sure what its doing in the advisory opinion section, but I’ll bet there’s a story behind it, and it’s not a pretty one. The Website Notice cautions exporters that the licensee must apply to transfer licenses before it is swallowed up in the merger and can no longer make license applications.

Entering into full speculation mode, what prompted this notice was no doubt the aftermath of a merger where the surviving company woke up one morning and discovered it had export licenses, rather like Gregor Samsa waking up and finding himself with four extra legs. Hopefully the overlooked licenses were discovered before the company tried to export anything under those licenses. A meeting was hastily convened and the General Counsel proposed that the company file transfer applications under section 750.10 of the Export Administration Regulations (“EAR”). The application letter dropped a footnote explaining the inconvenient disappearance of the licensee as justification for the application being filed not by the licensee but by the proposed transferee. BIS was not amused. BIS denied license transfer. Company, through a veil of copious tears, regrets and apologies, pleadedthat the result was unfair, that it was the triumph of form over substance. BIS stood firm. Website Notice mysteriously appears.

Granted that section 750.10 requires a letter from the licensee as part of the transfer procedure, but little of substance is required in that letter which the proposed transferee couldn’t provide. Certainly the transferee could reasonably attest to the reasons for the transfer (that would, of course, be the merger), the licenses involved, identifying information about the transferee, and a description of the merger documents. So, if something like our hypothetical did in fact occur, the charge that BIS exalted form over substance and enforced the literal language of the rule without a particularly salient policy justification would be true.

Still, the rule is the rule. Rather than having to fuss with BIS over the unfairness of this requirement, companies that are about to acquire exporters need to remember that at least one component of their due diligence needs to cover export issues.

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