On April 9, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) announced the issuance of a final rule to expand its highly restrictive controls on the exportation and re-exportation of U.S.-origin and certain foreign-produced commodities, software, and technologies to Russia and Belarus. This action was taken to further choke off Russia’s and Belarus’s ability to access inputs needed to sustain their military capabilities.
The new rule expands license requirements to all items on the Commerce Control List (CCL) for Russia and Belarus, expanding U.S. scrutiny of transactions on dual-use technology, software, or commodities that could be used to support Russia’s war effort. Previously, BIS restrictions were limited to items covered by CCL Categories 3-9. The new rule expands the restrictions established under previous Russia and Belarus rules to Categories 0, 1, and 2 of the CCL, which include materials and equipment relevant to nuclear, chemical, and materials processing. Although the vast majority of these items already require a license for Russia and Belarus, this rule imposes new license requirements for items such as certain composite materials, medical products containing certain toxins or genetically modified organisms, hydraulic fluids, pumps, valves, and lower-level machine tools.
In addition, the new rule expands the Russia/Belarus Foreign Direct Product (FDP) Rule to all items on the CCL. With limited exceptions, BIS will review applications involving all such CCL items under a policy of denial. Further information on the Russia/Belarus FDP Rule can be found here and here.
Furthermore, on April 8, 2022, BIS issued a rule that formally adds Iceland, Liechtenstein, Norway, and Switzerland to the growing global coalition of nations that are cooperating with the United States’ stand against Russia’s and Belarus’s war against Ukraine. These countries join Australia, Canada, the 27 member states of the European Union (EU), Japan, the Republic of Korea, New Zealand, and the United Kingdom. Partner countries that are adopting or have expressed the intent to adopt substantially similar export controls and sanctions measures as those adopted by the United States are excluded from the Russia/Belarus FDP rule and Russia-/Belarus-MEU FDP rule.
120 Entities in Russia and Belarus Added to the Entity List
BIS added 120 entities to the Entity List on April 1, 2022. These include 95 entities added as Military End Users (“MEU”) in Belarus (24 entities) and Russia (71 entities) for acquiring and attempting to acquire items subject to the Export Administration Regulations (EAR) in support of Belarus’s and Russia’s militaries. Additionally, 25 Russian entities were added for acquiring and attempting to acquire items subject to the EAR in support of Russia’s military modernization efforts. These entities are part of the Russian and Belarusian aerospace, maritime, and defense sectors, and their placement on the Entity List is meant to cut them off from obtaining inputs necessary to sustain Russia’s war in Ukraine. EAR Section 744.21(g) defines MEUs as “the national armed services (army, navy, marine, air force, or coast guard), as well as the national guard and national police, government intelligence or reconnaissance organizations, or any person or entity whose actions or functions are intended to support ‘military end uses.’”
License applications for exports, re-exports, and (in-country) transfers to the listed entities of all items subject to the EAR will be reviewed under a policy of denial and license exceptions for such transactions are prohibited. Furthermore, the 95 MEUs are designated under Footnote 3 of the Entity List, making them subject to the Russian/Belarusian MEU FDP, which applies to reexports, exports from abroad, and transfers (in-country) of certain foreign produced items based on controlled U.S. technology, software, or tooling.
BIS Updates List of Aircraft Exported to Russia in Apparent Violation of U.S. Export Controls and Issues Temporary Denial Orders
BIS announced updates to its list of aircraft that have flown into Russia in apparent violation of the EAR on March 30, 2022, by adding 73 new aircraft to the list and removing 12 aircraft that have been authorized to return to owners in partner countries. Providing any form of service to any of the listed aircraft, including, but not limited to, refueling, maintenance, repair, or the provision of spare parts or services, is generally prohibited under General Prohibition 10 of the EAR (Section 736.2(b)(10)). General Prohibition 10 prohibits all transactions associated with items subject to the EAR such as the listed aircraft with knowledge that a violation of the EAR, the Export Administration Act, or any order, license, License Exception, or other authorization issued thereunder has occurred, is about to occur, or is intended to occur in connection with the item.
Enforcement actions have also been taken against three Russian airlines. On April 7, 2022, BIS announced that it issued Temporary Denial Orders (TDOs) terminating the rights of Aeroflot, Azur Air, and UTair to participate in any transactions subject to the EAR, including exports and reexports from the United States. These airlines operated, and continued to operate, controlled aircraft subject to the EAR without BIS authorization, which would have been required for any international flight. The TDOs are issued for a period of 180 days and may be renewed.
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With the expansion of these sanctions to Russia and Belarus, companies need to consider the extent to which they conduct business with Russia and Belarus, including:
- Whether the company exports or reexports U.S.-origin products to Russia and/or Belarus and, if so, the ECCNs of these products;
- Whether the company produces, exports, or reexports items that are the foreign direct product of certain U.S.-origin software or technology subject to the EAR; and
- Whether the company engages in any business with entities listed on the Entity List.
U.S. sanctions and export controls with respect to Russia, Ukraine, and Belarus are expected to change in the coming days and weeks. Contact us if you have questions about these developments or their potential impact on your business.