The following overview of recent U.S. export controls for Russia is brought to you by our Transportation Counsel firm Venable.
Through last week, BIS issued additional rules restricting exports to Belarus, updating previous changes to the Russia-related restrictions, and expanding sectoral sanctions on the Russian oil refining sector. Below we provide a brief summary of the new rules and restrictions for you to share with your staff.
I. Belarus Export Controls and Changes in Scope to Existing Controls for Russia (Effective as of March 2, 2022)
- New license requirements and review policies for Belarus and Russia under the Export Administration Regulations (EAR). A license would be required for the export, reexport, or transfer (in-country) to or within Russian or Belarus of any item subject to the EAR and specified in ECCN Categories 3 through 9 of the Commerce Control List (CCL), aside for certain mass market items, if an entity meets conditions that are described in more detail below. See Sec. III, Changes to License Requirements for ECCN 5A992 and 5D992 (Mass Market Items).
- Revises foreign direct product (FDP) rules to apply to Belarus/Belarusian military end users and changes the scope of the prior FDP rules for Russia/Russian military end users.
- Implements a license review policy of denial to Belarus.
- Restricts the use of EAR license exceptions. Notably, the encryption technology licensing exception (“ENC”) is now available only to those entities that meet certain requirements. See EAR § 746.8(c)(6). We note the “requirements” are the same as those for qualifying civil end users to export mass market items without a license.
- Expands existing control scopes for “military end use” and “military end user” (collectively, “MEU”) to include all items “subject to the EAR” to Belarus and Russia except* for food and medicine designated as EAR99. We note only license exception GOV can be used to overcome the MEU licensing requirements.
* We note the draft language for section 744.21 that relates to MEU licensing requirements is currently vague, but the intent seems to provide an exception for food and medicine designated as EAR99.
- Add new Belarusian entities to the Entity List as military end users.
- Implement a license requirement for nuclear nonproliferation items for exports and reexports to Belarus.
II. Food or Medicine Designated as EAR99
- Belarusian and Russian entities designated to the Entity List as subject to license requirements that apply to all items “subject to the EAR” except for food or medicine designated as EAR99.
- We note that the Russia/Belarus “military end-user” FDP rule includes “software” and “technology” in ECCNs in Categories 0, 1 and 2. As such, BIS noted that “the likelihood that EAR99 food and medicine foreign direct products could be subject to the EAR increases. To the extent that the direct product of ECCN 0, 1, or 2 “software” or “technology” may encompass EAR99 food or medicine, this rule exempts those items from the license requirement.”
III. Changes to License Requirements for ECCN 5A992 and 5D992 (Mass Market Items)
- Encryption-related items classified as “mass market” will not require a license for exports, reexports, or transfer (in-country) to Russia or Belarus for civil end-users that meet the requirements. Qualifying civil-end users are:
— Wholly-owned U.S. subsidiaries
— Foreign subsidiaries of U.S. companies that are joint ventures with other U.S. companies
— Joint ventures of U.S. companies with companies headquartered in countries from Country Group A:5 and A:6
— Wholly-owned subsidiaries of companies headquartered in countries from Country Group A:5 and A:6
— Joint ventures of companies headquartered in Country Group A:5 and A:6 with other companies headquartered in the same country groups.
- For all other exports, a license is required.
IV. Expansion of Sectoral Sanctions
- In addition to the new export controls on Belarus, and revised controls on Russia, the BIS issued another rule, which expands export controls on Russia’s oil refining sector. Effective March 3, 2022, the rule expands the scope of the general prohibitions in Section 746.5(a)(1) of the EAR. The new rule restricts the export, reexport, or transfer (in-country) of certain energy-related items subject to the EAR when used for certain Russian energy sector projects.
- The rule expands the scope of covered items to additional Harmonized Tariff Schedule-6 codes and Schedule B numbers.
- The rule also imposes license requirements for any items subject to the EAR in new Supplement No. 4 to Part 746 (attached). The supplement has four columns consisting of the HTS code and description and Schedule B and description. Notably, this portion of the rule does not contain any “knowledge” requirement.
- The rule includes a savings clause, which states that shipments of items that are en route aboard a carrier to a port of export, reexport, or transfer on the date of the Federal Register Notice may proceed to that destination under the previous eligibility for a License Exception or No License Required.