On February 24, BIS imposed expansive export controls against Russia, covering both U.S.-origin products and numerous items made abroad. They were effectively immediately, as a final rule, so there is no grace period. These export controls apply not only to future transactions, but to those already underway as of the effective date.
Watch as George Thompson outlines the new export controls, and what exporters, reexporters, and in-country transferors need to know.
Transcript of Export Control Sanctions on Russia, Effective February 24, 2022
Good afternoon, this is George Thompson. Today I’ll provide an overview of the recent Bureau of Industry and Security export control sanctions on Russia.
On February 24, BIS imposed very expansive export controls against Russia. They were effective immediately, as a final rule, so there is no grace period. This means they apply not only to future transactions, but also to those already underway on the effective date.
The new controls are not comprehensive in coverage. That is, they do not prohibit exports or reexports to Russia of all items subject to the Export Administration Regulations, the EAR. Instead, they require a BIS license for any item subject to the EAR, and specified in any Export Control Classification Number, or ECCN, in Categories 3, 4, 5, 6, 7, 8, or 9 of the Commerce Control List.
Therefore, items designated as EAR99 (that is, not on the CCL) generally are not covered.
However, there are more expansive controls on exports, reexports and in-country transfers of all items subject to the EAR to Russian military end users, and there are very limited exceptions to this restriction. Since the term military end user includes not only the armed forces, but suppliers to them as well, the applicability of this restriction will be quite broad.
The BIS sanctions also expand the foreign direct product rule. This is an extraterritorial extension of U.S. export controls which defines when foreign-made products are subject to the EAR. Any foreign products meeting this rule are covered by the new sanctions as well. I’ll prepare separate videos regarding the foreign direct product rule as well as its expanded coverage to Russia.
Suffice it to say now that foreign manufacturers which use U.S.-origin technology and software in their operations must determine the control status of that technology and software, as well as of the products they make with it. This will be a daunting task, I expect, since it will require a retroactive review of technology that was already transferred in the past.
On top of this, BIS expanded the foreign direct product rule for items destined to Russian military end users. It covers foreign-made products regardless of control status, so EAR99 and CCL items, it makes no difference.
And finally, Executive Order 14065 prohibits exports to, and imports from, the Donetsk and Lugansk areas.
It’s obvious these developments will disrupt established customer relationships and pose compliance challenges for U.S. and foreign firms. In fact, the Justice Department has announced formation of a Russian sanctions enforcement task force.
So, here are a few initial thoughts. First, make sure you know the control classification of your products going to Russia. Items previously uncontrolled there on February 23 suddenly required a license the next day.
Second, evaluate whether Russian customers qualify as military end users. Remember, private companies providing certain types of products or services to the armed forces will qualify as well.
Third, for foreign producers, evaluate the control classification of any U.S. origin technology you use to make your products, to determine whether the foreign direct product rule, as it was recently expanded, may apply.
That’s it for now, but I’ll have more videos on the way soon. Thanks for listening.
Thompson & Associates, PLLC provides representation in all aspects of customs laws and regulations, specializing in export and import regulations and international business counseling. We can be reached at 202-772-2039 or online.
