As Ukraine-Russia peace talks continue, the U.S. government continues to bring the heat. Yesterday, the Department of Commerce, Bureau of Industry and Security (BIS), issued a Final Rule broadly expanding existing restrictions against various Russian industry sectors under the Export Administration Regulations (EAR). See 87 Fed. Reg. 28,758 (May 11, 2022). The Final Rule aligns U.S. export controls with those of the European Union and further restricts Russia's access to "items that it needs to support its military capabilities." In effect, these efforts cut off sources of revenue and further challenge Russia's ability to withstand the economic harm of multilateral sanctions.
This is part of a series of advisory alerts from Venable's International Trade and Logistics Group, published in response to the ongoing situation in Ukraine. Earlier alerts on Russia and Ukraine sanctions are available in sequential order here, here, here, here, here, here, and here.
The Final Rule, which took effect on May 9, 2022, expands the licensing requirements for exports to Russia under the BIS Russian Industry Sector sanctions by adding 205 new Harmonized Tariff Schedule (HTS) codes and 478 corresponding Schedule B numbers to Supplement No. 4 to Part 746. See 15 C.F.R. § 746.5(a)(1)(ii); Supplement No. 4 to Part 746 Controls. Exporters of subject items must acquire a license in order to export or reexport to or transfer within Russia unless authorized, such as License Exception GOV. While exporters may apply for an export license, BIS will review the applications under a policy of denial, unless they are intended for a humanitarian purpose.
The wide range of subject commodities include, but are not limited to, the following:
- Supported Catalysts
- Veneer Sheets and Sheets for Plywood and Other Wood
- Casks, Barrels, Staves, Hoops, and Other Wood Products
- Various Iron or Steel Products (e.g., drums, tanks, vats, etc.)
- Wood Working and Metal Working Products
- Various Boilers, Engines, and Motors
- Parts for Fans, Air Conditioning Machines, Ice-making Machines, Drinking Water Coolers, etc.
- Filters, Centrifuges, Mechanical Appliances, Elevators, etc.
- Various Machine Tools, Machinery, and Parts
- Generating Sets
- Battery and Cell Parts
- Transmission Apparatus for Radio Broadcast or Television
- Motor Vehicles, Trailers, Parts of Work Trucks, etc.
- Surveying Instruments
- Measuring or Checking Instruments
For subject items already en route to the foreign destination pursuant to a previously eligible License Exception or classification as No License Required (NLR), BIS provides a Savings Clause for those exports, reexports, or transfers (in-country) en route as of May 9, 2022. Those transactions may proceed to their destination.
The Final Rule also reorganizes Supplement No. 4 to better enable exporters to determine the items subject to the new licensing requirement. BIS has advised that exporters should rely on the HTS Description column in Supplement No. 4 in making a scope determination. The listed HTS Code, Schedule B Number and Schedule B Description "are intended to assist exporters with their AES filing responsibilities"; however, if an item is classified under a listed HTS Code or Schedule B number but is not described by the relevant HTS Description column in Supplement No. 4, the item is not subject to the license requirement set forth in EAR § 746.5(a)(1)(ii). Exporters should also note that where an item is subject to more than one export license requirement, each of the applicable license requirements described in the EAR must be satisfied.
Finally, in addition to the above tightening on U.S. export controls applied to Russia, we also note that the Department of Commerce has launched a review of whether the U.S. should strip Russia of its market economy status, as described in the Tariff Act of 1930. If this occurs, it would signal a policy shift, which could result in increased antidumping and countervailing duties on imports from Russia. Once Commerce publishes its notice of review in the Federal Register, interested parties will have up to 21 days to submit comments.
We continue to monitor these evolving issues and anticipate further developments should the aggression in Ukraine continue. If you have questions regarding whether the new export controls apply to your business activities or simply want to better understand the multifaceted restrictions and prohibitions, please reach out to our International Trade and Logistics Group for guidance.