Commerce Implements New Restrictions on Russia and Belarus under the EAR
On September 16, 2022, the U.S. Department of Commerce, Bureau of Industry and Security (BIS), issued a Final Rule (Implementation of Additional Sanctions Against Russia and Belarus Under the Export Administration Regulations (EAR) and Refinements to Existing Controls, 87 Fed. Reg. 57, 068 (Sept. 16, 2022)) (Rule), further broadening restrictions against Russia and Belarus under the Export Administration Regulations. These latest actions seek to clarify and enhance the effectiveness of U.S. export controls as part of a coordinated allied response to Russia's ongoing invasion of Ukraine.
This Rule makes the following significant changes to export controls for Russia and Belarus effective immediately:
- Industry Sector Sanctions Expanded to Target Production of Chemical and Biological Weapons
The Rule expands the scope of the EAR's Russian industry sector sanctions by adding new licensing requirements, and an identification of certain EAR99 items that may be useful to Russia in the development and production of chemical and biological weapons (CBW), and in the advancement of their manufacturing capabilities across several industries.
New License Requirements. A license is now required for the export, reexport, and transfer (in-country) to or within Russia or Belarus of items subject to the EAR that are listed in new Supplement No. 6, pursuant to EAR § 746.5(a)(1)(iii).
New Supplement No. 6 to Part 746. The Final Rule adds discrete chemicals, biologics, fentanyl and its precursors, and related equipment designated as EAR99 that may be useful for Russia's CBW production and development capabilities, with reference to Chemical Abstract Numbers (CAS) where applicable. The Rule also applies the Russian/Belarusian Military End User Foreign Direct Product (FDP) rule at EAR § 734.9(f)(i) to the items identified in Supplement No. 6.
- Industry Sector Sanctions Applied to Belarus to Curb Risks of Diversion
To address concerns of diversion, the Final Rule adds Belarus to the scope of industry sector sanctions that previously applied only to Russia. By renaming EAR § 746.5 to Russian and Belarusian industry sector sanctions, the U.S. hopes to thwart potential diversions from Belarus to Russia.
- MEU and MIEU Controls Enhanced
In order to further limit military support for Russia and Belarus, the Rule significantly broadens the application of existing controls on "military end users" (MEUs) and "military-intelligence end users" (MIEUs) at EAR §§ 744.21 and 744.22, respectively. The restrictions now apply to Belarusian, Burmese, Cambodian, Chinese, Russian, and Venezuelan MEUs located anywhere in the world and MIEUs of the foregoing countries and those of countries listed in Country Group E:1 or E:2 of Supplement No. 1 to Part 740 wherever located. Relatedly, BIS redesignated six previously listed entities located outside of Russia and Belarus as MEUs pursuant to EAR § 744.21 and applies the FDP rule to them, thereby curtailing these entities from producing items needed by the Russian and Belarussian military and industrial sectors. Furthermore, the Rule clarifies MEU and MIEU requirements related to Burma, Cambodia, the People's Republic of China, and Venezuela.
- Dollar Value Exclusion Thresholds for Luxury Goods Lowered
Additionally, the Rule implements lower dollar value exclusion thresholds for 'luxury goods" for Russia and Belarus to align more closely with controls implemented by U.S. allies.
- Corrections and Clarifications Implemented for Existing Controls on Russia and Belarus
Finally, the Rule makes numerous corrections and clarifications to the existing controls on Russia and Belarus to clarify the scope of the controls and more effectively further policy objectives. Most notably, these changes include (i) expanding the list of consumer communications devices eligible for License Exception CCD to cover EAR99 items such as tablets and microphones, (ii) clarifying that License Exception CCD applies to the Russian (and now Belarusian) industry sector sanctions under EAR subsection 746.5 and the "Luxury goods" sanctions under subsection 746.10, and (iii) clarifying eligibility for Russia and Belarus for the news media authorization under License Exception TMP.
OFAC Concurrently Issues New Sanctions Targeting Russia
In tandem with BIS, OFAC also announced new sanctions naming an additional 22 Russian officials and two entities to its list of Specially Designated Nationals as a result of their contributions to the Russian aggression in Ukraine. The September 15 announcement implemented Executive Order (EO) 14071, which prohibits the export, reexport, sale, or supply of U.S. quantum computing services to any person located in the Russian Federation (see Determination). This latest action builds upon an earlier Determination from April 2022, which banned U.S. persons from providing "accounting, trust and corporate formation, or management consulting services" to any person located in Russia.
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Venable's International Trade and Logistics Group is carefully monitoring the situation and will continue to provide updates as developments occur. If you have any questions, please reach out to the authors for guidance.