On June 2, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) updated the Export Administration Regulations (“EAR”) to: (i) add 71 entities to the Entity List “for acquiring or attempting to acquire U.S.-origin items in support of Russia’s military”; (ii) issue minor revisions, corrections, and clarifications to its Russia and Belarus export controls; and (iii) increase its administrative disclosure authorities to allow the publication of charging letters prior to a resolution of an administrative case. The changes went into effect immediately on June 2, 2022 and were published in the Federal Register on June 6, 2022 via two Final Rules available (here) and (here).
Entity List Designations
The full list of entities are all Russian except for one Belarusian entity, JSC Eleron. Sixty-six (66) of the total seventy-one (71) entities added to the Entity List received a footnote 3 designation, meaning that in addition to the standard prohibitions on export, reexport, in-country transfers to the designated entities, those 66 entities will also be prohibited from involvement in transactions for foreign-produced items “subject to the EAR” under the Russia/Belarus-Military End User FDP Rule, which we previously covered (here), (here), and, most comprehensively, (here). The list of newly designated entities appears to include many manufacturing entities that generate products vital to Russia’s military. All license applications for exports, reexports, or in-country transfers to the newly designated entities are subject to a review policy of denial, except for applications involving food and medicine designated EAR99, which are subject to a case-by-case review policy.
Russia/Belarus-Related EAR Revisions, Corrections, and Clarifications
BIS made relatively minor changes to a variety of EAR provisions. Here are the most noteworthy of those changes:
- Luxury Goods Sanctions against Exports, Reexports, and Transfers to Russia, Belarus, and Russian Oligarchs Worldwide: BIS clarified that certain goods that included a $1,000 threshold to trigger the new controls require the amount of the items in the shipment to be “valued at greater than or equal to $1,000 . . . .” This is not a substantive change, and merely clarifies the existing descriptions. We previously covered the EAR Luxury Goods Sanctions in further detail (here).
- Russia/Belarus Military End-Use / End-User (“MEU”) Language Clarified: On March 2, 2022 BIS intended to merely extend to Belarus the same heightened MEU controls it had implemented against Russia on February 24, 2022, but some language in the MEU control was not technically consistent with the intended change and resulted in confusion about the dividing line between MEU controls against Russia and Belarus (which prohibit export, reexport, and transfer of EAR99-designated items) versus the MEU controls against other MEU rule countries (Burma, Cambodia, China, and Venezuela), which are limited to an enumerated list of items. BIS has now fixed the inconsistency.
- Elimination of the Exclusion of EAR99 Food and Medicine “Subject to the EAR” from Licensing Requirements for Russian/Belarusian MEUs: License applications for EAR99-designated food and medicine exports, reexports, and in-country transfers will be subject to a case-by-case review. BIS clarified that elimination of the license requirement exclusion “does not impose a license requirement regarding the export, reexport, or transfer (in-country) of food and medicine designated as EAR99 for the use and benefit of the Russian people, the people of the Crimea region of Ukraine, or the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) regions of Ukraine (covered regions of Ukraine).”
- Three Schedule B Numbers Now Common to Both Russia Industry Sector Sanctions Lists: Those three Schedule B numbers are 8421.39.8020, 8421.39.8030, and 8421.39.8040. We recently covered a significant update to the Supplement No. 4 Russia Industry Sector Sanctions list (here).
The EAR Now Allows for Publication of Charging Letters Prior to Settlement and BIS Immediately Announced the Issuance of a Charging Letter against Roman Abramovich
Simultaneous with publication of the two Final Rules in the Federal Register on June 6, 2022, BIS announced it had issued a charging letter against Russian oligarch and former FC Chelsea owner Roman Abramovich for flights involving his two U.S.-origin aircraft that violated the EAR. As part of the effort, the U.S. Department of Justice unsealed a seizure warrant for the two aircraft. BIS stated the new policy of publicizing charging letters prior to a case resolution is meant to ensure industry understands the importance of compliance with swiftly changing regulations as quickly as possible instead of waiting, in some cases for years, for cases to be resolved to understand BIS’ enforcement approach. This new policy is consistent with an increasingly aggressive enforcement approach which we covered recently in blog posts (here) and (here), and which extends to international cooperation as described in a June 7, 2022 joint press release from the Canada Border Services Agency and BIS describing a “joint commitment” to “share information; conduct pre- and post-shipment verifications and audits; inspect, detain, and seize shipments; and reduce threats through coordinated enforcement actions and investigations” toward the goal of “restricting Russia’s access to technologies and other goods Russia needs to sustain its aggressive military capabilities.”
Husch Blackwell’s Export Controls and Economic Sanctions Team continues to closely monitor all sanctions and export controls developments concerning Russia, Belarus, and Ukraine and will provide further updates as conditions change. Interested readers can also review content covering previous Russia, Belarus and Ukraine sanctions developments at the Husch Blackwell Russia Sanctions Resource Library. Should you have any questions or concerns, please contact Cortney Morgan, Grant Leach, Tony Busch, or Isabella Peek of our Export Controls and Economic Sanctions Team.