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In response to Russia’s invasion of Ukraine, the U.S. government has deployed a whole-of-government approach to impose sanctions and tighter export controls on Russia since February 24, 2022. This alert summarizes the key export restrictions currently in place, including those imposed by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and by the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC)). These controls significantly curtail exports, reexports and transfers (in country) of technology, commodities, and software (collectively, the items) destined for or transiting Russia or Belarus and items intended for certain persons affiliated with Russia and Belarus.&nbsp; The BIS restrictions are described in the Export Administration Regulations (<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C" target="_blank" rel="noreferrer noopener">EAR</a>), which are set forth in&nbsp;15 C.F.R. Parts 730-774. Although many of the amendments to the EAR were the subject of prior detailed&nbsp;<a href="https://www.bakerlaw.com/International-Trade-Export-Controls-and-Economic-Sanctions" target="_blank" rel="noreferrer noopener">alerts</a>, this website provides an overview of the key export controls currently in place. This alert is not intended to be and is not a detailed summary of the export controls implemented in response to the invasion of Ukraine. Rather, it is a tool to help businesses, both American and foreign, identify whether their transactions with Russia, Belarus or Ukraine may now require a license, or be prohibited, under the wide-ranging controls that have been imposed. A review of the regulations will be necessary to determine specific licensing requirements.

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An overview of the sanctions imposed by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), which apply in addition to the export controls summarized in this alert, can be viewed <a href="https://www.bakerlaw.com/insights/current-state-of-u-s-economic-sanctions-imposed-on-the-russian-federation-and-covered-regions-of-ukraine-in-response-to-the-russia-federations-invasion-of-ukraine-october-2-2023/" target="_blank" rel="noreferrer noopener">here.</a>

Executive Summary of Changes Since June 26, 2023

In recent months, BIS, including its Office of Export Enforcement (OEE), has conducted more robust outreach to the public regarding the serious risk of Russian and Belarusian export control evasion and diversion attempts. This includes <a href="https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/3340-final-axelrod-bafa-keynote-09-28-2023/file">remarks on September 28</a> by the Assistant Secretary for Export Enforcement, Matthew Axelrod, and the issuance of a comprehensive <a href="https://www.bis.doc.gov/index.php/2011-09-14-14-10-06/russia-export-controls">List of High Priority Items</a> and related guidance by BIS on September 14, 2023.&nbsp; In addition, joint guidance regarding the High Priority Items was issued by BIS and U.S. allies, known as the <a href="https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3336-2023-09-26-export-enforcement-five-guidance-for-industry-and-academia-priority-hs-codes/file">Export Enforcement Five</a> (E5), on September 26, 2023, highlighting joint efforts with allied nations seeking to identify and prevent Russian evasion tactics.

The guidance highlighted that goods falling under certain Harmonized System Codes (HS codes) pose a higher risk of diversion for end-use by the Russian military and put freight forwarders on notice that they should be more aware of their customers’ cargo to help identify evasion and diversion risks.&nbsp;

The List of High Priority Item ranks nine HS codes by their six-digit number in Tiers 1 and&nbsp;2&nbsp;and places other items, including lower technology items and commodities, in Tier 3 (A or B) or 4.&nbsp; Generally, the HS codes in the four tiers cover items such as the following:

Tier 1: Electronic integrated circuits of different varieties.

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Tier 2: Communication devices, radar and electrical parts and equipment.

Tier 3A: Diodes, cameras, static convertors and other electronic items.

Tier 3B: Bearings, optical devices, and parts of airplanes, helicopters, or unmanned aircraft.

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The nine HS codes in Tiers 1 and 2 are the items most highly prioritized by BIS, and are as follows:&nbsp;&nbsp;

8542.31 Electronic integrated circuits: Processors and controllers, such as microcontrollers

8542.32 Electronic integrated circuits: Memories, such as SRAM

8542.33 Electronic integrated circuits: Amplifiers, such as op amps

8542.39 Electronic integrated circuits: Other, such as FPGAs

8517.62 Machines for the reception, conversion and transmission or regeneration of voice, images, or other data, such as wireless transceiver modules

8526.91 Radar apparatus, Radio navigational aid apparatus and radio remote control apparatus, such as GNSS modules

8532.24 Fixed capacitors: Ceramic dielectric, Multilayer

8548.00 Electrical parts of machinery or apparatus, not specified or included elsewhere in HS codes beginning with 85, such as EMI filters

Importantly, all items listed in Tiers 1 to 4 are subject to the EAR and, as further discussed in Part II, a license is required to export, reexport, or transfer (in-country) most items to or within Russia and Belarus, including items on the High Priority List. To be clear, the High Priority List does not impose any additional controls but was issued in an effort to clamp down on diversion of items important to the Russian war effort. The full list of the 45 items on the High Priority List identified by their HS code and description can be found <a href="https://www.bis.doc.gov/index.php/2011-09-14-14-10-06/russia-export-controls">here</a>.

The High Priority List follows previous guidance issued by BIS and other U.S. agencies in <a href="https://www.fincen.gov/sites/default/files/2022-06/FinCEN%20and%20Bis%20Joint%20Alert%20FINAL.pdf">June 2022</a> and <a href="https://www.bis.doc.gov/index.php/documents/enforcement/3272-fincen-and-bis-joint-alert-final-508c/file">May 2023</a> to alert the trade community of Russian export control evasion and diversion attempts.&nbsp; Those alerts identified various red flags that exporters should be aware of in relation to items on the High Priority List.&nbsp; BIS encourages exporters to conduct additional due diligence when engaging in a transaction involving any of the listed HS codes to verify the legitimacy of the transaction and to prevent potential diversion to Russia. Some of the red flag indicators discussed in the alerts include:&nbsp;

Transactions with entities incorporated after February 24, 2022, in non-U.S. allied countries;

The end customer has not received any items listed in the High Priority List prior to February 24, 2022;

Sudden and sustained increase in purchase order volumes for listed items after February 24, 2022;

Transactions involving freight forwarding firms that are also listed as the product’s final end customer; and

Designation of shipping routes not ordinarily used for the type of product or destination.

The alerts showcase the level of concern BIS and U.S.-allied nations have regarding various evasion tactics and diversionary schemes that have resulted in controlled items reaching Russian military end-users, as evidenced by controlled electronics and equipment being found on the battlefield.

To assist exporters in carrying out additional due diligence regarding the listed items, BIS published a <a href="https://www.bis.doc.gov/index.php/documents/policy-guidance/3339-tent-final-best-practice-customer-certification-v4/file">sample certification</a> form on September 28, 2023.&nbsp; BIS encourages exporters to use the certification to receive written assurances of compliance with customers procuring those items. The form is not intended to replace additional screening or other inquiries regarding transactions involving High Priority items, but it is intended to help exporters supplement their existing best practices.

In line with increased enforcement actions and targeting of export control violators, BIS <a href="https://www.federalregister.gov/documents/2023/09/27/2023-21080/addition-of-entities-and-revision-to-existing-entities-on-the-entity-list-removal-of-existing-entity">added</a> a total of 28 parties to the Entity List on September 27. Some of the entities named, in Russia as well as other countries, were specifically added for attempting to procure or procuring in violation of the EAR various electronic equipment and other commodities for use in Russia’s unmanned aerial vehicle program. Several other parties were added because of a “critical risk of diversion of U.S. defense technologies” or “working as a network to procure aerospace components . . . used . . . by Russia in Ukraine”.&nbsp; We expect BIS and other allied countries will continue to highlight the risk of diversion schemes through published guidance and will focus on bringing enforcement actions against export violators involved in illegal exports to Russia.

I. Overview of BIS Export Controls Relating to Russia and Belarus

A. BIS License Requirements Relating to Russia

Exports (direct or indirect), reexports (from one third country to another) and transfers (in country; any transfer within any third country) of the following items are subject to license requirements:

All items on the EAR’s Commerce Control List (CCL).

Luxury goods (EAR99) listed in Supplement No. 5 to Part 746 of the EAR.

Sector-specific items listed in Section 746.5 and Supplement Nos. 2, 4 and 6 to Part 746 of the EAR.

Any items subject to the EAR going to a military end use or end user (MEU) or a military intelligence end use or end user (MIEU), regardless of whether located in or outside Russia (note that slightly different due diligence standards apply for exports to end users outside Russia; please consult Section 744.21 of the EAR).

Foreign-produced items that are subject to the EAR under the FDPRs, including the specific Russia/Belarus rules in Sections 746.8 and 734.9(f) and (g) of the EAR.

Any item subject to the EAR if a person on the BIS Entity List or BIS Denied Persons List or another sanctioned persons list is involved in the transaction.

For a detailed summary of each of these requirements, see Part II below.

B. BIS License Requirements Relating to Belarus

Exports, reexports and transfers (in country) of the following items are subject to license requirements:

Sector-specific items listed in Section 746.5 and Supplement Nos. 2, 4 and 6 to Part 746 of the EAR (noting that Section 746.5(a)(1)(i) and Supplement No. 2 apply only to use in Arctic offshore locations or shale formations in Belarus).

Any items subject to the EAR going to an MEU or MIEU, regardless of whether it is located in or outside Belarus (note that slightly different due diligence standards apply for exports to end users outside Russia; please consult Section 744.21 of the EAR).

Foreign-produced items that are subject to the EAR under the FDPR, including the specific Russia/Belarus rules in Sections 746.8 and 734.9(f) and (g) of the EAR.

For a detailed summary of each of these requirements, see Part III below.

C. License Requirements Relating to the Covered Regions of Ukraine

All items subject to the EAR, including EAR99 items.

The covered regions of Ukraine are Crimea and the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR).

For a detailed summary of each of these requirements, see Part IV below.

D. DDTC License Requirements

The following requirements apply to U.S. Munitions List (USML) items:

All defense articles and defense services on the USML contained in the International Traffic in Arms Regulations (ITAR) require licenses for export to Belarus, and applications for such licenses have long been subject to a policy of denial.

All defense articles and defense services on the USML require licenses for export to Russia, and applications for such licenses are subject to a policy of denial, except for license applications related to government space cooperation, which will be considered on a case-by-case basis.

For a detailed summary of each of these requirements, see Part V below.

In addition to the information provided in Parts II through V regarding the BIS export controls applicable to Russia, Belarus and the covered regions of Ukraine, as well as ITAR controls applicable to Russia and Belarus, further information on the BIS Entity List-based controls and compliance tips may be found in Parts VI and VII below.

II. License Requirements Relating to Russia

Items subject to the jurisdiction of BIS under the EAR include most items exported from the United States; U.S.-origin items, wherever located; and foreign-produced items subject to the EAR under the&nbsp;De Minimis&nbsp;Rule&nbsp;or any of the applicable&nbsp;FDPRs. The EAR’s jurisdiction is based on the item; both U.S. and foreign persons must comply with the EAR – including the EAR’s General Prohibition 10, which prohibits any transaction related to an item that has been exported in violation of the EAR. For example, BIS has issued several public notices regarding Russian-owned aircraft that are subject to these prohibitions.

All items on the EAR’s&nbsp;CCL require a BIS license for export (direct and indirect), reexportation (from one third country to another) or transfer (in country; any transfer within any third country)&nbsp;<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-746#p-746.8(a)(1)" target="_blank" rel="noreferrer noopener">(15 C.F.R. Section 746.8(a)(1))</a>&nbsp;if the intended end user is in Russia or the item will transit Russia.

As of April 8, 2022, any item listed in any of the 10 CCL categories requires a BIS license when destined for Russia, regardless of the end use or end user. The license requirements for items in Categories 3-9 of the CCL were&nbsp;<a href="https://www.federalregister.gov/documents/2022/03/03/2022-04300/implementation-of-sanctions-against-russia-under-the-export-administration-regulations-ear" target="_blank" rel="noreferrer noopener">imposed on February 24, 2022</a>, and the license requirements for items in Categories 0-2 of the CCL were&nbsp;imposed on&nbsp;<a href="https://www.federalregister.gov/documents/2022/04/14/2022-07937/expansion-of-sanctions-against-russia-and-belarus-under-the-export-administration-regulations-ear" target="_blank" rel="noreferrer noopener">April 8, 2022</a>.&nbsp;The permitted uses of license exceptions are very limited though; for example, certain carve-outs for some mass market items classified under ECCNs 5A992 or 5D992 may apply.

Deemed exports and reexports are not subject to these license requirements.

Items, including EAR99 items, subject to&nbsp;<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-746#746.8" target="_blank" rel="noreferrer noopener">Russian industry sector sanctions</a>&nbsp;require a BIS license (<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-746#746.5" target="_blank" rel="noreferrer noopener">15 C.F.R. Section 746.5</a>).

A BIS license is required for the export, reexport or transfer (in country) to or within Russia of items subject to the ECCNs listed in Section 746.5(a)(1)(i) or any of the items listed in Section 746.5, Supplement No. 2 to Part 746 of the EAR (for certain deepwater oil-and-gas-related end uses), and for the export, reexport or transfer (in country) to or within Russia of such items (for certain Arctic offshore or shale formation oil-and-gas-related end uses). In addition, a BIS license is required for the export, reexport or transfer (in country) to or within Russia of items listed in&nbsp;<a href="https://bis.doc.gov/index.php/documents/regulation-docs/420-part-746-embargoes-and-other-special-controls/file" target="_blank" rel="noreferrer noopener">Supplement Nos. 4 and 6 to Part 746 of the EAR.</a>

As of October 2, 2023, all items in Supplement Nos. 2 and 4 to Part 746 of the EAR are identified by a six-digit HTS code and description. The license requirement is based on the six-digit HTS code. This means that if an item is classified under the six-digit HTS code but does not correspond to the HTS description, the item is nonetheless covered and subject to licensing requirements. If any item is potentially described in more than one HTS description, the HTS code controls license determinations. Further, any item classified under an eight- or 10-digit HTS code that begins with a listed six-digit HTS code is also subject to license requirements.

As of October 2, 2023 , there are over <a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-746/appendix-Supplement%20No.%204%20to%20Part%20746">2,020 items listed in Supplement No. 4</a>, as all items in Chapters 84, 85 and 90 of the HTS system are now listed in Supplement No. 4. Supplement No. 4 is a list of commercial and industrial items that require a license for export or reexport to or transfer within Russia or Belarus. The items added on May 19 include electronics, medical instruments and advanced fibers for the reinforcement of composite materials (including carbon fibers), which have the potential for Russian military application.

As of October 2, 2023, Supplement No. 4 includes most “components,” “parts,” “accessories” and “attachments” for the listed items, regardless of HTS code or HTS description – apart from any “part” or minor “component” (i.e., fasteners, washers, spacers, insulators, grommets, bushings, springs, wires or solder) that is not controlled. &nbsp;

License applications for items in Supplement Nos. 2, 4 and 6 submitted by companies not headquartered in Country Groups D:1, D:5, E:1 or E:2 and intending to curtail or close all operations in Russia will be reviewed on a case-by-case basis to determine whether the disposition of the item will benefit the Russian government or military.

Over 130 items are listed in&nbsp;<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-746/appendix-Supplement%20No.%206%20to%20Part%20746" target="_blank" rel="noreferrer noopener">Supplement No. 6</a>&nbsp;as of&nbsp; October 2, 2023. The items in Supplement No. 6 include discrete chemicals, biologics, fentanyl and its precursors, and related equipment. The chemicals are specified based on their Chemical Abstracts Service (CAS) Registry Numbers in certain concentrations by weighted percentage and include:

Triethylamine (CAS 121-44-8), trimethylamine (CAS 75-50-3), lithium chloride (CAS 7447-41-8), lithium chloride hydrate (CAS 85144-11-2), (44) lithium chloride monohydrate (CAS 16712-20-2) and lithium carbonate (CAS 554-13-2).

Assay kits and reagents for nucleotide or peptide isolation, extraction or purification, n.e.s.

Laboratory equipment, including “components,” “parts,” “accessories” and “consumable materials” for such equipment for the analysis or detection, destructive or nondestructive, of chemical substances, n.e.s.

The license requirement is based on product description and the CAS in distinct concentrations. Supplement No. 6 also includes quantum computing items, cryogenic refrigeration systems, additive manufacturing equipment, microscopes and several other items.

EAR99 Luxury Goods Require a BIS License&nbsp;<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-746#746.10" target="_blank" rel="noreferrer noopener">(15 C.F.R. Section 746.10)</a>

<a href="https://www.bis.doc.gov/index.php/component/docman/?task=doc_download&amp;gid=2932" target="_blank" rel="noreferrer noopener">Effective March 11, 2022</a>,&nbsp;a BIS license is required for exports, reexports and transfers to or within Russia of certain luxury goods subject to the EAR, as well as to designated Russian oligarchs or other persons, regardless of their location.

Over 600 luxury goods are listed in&nbsp;<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-746/appendix-Supplement%20No.%205%20to%20Part%20746" target="_blank" rel="noreferrer noopener">Supplement No. 5 to Part 746 of the EAR</a>&nbsp;as of September 29; they include household and department store items such as kitchen appliances, fans, radio/TV products, certain spirits, tobacco products, clothing items, jewelry, leather items, plastic items, vehicles, antiques, sporting goods and other goods. Unlike items listed in other supplements to Part 746, the items in Supplement No. 5 are identified by a Schedule B number, the two-digit Schedule B chapter heading and a 10-digit commodity description. In certain cases, value thresholds apply, although in many cases, value thresholds have not been assigned, and in some cases, the value thresholds have changed over the course of the past year. Thus, it is important to check the value thresholds to determine whether identified luxury goods were or will be subject to the licensing requirements of Supplement No. 5 to Part 746 of the EAR.

License applications for luxury goods listed in Supplement No. 5 will be reviewed on a case-by-case basis for those goods that meet humanitarian needs. And as discussed above, license applications for disposition of items subject to the EAR under certain conditions will also be reviewed on a case-by-case basis.

EAR99 Items to MEUs Require a BIS License&nbsp;<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-744#744.21" target="_blank" rel="noreferrer noopener">(15 C.F.R. Sections 744.21 and 744.22)</a>

A BIS license is required for the export, reexport or transfer to or within Russia and Belarus of all items subject to the EAR (including foreign-produced items subject to the EAR as well as U.S.-origin items) to MEUs or MIEUs located anywhere in the world. Conducting due diligence to verify whether an entity qualifies as an MEU or MIEU remains essential, but the Russian and Belarusian MEUs and MIEUs that are located outside Russia or Belarus are on the BIS Entity List in Supplement No. 4 to Part 744 of the EAR. The terms “military end use” and “military end user” as well as “military intelligence end use” and “military intelligence end user” are broadly defined in the EAR.

As of October 2, 2023, BIS has designated&nbsp;over 380 Russian and Belarusian entities/individuals as MEUs. They are now on the BIS Entity List. No license exceptions, other than for limited use of the GOV license exception, are available to overcome this license requirement.

Use of License Exceptions Has Been Severely Limited

The availability of license exceptions has been severely limited for transactions involving Russia. Even when a license exception is available, the terms and conditions of its use are very restrictive. It is important to review each specific control carefully, as the availability and scope of license exceptions differ among the various controls.

Certain Foreign-Produced Items Require a BIS License

There are two ways that foreign-produced items (commodities, technology and software) can be subject to the EAR – under the&nbsp;De Minimis&nbsp;Rule&nbsp;or under the FDPRs. These complex rules are summarized below; the applicable regulations should be consulted to determine whether the rules may apply to a specific foreign-produced item. If a foreign-produced item is subject to the EAR, it may be subject to the same export license requirements as if the item were exported from the United States.&nbsp;(Note: The FDPRs discussed below are the FDPRs targeted at Russia and Belarus; for a complete list of FDPRs, please consult EAR Section 734.9.)

De Minimis&nbsp;Rule&nbsp;<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-734#734.4" target="_blank" rel="noreferrer noopener">(15 C.F.R. Section 734.4)</a>.&nbsp;The&nbsp;De Minimis&nbsp;Rule provides that a foreign-produced item that derives more than 25 percent&nbsp;of its value from controlled U.S.-origin items is subject to the EAR. As of April 8, 2022, for items destined for Russia, any U.S.-origin item on the EAR’s CCL would qualify as controlled content for the purpose of calculating whether more than 25 percent of the foreign-made item’s value is derived from controlled items under the&nbsp;De Minimis&nbsp;Rule. (To date, the lower&nbsp;de minimis&nbsp;level of 10 percent or more applicable to shipments to Country Group E:1 countries (Iran, Syria, Sudan and North Korea) has not been applied to Russia or Belarus.)

FDPRs&nbsp;<a href="https://bis.doc.gov/index.php/documents/regulations-docs/2382-part-734-scope-of-the-export-administration-regulations-1/file" target="_blank" rel="noreferrer noopener">(15 C.F.R. Sections 746.8 and 734.9).</a>&nbsp;Under the FDPRs, if the foreign-produced item is the “direct product” of certain U.S.-origin-controlled technology or software, it can be subject to the EAR. There are two specific FDPRs that subject a broad range of foreign-produced items to the EAR when destined for Russia or Belarus. The first one applies to any end user in Russia or Belarus and&nbsp;the second one, which is more restrictive, relates to MEUs.<ul><li>
Russia/Belarus FDPR: See&nbsp;<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-746#p-746.8(a)(2)" target="_blank" rel="noreferrer noopener">15 C.F.R. Section 746.8(a)(2)</a>&nbsp;and&nbsp;<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-734#p-734.9(f)" target="_blank" rel="noreferrer noopener">Section 734.9(f)</a>.&nbsp;Foreign-produced items subject to the EAR under this FDPR include any foreign-produced item that is a direct product of U.S.-origin technology or software specified in any ECCN in product groups D or E of the CCL (or produced by a plant or “major component” of a plant that is itself a direct product of such U.S. technologies and software) and is specified in any ECCN on the CCL or identified in Supplement Nos. 6 or 7 to Part 746 of the EAR. A license will be required when there is reason to know the foreign-produced item meets the product scope and is destined for Russia, Belarus or the Crimea region of Ukraine or will be incorporated or used in the production or development of any part, component or equipment specified in any ECCN on the CCL or in Supplement Nos. 6 or 7 to Part 746 of the EAR and produced in or destined for Russia or Belarus.<ul><li>The Crimea region was added to the destination scope of the Russia/Belarus FDPR on May 19.</li></ul>
</li></ul>

In most cases, BIS will review license applications related to items subject to these license requirements under a policy of denial. Applications related to EAR99 food and medicine will be reviewed on a case-by-case basis.

III. License Requirements Relating to Belarus

The license requirements and restrictions on the use of license exceptions imposed on transactions involving Belarus largely mirror those imposed on Russia. For a summary of the license requirements and availability of license exceptions relating to Belarus, please see the above discussion of controls applicable to Russia.

IV. License Requirements Relating to the Covered Regions of Ukraine

Export license requirements applicable to Crimea have been in place for several years&nbsp;<a href="https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-746#746.6" target="_blank" rel="noreferrer noopener">(15 C.F.R. 746.6)</a>, as have related sanctions.&nbsp;<a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2022/02/21/executive-order-on-blocking-property-of-certain-persons-and-prohibiting-certain-transactions-with-respect-to-continued-russian-efforts-to-undermine-the-sovereignty-and-territorial-integrity-of-ukraine/" target="_blank" rel="noreferrer noopener">Effective of February 21, 2022</a>, these requirements were extended to cover all items subject to the EAR (other than food and medicine designated as EAR99 and certain software and Internet-based personal communications) destined for the DNR and LNR regions of Ukraine. That same day, the President issued an&nbsp;<a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2022/02/21/executive-order-on-blocking-property-of-certain-persons-and-prohibiting-certain-transactions-with-respect-to-continued-russian-efforts-to-undermine-the-sovereignty-and-territorial-integrity-of-ukraine/" target="_blank" rel="noreferrer noopener">executive order</a>&nbsp;prohibiting U.S. persons from engaging in new investment in the DNR and LNR regions or engaging in trade, including export, import, reexport, sale or supply of goods, services or technology, with the DNR and LNR regions. U.S. persons, wherever located, are prohibited from approving, financing, facilitating or guaranteeing transactions by foreign persons that cannot be performed by U.S. persons as a result of the executive order. Licenses from both BIS and OFAC may be required for any export, reexport or transfer (in country) involving the DNR and LNR regions.

V. DDTC License Requirements

All defense articles and services on the USML have long required licenses for export to Belarus, and applications for such licenses remain subject to a policy of denial. Since March 2021, all defense articles and services on the USML have been subject to license requirements for export to Russia, and applications for such licenses are subject to a policy of denial, except for license applications related to government space cooperation, which will be considered on a case-by-case basis.&nbsp;

Most license exemptions are not available for exports to Russia, although certain exemptions may be used in support of government space cooperation.

VI. The BIS Entity List, Denied Persons List and Unverified List

As of September 29, BIS has added over 520 Russian and Belarusian entities and individuals to its Entity List, and more than 380 of those have been designated as MEUs. On September 26, 2023, five entities were added to the BIS Entity List, including one with a footnote 3 designation for support of Russia’s military and defense sector. This builds on the BIS May 19, 2023, rule adding 71 entities on the BIS Entity List, including 69 entities listed as footnote 3 entities. Thus, they are subject to the Russia/Belarus MEU FDPR set forth in Section 734.9(g) of the EAR.

BIS also has added Russian individuals and related entities to its Denied Persons List, subjecting them to denial orders for violating the EAR or to prevent the occurrence of an imminent violation of the EAR. The most recent example of this is the August 23, 2023 <a href="https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3324-2023-08-31-bis-press-release-petrov-tdo/file">temporary denial order</a> issued against several companies and Russian nationals for their part in a Russia-based illicit procurement network that supplies the Russian military. Denial of export privileges is one of the most severe enforcement tools to address violations of U.S. export controls and to prevent imminent violations of the EAR. A denial order may be imposed by BIS even when there is no criminal component to the violations.

Also of importance is the BIS Unverified List (UVL), which is composed of foreign parties involved in any transaction involving an item subject to the EAR where BIS has been unable to verify the bona fides of a transaction through a post-shipment verification or prelicense check. Under BIS policy, if 60 days passes following addition to its UVL and BIS still has not been able to successfully complete an end-use check, BIS may begin the process to have the foreign party moved to its Entity List. Given this policy, adopted in October 2022, U.S. exporters and foreign reexporters should pay particular attention to BIS UVL due to the high risk that parties on this list may be added to the BIS Entity List.

The October 2022 policy and related&nbsp;Federal Register&nbsp;notice may be found&nbsp;<a href="https://www.bis.doc.gov/index.php/documents/policy-guidance/3156-axelrod-prevention-of-end-use-checks-policy-memo-10-7-22/file" target="_blank" rel="noreferrer noopener">here</a>&nbsp;and&nbsp;<a href="https://www.federalregister.gov/documents/2022/12/16/2022-27149/revisions-to-the-unverified-list-and-the-entity-list" target="_blank" rel="noreferrer noopener">here</a>, respectively. A license (or in the case of an entity on the BIS UVL, a BIS UVL statement as required by Section 744.15(b) of the EAR) must be obtained from BIS if a transaction involves an item subject to the EAR and a listed entity. Use of license exceptions is not permitted. As a general rule, license applications will be approved only on an exceptional basis for transactions involving a listed person.

Three important steps for compliance are:

Determine the export control jurisdiction and USML category or ECCN of any technology, commodity or software destined, directly or indirectly, for Russia or Belarus, and determine license requirements and availability.

If the item is not on the USML or the EAR’s CCL, verify its Schedule B number, Schedule B description, HTS code, value threshold and HTS description, and then review the relevant EAR supplements.

Conduct sanctioned person screening at the time of the order and prior to the export, reexport or transfer (in country) to verify that no party to a transaction is covered by any applicable sanctioned persons list, including BIS’s UVL, Denied Persons List or Entity List and OFAC’s List of Specially Designated Nationals and Blocked Persons.

Please do not hesitate to reach out to any member of our&nbsp;<a href="https://www.bakerlaw.com/International-Trade-National-Security" target="_blank" rel="noreferrer noopener">International Trade and National Security team</a>&nbsp;or your BakerHostetler relationship partner if you have questions. BakerHostetler continues to closely monitor this rapidly changing situation.

This alert is a tool to help businesses, both U.S. and foreign, identify whether their business with Russia, Belarus or Ukraine may now be subject to U.S. export license requirements or involve newly sanctioned or blocked persons. This alert cannot be relied on as legal advice and provides only a high-level summary of the export controls applicable to Russia, Belarus and the covered regions of Ukraine. The export controls and related sanctions are complex, detailed and continuing to develop, and legal counsel should be sought for guidance on specific transactions.

BakerHostetler publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act on the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely on advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

Current State of U.S. Export Controls in Response to the Russian Federation’s Invasion of Ukraine – October 2023

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