BIS continues to expand export controls in Russia and Belarus and adds 71 ​​entities to its Entity List | Hogan Lovells

The BIS issued two final rules on June 2, 2022 regarding export controls in Russia and Belarus. As described in more detail below, Rule One introduced several changes to the EAR, including controls on EAR99 for food and drugs destined for Russian and Belarusian military uses and military end users, and Rule Two added 71 Russian/Belarusian entities to the Entity List.

“Revisions to Russia and Belarus Sanctions and Related Provisions; revisions, corrections, and other clarifications” Final Rule

This is the final rule Review, correct, and clarify certain provisions of the EAR relating to export controls on Russia and Belarus in response to the further Russian invasion of Ukraine.

The rule made the following major changes:

  • EAR99 Food and Drug Restricted End Users in Russian/Belarusian Military. extending the licensing requirement for Russian and Belarusian military uses and military end users to EAR99 for Food and Drugs (i.e. they are no longer excluded from licensing requirements);

    • EAR99 Food and Drug applications intended for Russian and Belarusian military uses/users will be reviewed under the License Review Policy on a case-by-case basis, except for the Foreign Intelligence Service (“SVR”), the Federal Security Service (“FSB”), and the Main Intelligence Directorate which is a review policy Its own licensing of such items acts as a refusal policy.

    • This change do not impose License requirement for export, re-export or transfer (within the country) of food and medicine EAR99 for the use and benefit of civilians in Russia, the Crimea region of Ukraine, the so-called Donetsk People’s Republic (“DNR”) and Luhansk People’s Regions (“LNR”) of Ukraine (“Covered areas” of Ukraine). Nor does it change the BIS policy regarding exports, re-exports or transfers (within the country) of Food and Drug EAR99 to or within any other regions of Ukraine.

  • Alignment of license review policies. Revisions of Article 746.6 to align the license review policy for the Crimea and Covered Areas of Ukraine with the corresponding policy of Russia and Belarus in § 746.8 so that the same categories of license applications defined in § 746.8 (eg, aviation safety, maritime safety) are on a case-by-case basis when engaging Crimea and the covered regions of Ukraine;

  • Factor changes to consider in license review policies. Revisions to the license review policies of both Sections 746.6 and 746.8 to consider whether the transaction in question would benefit the Russian or Belarusian government or the defense sectors and Section 746.6 to further consider whether the transaction would be harmful to the country or people of Ukraine, while removing reference to a review on a case-by-case basis for requests for transactions authorized under the relevant general licenses of OFAC of paragraph 746.6;

  • A case-by-case review of civil communications infrastructure. A revision of Section 746.8 to clarify that export licensing applications for companies headquartered in the United States, as well as those in groups of countries A:5 and A:6, that support civil telecommunications infrastructure, will be reviewed under a case-by-case license review policy Separately ;

  • Explanation of luxury goods subject to export restrictions. Explanation supplement no. 5 of Part 746 that the licensing requirement in respect of “luxury goods” for 61 items of clothing and footwear applies only when the wholesale price per unit in the United States is $1,000 or more;

  • Publish BIS Shipping Letters. Revise Section 766.20 to allow BIS export enforcement fee letters to be made publicly available upon issuance and prior to final administrative separation in such cases—a change intended to enhance the transparency efforts of the Office for International Settlements and inform interested parties of ongoing enforcement efforts;

  • Updates to Table B numbers. Updates to three of the Table B numbers (8421398020, 8421398030, and 8421398040) included in Appendix No. 2 to Part 746 (Russian Industry Sector Sanctions List) and/or Appendix no. 4 to Part 746 (HTS codes and Schedule B numbers that require a license to export, re-export and transport (within the country) to or within Russia in accordance with Section 746.5(a)(1)(2)); And the

  • Technical Corrections. Three corrections to Part 740 to 1) clarify the areas covered by Ukraine for the TMP license exception for temporary imports, exports, re-exports, and transfers (within the country), 2) correct a typo related to consumer communications equipment excluding a license (“CCD”), and 3) correct Entry for Belarus in country group A table to add footnote label 3; and three Technical Corrections to Paragraph 734.2(a)(i) to clarify the elements and activities that are subject to the EAR report.

Please note that a provisioning clause is available in connection with this final rule. Shipments of items that become ineligible for a license exception, export, re-export, or transfer (within the country) without a license (NLR) as a result of this regulatory action that was in the path on board a carrier to a port of export, re-export or transfer (within the country) on June 2, 2022 in accordance with actual requests for export, re-export or transport (within the country) to or within a foreign destination, may move to that destination under previous license exception eligibility or Exporting, re-exporting or transferring (within the country) without a license (NLR).

Final rule “Additions of entities to the list of entities”

This is the final rule Added 71 entities to the list of entities (Appendix 4 to EAR Part 744) under Destinations for Russia and Belarus, where the US Government has determined that these entities are acting inconsistent with the national security interests or foreign policy of the United States

Of the 71 entities, 66 have been added pursuant to Sections 744.11(b) and 744.21 and will receive a designation in Footnote 3 as military end-users from Russia or Belarus. This designation means that:

  • These entities are subject to licensing requirements for export, re-export, export from abroad, or transfer (within the country) of all items subject to the EAR and destined for such entities;
  • There are no license exceptions available for these entities;
  • These entities are subject to the Russia/Belarus Foreign Direct Producer Rule (“FDP”) in Section 734.9(g); And the
  • BIS will review all license applications for these entities under the refusal policy for all items subject to the EAR apart from EAR99 for Food and Drugs, which will be reviewed on a case-by-case basis, in accordance with Section 744.21(e)(1).

Only the remaining five entities are added as per Section 744.11(b), which means that:

  • These entities are also subject to licensing requirements for all items subject to the EAR;
  • BIS will review all license applications for these entities under the Deny Policy; And the
  • There are no license exceptions available for these entities.

Please note that the provisioning requirement is available. Shipments of items that have been removed from eligibility for a license, export, re-export, or (in-country) unlicensed transfer (NLR) exemption as a result of this regulatory action that was in the path On board a carrier to a port of export, re-export or transport (within the country), on June 2, 2022, subject to actual requests for export, re-export or transport (within the country) to or within a foreign destination, may move to that destination under previous eligibility to exclude Licensing, exporting, re-exporting or transferring (within the country) without a license (NLR).