Effective December 16, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Rule announcing that it was moving nine Russian companies from the Unverified List to the more restrictive Entity List. BIS stated it has continuously been unable to verify the bona fides of these companies due to the Russian government’s prevention of timely end-use checks. Thus, BIS determined there exists “an unacceptable risk of diversion or misuse of items subject to the EAR [Export Administration Regulations].” As a result, these entities have been added to the Entity List with a license requirement for all items subject to the EAR. BIS will review any license applications pertaining to these entities under a policy of denial, and no license exceptions are available for exports, reexports, or transfers (in-country) to these entities.
This is the first rule issued pursuant to changes announced in October 2022 which clarified that a sustained lack of cooperation by a host government that effectively prevents BIS from determining compliance with the EAR, including allowing for timely end-use checks by a foreign government, is grounds for adding an entity to the Entity List. See Update of October 11, 2022.
In addition, BIS has issued a Temporary Denial Order (TDO) immediately suspending the export privileges of three persons for 180 days for the unauthorized export of sensitive items subject to the EAR to Russia. According to BIS, the individuals were affiliated with Moscow-based companies that operate under the direction of Russian intelligence services to procure advanced electronics and sophisticated testing equipment for Russia’s military industrial complex and research and development sector. The individuals allegedly attempted to evade export controls by creating shell companies and associated bank accounts in the United States, to route shipments and layer financial transactions in order to obscure the true Russian end users.
In this Final Rule, it should also be noted that BIS removed 27 persons from the Unverified List – one under the destination of Pakistan and 26 under the destination of China – because enforcement officers were able to verify the bona fides of these companies.