On May 19, 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a significant Final Rule implementing additional sanctions and revising existing export controls against Russia and Belarus for ongoing aggression against Ukraine. According to the announcement, these revisions and additions seek to better align U.S. sanctions with the controls that have been implemented by U.S. allies imposing substantially similar controls on Russia and Belarus. The rule also revises recent BIS restrictions targeting Iran’s supply of Unmanned Aerial Vehicles (UAVs) to Russia. Finally, BIS has added 71 entities to its Entity List to prevent Russia from accessing goods it needs for continuing its efforts in Ukraine.
Expansion of Russia and Belarus Industry Sector Sanctions
Under this Final Rule, BIS has significantly expanded the scope of industry sector sanctions against Russia and Belarus.
Changes to Supplement No. 4 under Part 746 – 1,224 additional Harmonized Tariff Schedule (HTS) six-digit codes have been added to Supplement No. 4; thus, covered items – as well as any modified or designed components, parts, accessories, and attachments therefor regardless of the HTS Code or HTS Description – will now require a license for export or reexport to or transfer within Russia or Belarus. The items added include a variety of electronics, instruments, and advanced fibers for the reinforcement of composite materials, including carbon fibers. BIS’ review of any license applications for items listed on Supplement No. 4 remains a “policy of denial.”
Removal of Schedule B Numbers for Supplement No. 5 to Part 746 – Supplement No. 5 lists various “luxury items” that are restricted for export to Russia and Belarus. This list has relied on identifying covered items by their Schedule B numbers and descriptions. The Final Rule revises the list to replace the columns for Schedule B and Schedule B Description with columns for HTS Code and HTS Description. BIS’ review of any license applications for items listed on Supplement No. 4 remains a “policy of denial.”
Expansion of List under Supplement No. 6 of Part 746 – This list has been expanded to include additional chemicals (identified by their CAS numbers). Items on this list are a subset of items that are otherwise designated as EAR99 under the Commerce Control List (CCL). These items may be useful for Russia’s chemical and biological weapons production capabilities or may be diverted from Belarus to Russia for these activities of concern. These items consist of discrete chemicals, biologics, fentanyl and its precursors, and related equipment. While historically not controlled for export to Russia or Belarus, items on Supplement No. 6 require a license from BIS. BIS’ review of any license applications for items listed on Supplement No. 6 remains a “policy of denial.”
The Final Rule also makes numerous corrections and clarifications to existing controls on Russia and Belarus, including clarifications under the Russian and Belarus industry sector sanctions at 15 C.F.R. 746.5.
Revisions to Iran UAVs Rule and Related Iran FDP Rule
BIS previously imposed license requirements for a subset of generally low-technology (EAR99) items when destined for end-use in Iran, Russia or Belarus, regardless of whether a U.S. person is involved in the transaction. BIS established a new list (Supplement no. 7 to part 746 of the EAR) identifying these EAR99 items by their six-digit HTS subheading and description. Although exports of nearly all U.S. origin items and items with more than de minimis content are restricted for export to Iran, these items are subject to the Iran Foreign Direct Product (FDP) Rule which means that non-U.S. origin items on this list that are the result of U.S. origin technology are also subject to these restrictions.
The Final Rule adds one additional HTS-6 Code entry (HTS 854800) to Supplement No. 7. The items covered under this HTS subheading include a variety of electrical parts of machinery or apparatus, NESOI. For additional details on BIS’ original rule on this matter to address Iran’s support of Russia and the Iran FDP Rule, see Update of February 27, 2023.
Expansion of Russia/Belarus FDP Rule to Occupied Crimea
The Final Rule also expands the Russia/Belarus Foreign-Direct Product (FDP) Rule to add the “temporarily occupied Crimea region of Ukraine” to the scope of this FDP Rule in order to strengthen the EAR’s controls in this region of Ukraine and make it more difficult for items to be procured for Russia’s use in Crimea in support of its ongoing and overall military aggression in Ukraine. For additional details on BIS’ original rule on this matter, see Updates of February 25, 2022 and March 4, 2022.
Additions to the Entity List
Under a separate Final Rule, BIS added 71 entities to the Entity List. These entities were determined to be acting contrary to the national security or foreign policy interests of the United States and will be listed on the Entity List under the following countries: Armenia, Kyrgyzstan and Russia.
BIS has added 69 entities to the Entity List under Russia for providing support to Russia’s military and defense sector and determined that these entities are Russian or Belarusian ‘military end users.’ As such, these entities are receiving a Footnote 3 designation that subjects them to the Russia/Belarus-Military End User FDP Rule. These entities are added to the Entity List with a license requirement for all items subject to the EAR. They are added with a license review “policy of denial” for all items subject to the EAR apart from food and medicine designated as EAR99, which will be reviewed on a case-by-case basis.
An Armenian company and a Kyrgyzstan company have been added to the Entity List due to conduct that prevented the successful accomplishment of an end-use check. These two entities are added with a license requirement for all items subject to the EAR and a license review policy of presumption of denial.
Both Final Rules are effective as of May 19, 2023. However, for the changes being implemented by the rules, shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on May 19, 2023, pursuant to actual orders for export, reexport, or transfer (in-country) to or within a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR), provided the export, reexport, or transfer (in-country) is completed no later than on June 20, 2023.