BIS continues to expand export controls on Russia and Belarus and adds 71 entities to the Entity List

BIS issued two final rules on 2 June 2022 in connection with export controls on Russia and Belarus.  As described in further detail below, the first rule made numerous changes to the EAR, including on controls on EAR99 food and medicine destined for Russian and Belarusian military end-uses and to military end-users, and the second rule added 71 Russian/Belarusian entities to the Entity List.

The “Revisions to Russia and Belarus Sanctions and Related Provisions; Other Revisions, Corrections, and Clarifications” Final Rule

This final rule revises, corrects, and clarifies certain provisions of the EAR that pertain to export controls on Russia and Belarus in response to Russia’s further invasion of Ukraine. 

The rule made the following key changes:

• EAR99 Food and Medicine Restricted for Russian/Belarusian Military End-Users.  The extension of the license requirement for Russian and Belarusian military end-uses and military end-users to EAR99 food and medicine (i.e., they are no longer excluded from the licensing requirement);

  • Applications for EAR99 food and medicine destined for Russian and Belarusian military end-uses/users will be reviewed under a case-by-case license review policy, except with regard to the Foreign Intelligence Service (“SVR”), the Federal Security Service (“FSB”), and the Main Intelligence Directorate for which the license review policy for such items is a policy of denial.

  • This change does not impose a license requirement for the export, reexport, or transfer (in-country) of EAR99 food and medicine for the use and benefit of civilians in Russia, the Crimea region of Ukraine, or the so-called Donetsk People’s Republic (“DNR”) and Luhansk People’s Republic (“LNR”) regions of Ukraine (the “covered regions” of Ukraine).  Neither does it alter BIS policy regarding exports, reexports, or transfers (in-country) of EAR99 food and medicine to or within any other regions of Ukraine.

• Harmonization of License Review Policies.  Revisions to § 746.6 to harmonize the license review policy for the Crimea region and the covered regions of Ukraine with the corresponding policy for Russia and Belarus in § 746.8 so that the same categories of license applications specified in § 746.8 (e.g., safety of flight, maritime safety) will be reviewed on a case-by-case basis when involving Crimea and the covered regions of Ukraine;

• Changes of Factors to Consider in License Review Policies.  Revisions regarding the license review policies to both §§ 746.6 and 746.8 to take into consideration whether the transaction in question would benefit the Russian or Belarusian government or defense sectors and to § 746.6 to additionally consider whether the transaction would be detrimental to the country or people of Ukraine, while removing from § 746.6 the reference to the case-by-case review of applications for transactions authorized under OFAC Ukraine-Related General Licenses;

• Case-by-Case Review for Civil Telecommunications Infrastructure.  A revision to § 746.8 to clarify that applications for export licenses for companies headquartered in the U.S., as well as those in Country Groups A:5 and A:6, that are in support of civil telecommunications infrastructure, will be reviewed under a case-by-case license review policy;

• Clarification to Luxury Goods Subject to Export Restrictions.  A clarification to supplement no. 5 to part 746 that the licensing requirement with respect to “luxury goods” for 61 clothing and shoes items applies only when the per unit wholesale price in the U.S. is $1,000 or greater;

• Publication of BIS Charging Letters.  A revision to § 766.20 to permit BIS export enforcement case charging letters to be made available to the public upon their issuance and prior to the final administrative disposition of such cases – a change intended to enhance BIS’s transparency efforts and to inform interested parties of ongoing enforcement efforts; 

• Updates on Schedule B Numbers.  Updates to three of the Schedule B numbers (8421398020, 8421398030, and 8421398040) included in supplement no. 2 to part 746 (Russian Industry Sector Sanctions List) and/or supplement no. 4 to part 746 (HTS Codes and Schedule B Numbers that Require a License for Export, Reexport, and Transfer (In-Country) to or within Russia Pursuant to § 746.5(a)(1)(ii)); and

  • Please note that the changes here are limited to the Schedule B numbers and do not change the description of the corresponding items.

• Technical Corrections.  Three corrections to part 740 to 1) clarify the covered regions of Ukraine for License Exception TMP for temporary imports, exports, reexports, and transfers (in-country), 2) correct a typographical error related to License Exception Consumer Communications Devices (“CCD”), and 3) corrects the entry for Belarus in the Country Group A table to add a footnote 3 designation; and three technical corrections to § 734.2(a)(1) to clarify what items and activities are subject to the EAR.

Please note the availability of a savings clause in connection with this final rule.  Shipments of items rendered ineligible 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 2 June 2022 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).

The “Additions of Entities to the Entity List” Final Rule

This final rule added 71 entities to the Entity List (supplement No. 4 to part 744 of the EAR) under the destinations of Russia and Belarus, as these entities have been determined by the U.S. Government to be acting contrary to the national security interests or foreign policy of the U.S. 

Of the 71 entities, 66 entities are being added pursuant to §§ 744.11(b) and 744.21 and will receive a footnote 3 designation as Russian or Belarusian military end-users.  Such designation means that:

• These entities are subject to a license requirement for the export, reexports, exports from abroad, or transfers (in-country) of all items subject to the EAR that are destined to these entities;

• No License Exceptions are available for these entities;

• These entities are subject to the Russia/Belarus foreign direct product (“FDP”) rule in § 734.9(g); and

• BIS will review all license applications for these entities under a policy of denial for all items subject to the EAR apart from EAR99 food and medicine, which will be reviewed on a case-by-case basis, per § 744.21(e)(1).

The remaining five entities are being added solely pursuant to § 744.11(b), meaning that:

• These entities are also subject to a license requirement for all items subject to the EAR;

• BIS will review all license applications for these entities under a policy of denial; and

• No License Exceptions are available for these entities.

Please note the availability of the savings clause.  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 2 June 2022, 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).

Next Steps

Hogan Lovells regularly advises on the development and maintenance of an effective trade compliance program and would be pleased to answer any questions regarding the impact of these changes on your organization.

Authored by Anthony Capobianco, Aleksandar Dukic, Ajay Kuntamukkala, Beth Peters, Stephen Propst, Ashley Roberts, Deborah Wei, and Hao-Kai Pai.