On September 17, the U.S. government issued its latest round of sanctions on Russia for its role in the current unrest in eastern Ukraine. The final rule issued by the Department of Commerce’s Bureau of Industry and Security (BIS) targets Russia’s defense sector by further restricting certain types of defense-related exports. Effective immediately, exporters to Russia should confirm that their current shipments comply with the extensive regulations.
The recent action amends Section 744.21 of the Export Administration Regulations (EAR), a 2007 rule requiring a license to export, re-export, or in-country transfer certain items to China that are known to be intended for a “military end use.” A license exception is provided for U.S. government-related destinations. The new regulation makes two significant changes to the so-called “China rule.” First, it adds Russia as a destination that requires the license. Second, it broadens the mandate’s scope over Russia in particular by also applying the license requirement to any “military end user” destination. This additional restriction covers many dual-purpose exports used by the Russian military for commercial purposes. Consequently, if a U.S. company knows that its product will be used in any capacity by the Russian military, it may only be exported if it is granted a license by BIS, regardless of whether it is used for a military-related purpose.
The rule requires immediate attention by American exporters to Russia to ensure compliance. The list of restricted items is published in Supplement No. 2 to Section 744. It contains thirty-two Export Control Classification Numbers (ECCNs) from nine of the ten categories on the Commerce Control List (CCL). Its range is extensive, including certain electronics, telecommunications equipment, lasers, etc.
It is important for exporters to note what constitutes a “military end user” because of its broad reach. In addition to members of the Russian military, police, and intelligence organizations, it also covers “any person or entity whose actions… support ‘military end uses.’” In other words, this restriction applies to both military and commercial uses by official and unofficial military persons. This requirement is likely meant to address Russia’s current involvement in eastern Ukraine. License applications are reviewed on a case-by-case basis under the standard of whether the export would “make a material contribution” to Russia’s “military activities contrary to the national security interests of the United States.”
The rule creates new and immediate challenges for many American exporters to Russia. If a company exports one of the restricted items and knows, has reason to know, or has been told by BIS that it is destined for a “military end use” or “user,” it must be granted a license. This requires detailed examination of all exports to Russia and their specific destinations to determine whether it must apply for a license.