Additional Export Restrictions to Russia and Belarus: BIS Announces Additional Export Sanctions Against Russia and Belarus and Other Refinements to Existing Controls

At a Glance

• BIS amended the Export Administration Regulations (EAR) by adding five entities in Russia and China to the Entity List, including, for the first time, addresses unassociated with any particular entity names, restricting exports, reexports and transfers (in-country) that involve the entities.
• BIS has further restricted exports to Russia, including, importantly, the export of certain EAR99 software as well as additional EAR99 items listed by tariff classification, and also restricting the application of License Exception CCD.
• BIS stated it will more extensively target foreign companies that supply U.S.-branded products to Russia through Entity List additions and other related actions to further impair Russia’s diversion efforts.
• OFAC announced a determination pursuant to EO 14071 that will prohibit U.S. persons from providing IT consultancy and design services and IT support services for certain software.

On June 12, 2024, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced several significant additional export control restrictions and related actions against Russia as a response to continued Russian aggression against Ukraine, in coordination with the U.S. Department of Treasury’s Office of Foreign Assets Control, which announced additional sanctions against Russian individuals and entities as well as IT support services. Most of the restrictions became effective on June 12, but certain restrictions take effect in September. BIS also re-organized 15 C.F.R. Part 746 to make it more clear.

Below are summaries of the key actions.

Further Restrictions on Individuals and Entities

BIS added four entities in China to the Entity List, alleging the companies had procured U.S.-origin components for use in manufacturing of unmanned aerial vehicles later exported to Russia. BIS also added one Russian entity to the Entity List for its alleged support of Russian military and defense sectors, including the provision of chemicals of concern. Importantly, for the first time, BIS also added eight addresses in Hong Kong to the Entity List, unconnected to any entity names, as the agency determined those addresses have a high risk of diversion.

OFAC revised certain listings on its Specially Designated Nationals (SDN) list and added more than 100 entities and individuals the U.S. government has determined have engaged in the development of Russia’s future energy, metals, and mining production and export capacity; sanctions evasion and circumvention; and furthering Russia’s ability to wage its war against Ukraine. OFAC extended some general licenses allowing certain transactions with listed entities and individuals.

Further Restrictions on Software Exports and Related Services

BIS has imposed a license requirement on the export, reexport or transfer (in country) of certain types of EAR99 software and their updates to Russia and Belarus, including enterprise resource planning (ERP); customer relationship management (CRM); business intelligence (BI); supply-chain management (SCM); enterprise data warehouse (EDW); computerized maintenance management system (CMMS); project management software, product lifecycle management (PLM); building information modelling (BIM); computer aided design (CAD); computer-aided manufacturing (CAM); and engineering to order (ETO). The only exceptions to this license requirement are for companies that exclusively operate in the agricultural or medical sectors. BIS explained this action will make it harder for Russia’s and Belarus’ military industrial bases to operate with a modern software infrastructure. These restrictions take effect September 16, 2024.

Simultaneously, OFAC released a determination pursuant to Executive Order (EO) 14071 prohibiting the provision of (1) information technology (IT) consultancy and design services, and (2) IT support services and cloud-based services for the following categories of software: enterprise management software, and design and manufacturing software. As with previous determinations under this EO, services provided to Russian entities owned by U.S. persons or entities that are divesting are excluded from the prohibition. Unlike previous determinations, OFAC also stated that if the export of software would be authorized or otherwise licensed by BIS, related services would not be prohibited. The restrictions take effect September 12, 2024.

Restrictions on Trade in More Items Destined to Russia and Belarus

BIS is adding controls on more than 500 additional 6-digit Harmonized Tariff System (HTS) codes for export, reexport or transfer (in-country) to Russia and Belarus. With this rule, BIS now controls 22 entire 2-digit chapters of HTS codes to Russia. BIS is also adding controls on several additional riot-control agents to Russia and Belarus. Most remaining trade with Russia is limited to the agricultural and medical sectors.

Reducing License Exception Eligibility for Certain Consumer Goods

BIS is narrowing the scope of License Exception Consumer Communications Devices (CCD) pursuant to its ability to revoke or suspend the availability of license exceptions for actors aiding in the evasion of export controls. With this change, additional items such as lower-level graphics processing units are no longer eligible for export to Russia or Belarus pursuant to License Exception CCD.

Temporary Denial Orders

BIS issued two Temporary Denial Orders (TDO) against two Russian procurement networks facilitating exports of aircraft parts to Russia through third countries in violation of U.S. export controls. TDOs are significant protective administrative measures issued by BIS that cut off not only the right to export items subject to the EAR from the U.S., but also the ability to receive or participate in exports from the United States or reexports of items subject to the EAR.

Restricting Transhippers

BIS announced that its focus continues to be on impairing transshipment of items to Russia’s defense industrial base. BIS recently informed more than 130 U.S. distributors of additional restrictions on shipments to known suppliers to Russia to disrupt the flow of U.S. and foreign-produced electronic components destined for Russia. BIS stated it will more extensively target foreign companies who supply U.S.-branded products to Russia through Entity List additions and other related actions to further impair Russia’s diversion efforts.

For More Information

Please note that we will continue to closely monitor this situation and provide timely updates, as warranted. In the meantime, please do not hesitate to reach out to a member of the Faegre Drinker customs and international trade team if you have any questions.