The U.S. Department of Commerce's Bureau of Industry and Security (BIS) announced an expansion of existing export controls and imposition of additional sanctions against the Russian Federation (Russia) and Belarus in response to continued aggression toward Ukraine. Effective September 15, 2022, these actions are intended to "clarify and enhance the effectiveness of U.S. controls and to better align [U.S.] controls on both Russia and Belarus with those implemented by U.S. allies" and "reflect the U.S. Government's position that Russia's invasion of Ukraine, and Belarus's complicity in the invasion, flagrantly violated international law, is contrary to U.S. national security and foreign policy interests, and undermines global order, peace, and security."1 Among other changes, this Final Rule adds controls on the export of certain EAR99 items to Russia and Belarus, expands the foreign direct product rule to also include certain EAR99 items, and expands controls on exports to military end-users and/or for military end-uses.
Most notably, the Final Rule, "Implementation of Additional Sanctions Against Russia and Belarus Under the Export Administration Regulations (EAR) and Refinements to Existing Controls," expands the scope of Russian industry sector sanctions that previously controlled the export of items used in oil and gas production to now include the export of certain items that are viewed as potentially useful for Russia's chemical and biological weapons capabilities and Russia's defense-industrial base. These items are listed in Supplement Number 6 to Part 746, and include certain chemicals, biologics, fentanyl and its precursors, and nucleic acid sequencers, as well as quantum computing and advanced manufacturing items. Additionally, 57 new entries of industrial machinery, equipment, and related parts or accessories that could support Russia's defense-industrial base were added to Supplement Number 4 to Part 746. Supplement Number 4 includes, among a variety of other items, certain cameras and industrial robots. Due to concerns about the diversion of items from Belarus to Russia, the Final Rule adds Belarus to the industry sector sanctions that previously applied solely to Russia under 15 CFR § 746.5.
Among other changes, the Final Rule also:
- Revises the foreign direct product rule to also apply to the items listed in Supplement 6;
- Expands controls in 15 CFR § 744.11 and 15 CFR §§ 744.21-22 to cover Belarusian, Burmese, Cambodian, Chinese, Russian, and Venezuelan "military end users" and "military-intelligence end users," or "military-intelligence end users" wherever located;
- Refines existing Russia/Belarus controls by adding additional thresholds by dollar value for "luxury goods";
- Expands the list of consumer communications devices eligible for License Exception CCD, including certain microphones, speakers, and headphones, that are designated EAR99 or classified under Export Control Classification Numbers (ECCN) 5A992.c or 4A994.b; and
- Adds a news media authorization under license exception TMP (the Office of Foreign Assets Control (OFAC) also issued a General License authorizing certain transactions with sanctioned parties when "incident and necessary to such U.S. persons' journalistic activities or to the establishment or operation of a news bureau").
Finally, in addition to the new export controls implemented by BIS, OFAC expanded the prohibition on accounting, trust and corporate formation services, and management consulting sectors to any person located in the Russian Federation to include a prohibition on providing quantum computing services and also imposed restrictions on 22 additional officials and two entities in Russia, adding them to the ever-growing list of sanctioned parties in Russia.
We will continue to closely monitor the evolving regulations and welcome you to reach out with any questions. Please feel free to contact Josephine Aiello LeBeau, Mike Casey, Anne Seymour, Jahna Hartwig, Kara Millard, or another member of Wilson Sonsini's national security practice for more information.
[1] Implementation of Additional Sanctions Against Russia and Belarus Under the Export Administration Regulations (EAR) and Refinements to Existing Controls, 87 Fed. Reg. 57,068 (Sept. 16, 2022) (to be codified at 15 C.F.R. pts. 732, 734, 736, 740, 744, 746, and 762).
