The Obama administration announced this week that companies with pending license requests to export certain controlled dual-use goods or technology, defense articles or defense services to Russia will face an indefinite hold on receiving approval from the U.S. government. The policy is expected to have a significant impact on Russia and may affect the U.S. trade balance with Russia.

On March 27, 2014, the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) released an industry notice indicating that it “placed a hold on the issuance of licenses that would authorize the export of defense articles and defense services to Russia. State will continue this practice until further notice.” On March 25, 2014, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced on its website that “[s]ince March 1, 2014, BIS has placed a hold on the issuance of licenses that would authorize the export or reexport of items to Russia.  BIS will continue this practice until further notice.” 

BIS has indicated that the hold policy applies to new license applications only; existing licenses remain valid and use of license exceptions is not impacted at this time. See more here. DDTC has not yet publically confirmed whether the hold would apply to active licenses that it has already approved or whether it would prevent an exporter using exceptions or exclusions that may otherwise have applied to exports to Russia. However, we have learned through our sources that the DDTC hold policy would not impact existing licenses — to confirm, companies should contact the Office of Defense Trade Controls Licensing for confirmation. Moreover, we have been advised that DDTC and BIS will be issuing guidance in the coming days.

Together, DDTC and BIS have jurisdiction over items as seemingly basic as paraffin wax, on one end of the spectrum, and military helicopters and missiles at the other end. The hold policy implemented by BIS and DDTC could significantly impact companies with pending applications to export dual-use items, defense articles or defense services to Russia, as well as companies that may have made business decisions or entered into contracts based on an expectation of supply from the United States.   

For the U.S. Department of Commerce BIS notice, please click here. To see the U.S. Department of State DDTC notice, please click here. For more information on the sanctions put in place in connection with the situation in Ukraine, see here.

 

Topics:  Foreign Policy, Russia, Sanctions, Trade Policy, Ukraine

Published In: General Business Updates, Elections & Politics Updates, Finance & Banking Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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