UPDATE – December 2022 was another busy month for Entity List additions by BIS.

Effective Dec. 21, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) further tightened controls on the Wagner Group, which has been on the Entity List since 2017. BIS designated Wagner as a Russian military end user and footnote 3 entity and added one address and two aliases to its Entity List designation. Wagner’s aliases include Chastnaya Voennaya Kompaniya Vagner, Chvk Vagner, PMC Wagner, Wagner Group and Vagner Group. In addition, BIS expanded the license requirements to apply to Wagner wherever located and to any transaction involving an item subject to the Export Administration Regulations (EAR) to which Wagner is a party or that the exporter/reexporter has knowledge that may ultimately be acquired by Wagner. Thus, a reexport of an EAR99 item to an end user in China or any other foreign country in which Wagner is a consignee purchaser, etc., would require a license from BIS.

Further, effective Dec. 16, 2022, the BIS moved nine Russian companies from the Unverified List (UVL) to the Entity List. As a result, a license from BIS must now be obtained if any of the nine companies are a party to a transaction involving any item subject to the EAR. These moves were made pursuant to BIS’s new end-use check policy published in October. Under the new policy, BIS may move a UVL entity to the Entity List if BIS is unable to conduct an end-use check within 60 days of its addition to the UVL for various reasons, including a lack of cooperation from the host government and failure to confirm the bona fides of the foreign person. These nine entities were the first to be moved from the UVL to the Entity List pursuant to the new policy. The entities are:

• Alliance EG Ltd.
• FSUE Rosmorport Far Eastern Basin Branch.
• Intercom Ltd.
• Nasosy Ampika.
• Nuclin LLC.
• SDB IRE RAS.
• Security 2 Business Academy.
• Tavrida Microelectronics.
• VIP Technology Ltd.

Effective Dec. 8, 2022, BIS added 12 entities to the Entity List for reasons related to Russian export controls. These 12 entities were found to be major contributors to Russia’s military complex and defense base and have the footnote 3 designation identifying them as Russian or Belarusian military end users. These entities are:

• Fiber Optic Solutions (Latvia).
• AO Kraftway Corporation PSC.
• AO PKK Milandr.
• AO Scientific Research Center for Electronic Computing.
• LLC Fibersense.
• Milandr EK OOO.
• Milandr ICC JSC.
• Milur IS OOO.
• (OOO) Microelectronic Production Complex (MPK) Milandr.
• Ruselectronics JSC.
• Scientific Production Company Optolink.
• Milur SA (Switzerland).

The December designations demonstrate that BIS will not hesitate to add entities in countries other than Russia to the Entity List if they significantly contribute to Russia’s military and/or defense industrial base.

With the addition of these 21 entities, BIS has now included over 410 entities on the Entity List for reasons related to Russia’s invasion of Ukraine.

In addition to these designations, in a separate action on Dec. 13, 2022, BIS issued a temporary denial order (TDO) against three individuals and two entities for engaging in an export sanctions evasion scheme to procure EAR-controlled items, including signal generators, for Russian companies. The Russian recipients included Serina Engineering and Sertal LLC, both of which act on behalf of the Russia intelligence services and are now on the BIS Entity List. The denied individuals were all Russian nationals, one of whom owns or controls the newly denied entities, which are based in New York. As a result of the TDO, the export privileges of the named parties are denied for a period of 180 days, and no person or entity may engage in any transaction involving any item subject to the EAR with any of the newly denied persons. The entities and individuals named are:

• Boris Livshits.
• Svetlana Skvortsova.
• Aleksey Ippolitov.
• Advanced Web Services.
• Strandway LLC.

In tandem with BIS’s TDO, the U.S. Department of Justice indicted the individuals, among others, for export violations and other criminal violations, including conspiracy related to a global procurement and money laundering network on behalf of the Russian government. The charges were brought with the assistance of the KleptoCapture Task Force that was assembled earlier in the year to spearhead the U.S. government’s enforcement of Russian export controls and sanctions.

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Since Feb. 24, 2022, BIS has implemented numerous new export control restrictions in response to the invasion of Ukraine by the Russian Federation (Russia). These restrictions, which significantly curtail exports, reexports and transfers (in country) of technology, commodities and software (collectively, the Items) destined to or transiting Russia or Belarus as well as to certain persons affiliated with Russia and Belarus, can be found in the EAR 15 C.F.R. Parts 730-774. Although many of the amendments to the EAR were the subject of prior detailed alerts, the following summary provides an overview of the key export controls currently in place, including controls implemented by the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC). This alert is not intended to be and is not a detailed summary of the export controls implemented as a result of the invasion of Ukraine. Rather, it is a tool to help businesses, both American and foreign, identify whether their transactions with Russia, Belarus or Ukraine may now require a license, or be prohibited, under the wide-ranging export controls that have been imposed. Review of the regulations will be necessary to determine specific licensing requirements.

An overview of the sanctions imposed by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), which apply in addition to the export controls summarized here, will be provided in a separate alert.

I. Executive Summary

A. BIS License Requirements Relating to Russia

Exports (direct or indirect), reexports (from one third country to another) and transfers (in country; any transfer within any third country) of the following Items are subject to license requirements:

• All Items on the EAR’s Commerce Control List (CCL).
• Luxury goods (EAR99) listed in Supplement 5 to Part 746 of the EAR.
• Sector-specific Items listed in Section 746.5 and Supplements 2, 4 and 6 to Part 746 of the EAR.
• Any Items subject to the EAR going to a military end use or end user (MEU) or a military intelligence end use or end user (MIEU), regardless of whether located in or outside Russia (note that slightly different due diligence standards apply for exports to end users outside Russia; please consult Section 744.21 of the EAR).
• Foreign-produced Items that are subject to the EAR under the foreign-direct product rules (FDPRs), including the specific Russia/Belarus rules in Sections 746.8 and 734.9(f) and (g) of the EAR.
• Any Item subject to the EAR if a person on the BIS Entity List or Denied Persons List or other sanctioned persons list is involved in the transaction.

For a detailed summary of each of these requirements, see Part II below.

B. BIS License Requirements Relating to Belarus

Exports, reexports and transfers (in country) of the following Items are subject to license requirements:

• All Items on the EAR’s CCL.
• Luxury goods (EAR99) listed in Supplement 5 to Part 746 of the EAR.
• Sector-specific Items listed in Section 746.5 and Supplements 2, 4 and 6 to Part 746 of the EAR (noting that Section 746.5(a)(1)(i) and Supplement 2 apply only to use in Arctic offshore locations or shale formations in Belarus).
• Any Items subject to the EAR going to an MEU or MIEU, regardless of whether located in or outside Belarus (note that slightly different due diligence standards apply for exports to end users outside of Russia; please consult Section 744.21 of the EAR).
• Foreign-produced Items that are subject to the EAR under the FDPRs, including the specific Russia/Belarus rules in Sections 746.8 and 734.9(f) and (g) of the EAR.
• Any Item subject to the EAR if a person on the BIS Entity List or Denied Persons List or other sanctioned persons list is involved in the transaction.

For a detailed summary of each of these requirements, see Part III below.

C. License Requirements Relating to the Covered Regions of Ukraine

Exports, reexports and transfers (in country) of the following Items are subject to license requirements:

• All Items subject to the EAR, including EAR99 Items.

The Covered Regions of Ukraine are Crimea and the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) regions of Ukraine.

For a detailed summary of each of these requirements, see Part IV below.

D. DDTC License Requirements

The following requirements apply to U.S. Munitions List (USML) Items:

• All defense articles and defense services on the USML contained in the International Traffic in Arms Regulations (ITAR) require licenses for export to Belarus, and applications for such licenses have long been subject to a policy of denial.
• All defense articles and defense services on the USML require licenses for export to Russia, and applications for such licenses are subject to a policy of denial, except for license applications related to government space cooperation, which will be considered on a case-by-case basis.

For a detailed summary of each of these requirements, see Part V below.

In addition to the information provided in Parts II through V regarding BIS export controls applicable to Russia, Belarus and the Covered Regions of Ukraine as well as ITAR controls applicable to Russia and Belarus, further information on BIS list-based controls and compliance tips may be found in Parts VI and VII below.

II. License Requirements Relating to Russia

Items subject to the jurisdiction of BIS under the EAR include most Items exported from the United States, U.S.-origin Items, wherever located, and foreign-produced Items subject to the EAR under the De Minimis Rule or any of the applicable FDPRs. The EAR’s jurisdiction is based on the Item; both U.S. and foreign persons must comply with the EAR – including the EAR’s General Prohibition 10, which prohibits any transaction related to an Item that has been exported in violation of the EAR. For example, BIS has issued several public notices of Russian-owned aircraft that are subject to these prohibitions.

All Items on the EAR’s CCL require a BIS license for export (direct and indirect), reexportation (one third country to another) or transfer (in country; any transfer within any third country) (15 C.F.R. Section 746.8(a)(1)) if the intended end user is in Russia or the Item will transit Russia.

As of April 8, 2022, any Item listed in any of the 10 CCL categories requires a BIS license when destined for Russia, regardless of the end use or end user. The license requirements for Items in Categories 3-9 of the CCL were imposed Feb. 24, 2022, and the license requirements for Items in Categories 0-2 of the CCL were imposed April 8, 2022. The permitted uses of license exceptions are very limited though; for example, certain carve-outs for some mass market Items classified under Export Control Classification Numbers (ECCNs) 5A992 or 5D992 may apply.

Deemed exports and reexports are not subject to these license requirements.

Items, including EAR99 Items, subject to Russian Industry Sector Sanctions require a BIS license (15 C.F.R. Section 746.5).

A BIS license is required for the export, reexport or transfer (in country) to or within Russia of Items subject to the ECCNs listed in Section 746.5(a)(1)(i) or any of the 52 Items listed in Section 746.5, Supplement 2 to Part 746 of the EAR (for certain deep water oil and gas-related end uses), and for the export, reexport or transfer (in country) to or within Russia or Belarus of such Items (for certain Arctic offshore or shale formation oil and gas-related end uses). In addition, a BIS license is required for the export, reexport or transfer (in country) to or within Russia or Belarus of Items listed in Supplement 4 to Part 746 of the EAR or in the newly created Supplement 6 to Part 746 of the EAR.

As of Oct. 24, 2022, there were over 544 Items listed in Supplement 4. The Items listed in Supplement 4 are identified by a Schedule B number, Schedule B description, Harmonized Tariff Schedule (HTS) code and HTS description. The license requirement is based on the HTS description. This means that Items covered more generally by the HTS codes or Schedule B numbers in Supplement 4 are not subject to the Section 746.5(a)(1)(ii) license requirement unless described in the “HTS Description” column of Supplement 4. Notably, Supplement 4 now includes most components, parts, accessories and attachments for the listed Items.

Over 125 Items are listed in Supplement 6. The Items in Supplement 6 include discrete chemicals, biologics, fentanyl and its precursors, and related equipment. The chemicals are specified based on their Chemical Abstract Numbers (CAS) in certain concentrations by weighted percentage. The license requirement is based on product description and CAS in distinct concentrations. Supplement 6 also includes quantum computing items, cryogenic refrigeration systems, additive manufacturing equipment, microscopes and several other Items.

EAR99 Luxury Goods Require a BIS License (15 C.F.R. Section 746.10)

Effective March 11, 2022, a BIS license was required for exports, reexports and transfers to or within Russia of certain luxury goods subject to the EAR as well as to designated Russian oligarchs or other persons, regardless of their location.

The approximately 400 luxury goods are listed in Supplement 5 to Part 746 of the EAR; they include certain spirits, tobacco products, clothing items, jewelry, leather items, plastic items, vehicles, antiques, sporting goods and other goods. They are identified by a Schedule B number, the two-digit Schedule B chapter heading and a 10-digit commodity description. In certain cases, value thresholds apply. With the Sept. 15 rule, value thresholds have been added or amended to align with controls imposed by allied countries (although not all Items have been assigned value thresholds, and in many cases, the value thresholds have been reduced effective as of Sept. 15). It is important to check the value thresholds to determine whether identified luxury goods will be subject to the licensing requirements of Supplement 5 to Part 746 of the EAR.

License applications for luxury goods in Supplement 5 will be reviewed on a case-by-case basis for those goods that meet humanitarian needs.

EAR99 Items to Military End-Uses and End-Users require a BIS license (15 C.F.R. Sections 744.21 and 744.22)

A BIS license is required for the export, reexport or transfer to or within Russia and Belarus of all Items subject to the EAR (including foreign-produced Items subject to the EAR as well as U.S.-origin Items) to MEUs or MIEUs located anywhere in the world. Conducting due diligence to verify whether an entity qualifies as an MEU or MIEU remains essential, but the Russian and Belarusian MEUs and MIEUs that are located outside Russia or Belarus are on the BIS Entity List in Supplement 4 to Part 744 of the EAR. The terms “military end use” and “military end user” as well as “military intelligence end use” and “military intelligence end user” are broadly defined in the EAR.

As of Dec. 21, 2022, BIS has designated over 260 Russian and Belarusian entities/individuals as MEUs. They are now on the BIS Entity List. No license exceptions, except for limited use of License Exception GOV, are available to overcome this license requirement.

Use of License Exceptions Has Been Severely Limited

The availability of license exceptions has been severely limited for transactions involving Russia. Even when a license exception is available, the terms and conditions of its use are very restrictive. It is important to review each specific control carefully, as the availability and scope of license exceptions differs among the various controls.

Certain Foreign-Produced Items Require a BIS License

There are two ways that foreign-produced Items (commodities, technology and software) can be subject to the EAR – under the De Minimis Rule or under the FDPRs. These complex rules are summarized below; the applicable regulations should be consulted to determine whether the rules may apply to a specific foreign-produced Item. If a foreign-produced Item is subject to the EAR, it may be subject to the same export license requirements as if the Item was exported from the United States. (Note: The FDPRs discussed below are the FDPRs targeted at Russia and Belarus; for a complete list of FDPRs, please consult EAR Section 734.9.)

• De Minimis Rule (15 C.F.R. Section 734.4). The De Minimis Rule provides that a foreign-produced Item that derives more than 25 percent of its value from controlled U.S.-origin Items is subject to the EAR. As of April 8, 2022, for Items destined to Russia, any U.S.-origin Item on the EAR’s CCL would qualify as controlled content for the purpose of calculating whether more than 25 percent of the foreign-made Item’s value is derived from controlled Items under the De Minimis Rule. (To date, the lower de minimis level of 10 percent or more applicable to shipments to Country Group E:1 countries (Iran, Syria, Sudan and North Korea) have not been applied to Russia or Belarus.)
• FDPRs (15 C.F.R. Sections 746.8 and 734.9). Under the FDPRs, if the foreign-produced Item is the “direct product” of certain U.S.-origin controlled technology or software, it can be subject to the EAR. There are two specific FDPRs that subject a broad range of foreign-produced Items to the EAR when destined for Russia or Belarus. The first one applies to any end user in Russia or Belarus, and the second one, which is more restrictive, relates to MEUs.
• Russia/Belarus FDPR: See 15 C.F.R. Section 746.8(a)(2) and Section 734.9(f). Foreign-produced Items subject to the EAR under this FDPR include any foreign-produced Item that is a direct product of U.S.-origin technology or software classified under any ECCN on the CCL (or produced by a plant or “major component” of a plant that is itself a direct product of such U.S. technologies and software) and is identified in Supplement 6 to Part 746 or has an export classification other than EAR99.
• Russia/Belarus MEU FDPR: See 15 C.F.R. Section 746.8(a)(3) and Section 734.9(g). This FDPR is applicable when there is knowledge that the foreign-produced Item is a direct product of any technology or software on the CCL (or produced by a plant or major component of a plant that is itself a direct product of such U.S. technologies and software) and “will be incorporated into or used in the ‘production’ or ‘development’ of any ‘part,’ ‘component’ or ‘equipment’ produced, purchased or ordered by an entity” that is designated as a Russian MEU per a footnote 3 designation on the Entity List is a party to the transaction.
• Exception: As of the date hereof, there are 37 countries excluded from the application of the Russia/Belarus FDPRs. These countries are excluded due to their participation in the global coalition standing with the Ukrainian people against the Russian invasion and Belarusian complicity. They include the 27 member states of the European Union as well as Australia, Canada, Iceland, Japan, Liechtenstein, New Zealand, Norway, Switzerland, South Korea and the United Kingdom.

In most cases, BIS will review license applications related to Items subject to these license requirements under a policy of denial. Applications related to EAR99 food and medicine will be reviewed on a case-by-case basis.

III. License Requirements Relating to Belarus

The license requirements and restrictions on the use of license exceptions imposed on transactions involving Belarus largely mirror those imposed on Russia. For a summary of the license requirements and availability of license exceptions relating to Belarus, please see the above discussion of controls applicable to Russia.

IV. License Requirements Relating to the Covered Regions of Ukraine

Export license requirements applicable to Crimea have been in place for several years (15 C.F.R. 746.6), as have related sanctions. As of Feb. 21, 2022, these requirements were extended to cover all Items subject to the EAR (other than food and medicine designated as EAR99 and certain software and Internet-based personal communications) destined to the DNR or LNR regions of Ukraine. That day, President Joe Biden issued an executive order prohibiting U.S. persons from engaging in new investment in the DNR and LNR regions, as well as engaging in trade, including export, import, reexport, sale or supply of goods, services or technology, with the DNR and LNR regions. U.S. persons, wherever located, are prohibited from approving, financing, facilitating or guaranteeing transactions by foreign persons that cannot be performed by U.S. persons as a result of the executive order. Licenses from both BIS and OFAC may be required for any export, reexport or transfer (in country) involving the DNR or LNR regions.

V. DDTC License Requirements

All defense articles and defense services on the USML have long required licenses for export to Belarus, and applications for such licenses remain subject to a policy of denial. Since March 2021, all defense articles and defense services on the USML have been subject to license requirements for export to Russia, and applications for such licenses are subject to a policy of denial, except for license applications related to government space cooperation, which will be considered on a case-by-case basis. 

Most license exemptions are not available for exports to Russia, although certain exemptions may be used in support of government space cooperation.

VI. The Entity List, Denied Persons List and the Unverified List

As of Jan. 17, BIS has added over 410 Russian and Belarusian entities and individuals to its Entity List, and more than 260 of those have been designated as MEUs.

BIS has also added Russian individuals and related entities to the Denied Persons List, subjecting them to denial orders for violating the EAR or to prevent the occurrence of an imminent violation of the EAR. The most recent example of this is the Dec. 13, 2022, temporary denial order (TDO against three individuals and two entities for engaging in an export control evasion scheme to procure EAR-controlled Items, including signal generators, for Russian companies. Denial of export privileges is one of the most severe enforcement tools to address violations of U.S. export controls and to prevent imminent violations of the EAR. A denial order may be imposed by BIS even when there is no criminal component to the violations.

Also of importance is the UVL, which is composed of foreign parties involved in any transaction involving an Item subject to the EAR where BIS has been unable to verify the bona fides of a transaction through a post-shipment verification or pre-license check. Now, under BIS’s new policy, if 60 days passes following addition to the UVL and BIS still has not been able to successfully complete an end-use check, then BIS may begin the process to have the foreign party moved to the Entity List. Given this policy, adopted in October 2022, U.S. exporters and foreign reexporters should pay particular attention to the UVL given the high risk that parties on this list may be added to the Entity List. The October 2022 policy and related Federal Register notice may be found here and here, respectively. A license (or in the case of an entity on the UVL, a UVL statement as required by Section 744.15(b) of the EAR) must be obtained from BIS if a transaction involves an Item subject to the EAR and a listed entity. Use of license exceptions is not permitted. As a general rule, license applications will be approved only on an exceptional basis for transactions involving a listed person.

VII. Keys to Compliance

Three important steps for compliance are:

• Determine the export control jurisdiction and USML category or CCL classification number (ECCN) of any technology, commodity or software destined, directly or indirectly, for Russia or Belarus and determine license requirements and availability.
• If the Item is not on the USML or EAR’s CCL, verify its Schedule B number, Schedule B description, HTS code, Value Threshold and HTS description, and then review the relevant BIS supplements.
• Conduct sanctioned person screening at the time of the order and prior to the export, reexport or transfer (in country) to verify that no party to a transaction is covered by any applicable sanctioned persons list, including BIS’s UVL, Denied Persons List or Entity List or OFAC’s List of Specially Designated Nationals and Blocked Persons.

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