On February 23 and 24, 2022, the United States, through the Department of Commerce’s Bureau of Industry and Security (“BIS”) and the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), took significant additional actions to respond to the Government of Russia’s invasion of Ukraine by imposing severe measures intended to have immediate and long-lasting effects on the Russian economy, financial system, defense industrial base, and military and intelligence services.  These new prohibitions and requirements, announced and effective on February 23 and 24, respectively, supplement the new measures imposed earlier in the week (collectively, “Russia Sanctions”).  The Russia Sanctions directly impact U.S. and foreign companies; cut Russia off from global financial markets; and severely restrict Russia’s access to technologies, commodities, and software subject to the Export Administration Regulations (collectively “Items”).  While the Russia Sanctions do not amount to a full embargo, they do prohibit U.S. persons from doing business with over 70% of Russian financial institutions and impose expansive U.S. license requirements on exports, reexports (one foreign country to another foreign country), and in-country transfers for Items destined for Russia.

Late on Friday, February 25, 2022, OFAC announced further additions to its SDN List, including the designation of Vladimir Putin, President of the Russian Federations, and Sergei Lavrov, Minister of Foreign Affairs of the Russian Federation.

This Alert provides an executive summary of some key provisions of the Russia Sanctions, some practical suggestions on how to comply with them, and a more detailed summary of key provisions (see Appendix I for a summary of the Russia Sanctions implemented by OFAC and Appendix II for a discussion of the export controls imposed on U.S. and foreign Items intended for export and/or reexport to Russia implemented by BIS).  As the new controls and prohibitions are extensive and complex, this Alert cannot be relied upon as legal advice regarding specific transactions, but rather as a tool to help businesses, both U.S. and foreign, identify whether their business with Russia may now be subject to U.S. export license requirements or involve newly sanctioned or blocked persons. 

Executive Summary

• Seventy-five entities (and subsidiaries thereof) and 19 individuals (and their families) in Russia have been designated as blocked persons (i.e., Specially Designated Nationals or SDNs), thereby prohibiting U.S. persons from conducting any business with them and requiring U.S. persons to block their property and interests in property.  The SDNs notably include the President of the Russian Federation, Vladimir Putin, and key financial institutions such as VTB Bank Public Joint Stock Company (“VTB Bank”) and its subsidiaries; Public Joint Stock Company Bank Financial Corporation Otkritie (“Otkritie”); Open Joint Stock Company Sovcombank (“Sovcombank”); and Joint Stock Commercial Bank Novikombank (“Novikombank”) and 34 of its subsidiaries.  These designations are in addition to the designations of State Corporation Bank for Development and Foreign Economic Affairs Venesheconombank and Promsvyazbank Public Joint Stock Company and their subsidiaries.
• OFAC also designated as SDNs 16 companies (and subsidiaries thereof) and 8 individuals (and their families) in Belarus in response to Belarus’s support for the Government of Russia’s invasion of Ukraine.
• BIS significantly increased the license requirements on dual-use Items, including on microelectronics, telecommunications Items, sensors, navigation equipment, avionics, marine equipment, and civil aircraft, exported¸ reexported or transferred in-country to Russia.  These license requirements do not apply to deemed exports or deemed reexports.  Thus, your Russian national employees, and individual contractors are not subject to further license requirements as long as they are not located in Russia.
• Under the new regulations, the scope of exports and reexports to Russia and transfers within Russia that may be available without having to obtain a license from BIS is limited to transactions for the provision of certain encryption Items to non-government end-users and state-owned enterprises (License Exception ENC); consumer communication devices and software to and for the use of independent non-governmental organizations in Russia (License Exception CCD); software updates for civil end users (License Exception TSU);  and Items for use by news media (License Exception TMP).   License Exceptions GOV, AVS, and BAG are also available, but each is quite narrow in scope.  Before using any license exception that may be available, it is extremely important to check with legal counsel or an experienced trade compliance professional to ensure that all license exception terms and conditions are met and documented and that the export, reexport, or transfer is truly eligible for the license exception.
• BIS moved 45 Russian entities that were on the Military-End-User List to the BIS Entity List, thereby enhancing the export license requirements applicable to such entities.  Further, BIS imposed broad controls on 49 Russian entities (including the aforementioned 45) that are comparable to those imposed against Huawei Technologies Co., Ltd. and its subsidiaries (collectively “Huawei”). These rules now control the export of all Items subject to the EAR with limited exceptions. 
• BIS greatly expanded its jurisdiction over foreign produced goods going to Russia, including by implementing two new Foreign Direct Product Rules and expanding the scope of foreign-produced Items that will be subject to U.S. controls because of the U.S. parts, materials, or components that the Items incorporate.  BIS is estimating that these controls alone will result in an increase of at least 2,000 license applications annually, the responsibility for which will fall on the foreign entities.
• As with the expansion of controls on Huawei, foreign companies, many of which never have applied for a U.S. export or reexport license, will likely now need to apply for U.S. export authorizations for business in or relating to Russia.
• On February 23, 2022, the U.S. government designated Nord Stream 2 AG, the company behind the Nord Stream 2 pipeline between Russia and Germany, and its German chief executive officer, Matthias Warnig, as SDNs.  Via General License 4, U.S persons must wind down any business involving Nord Stream 2 AG by March 1, 2022 or risk license requirements for wind-down activities beyond that date.

As a result of these actions, U.S. and non-U.S. persons must be vigilant not only when engaging in any transactions involving Russia but also transactions with those who deal with or in Russia.  We believe it is of paramount importance to take appropriate steps, including those outlined below, and seek advice from legal counsel to ensure compliance with applicable U.S. export control and sanctions laws.

Practical Tips for Compliance

Some practical suggestions for maintaining compliance are:

• Screen each party to a transaction potentially involving Russia and Ukraine, including all potential end-users and intermediaries, to ensure that none of the parties is a blocked person or appears on the Entity List or another restricted party list. 
  • For those new to screening, the U.S. government has a free online screening tool that easily allows names to be screened against the various U.S. government export and sanctions proscribed persons lists.  It may be found at https://www.trade.gov/data-visualization/csl-search. 
  • In addition, it is important to ensure that parties not specifically designated as SDNs are not SDNS by operation of law because they are 50% or more owned, individually or in the aggregate, by SDNs per OFAC guidance.
• Screen the postal codes of customers and other parties involved in an export, reexport or in-country-transfer to ensure that none of parties are located in the Donetsk People’s Republic (“DNR”) or the Luhansk People’s Republic (“LPR”) in Ukraine as these territories are subject to a U.S. embargo.
• Determine or verify the export control classification number (“ECCN”) for any Item that may go to Russia to determine whether it is subject to any of the new licensing requirements.
• Obtain complete and updated end-use and end-user statements for all Items destined to Russia or Ukraine, even if classified as EAR99. Due to broad controls on military end- users and end-uses, an EAR99 item can require a license to go to Russia.
• When dealing with foreign distributors and resellers, or other customers that may reexport products to Russia or Ukraine, obtain assurances that any Items sold to these customers will only be sent to Russia or Ukraine in compliance with applicable U.S. export control laws and regulations.
• Leverage software resources available to place export compliance holds on exports to Russia and to Ukraine so that these transactions can be properly vetted and reviewed prior to shipment.  If you have any knowledge, including reason to believe, of a Russian entity being involved or potentially involved in a transaction, seek advice from legal counsel or a trained export compliance professional to verify any license requirements and document the diligence and compliance steps taken to ensure that any required license is obtained and that the transaction is otherwise compliant with applicable U.S. export control laws and regulations (including export transactions involving EAR99 Items or Items not necessarily destined to Russia but which may be reexported to Russia).
• Foreign companies that use U.S.-origin technology or software to produce or develop Items should be aware that those Items could be subject to a BIS license requirement if sold or shipped directly to Russia or if the foreign companies have reason to know that their customer (or, even their customer’s customer, etc.) intends to export or reexport the ultimate end-item to Russia.  It is the responsibility of the foreign companies to obtain a license from BIS noting that parties further down the supply chain may have also been required to obtain licenses for the Item to go to Russia.
• Foreign companies exporting to Russia must now also take steps to ensure that they are not exporting or reexporting items that are the direct product of any U.S. technology or software listed on the CCL to Russian military end-users, which will likely require collecting end-user information so as to ensure that no export is being made to a designated Russian military end-user.
• Foreign companies exporting items to Russia must be wary of the de minimis rules and ensure that the item being exported does not contain more than 25% U.S.-origin controlled content, including Items subject to the new license requirements.
• Foreign companies exporting items to Russia must further ensure that the foreign -produced item being exported does not contain any U.S. content that is classified under paragraphs .a through .x of a  9x515 or “600 series” ECCN;  if it does, then the foreign company must obtain a license from BIS for the export from abroad. 

Please do not hesitate to reach out to any member of our International Trade and National Security team or your BakerHostetler relationship partner with questions. BakerHostetler continues to closely monitor the situation.

Appendix I:  

Overview of the Russia Sanctions Imposed by OFAC

On February 23, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) imposed sanctions on Nord Stream 2 AG, the company behind the Nord Stream 2 pipeline between Russia and Germany, and its German chief executive officer, Matthias Warnig.  On February 24, OFAC imposed sanctions against some of Russia’s largest companies and most high-profile individuals, as well as a number of companies and individuals in Belarus in response to Belarus’s support for the Government of Russia’s invasion of Ukraine.  On February 25, OFAC announced the designation of the President of the Russian Federation, Vladimir Putin, and the Minister of Foreign Affairs of the Russian Federation, Sergei Lavrov, as SDNs.  These measures and the sanctions announced by the U.S. earlier in the week (described here and here) effectively restrict U.S. financial transactions and U.S. persons more broadly from doing business with over 70% of Russian financial institutions. 

A. Correspondent and Payable-Through Account Sanctions on Sberbank and its Subsidiaries

The U.S. issued Russia-related Directive 2 under Executive Order (“EO”) 14024, which imposes correspondent and payable-through account sanctions on Sberbank and its subsidiaries, effectively placing these entities on the OFAC List of Foreign Financial Institutions Subject to Correspondent Account of Payable-Through Account Sanctions (“CAPTA List”).  Sberbank is the largest financial institutions in Russia, is majority owned by the Government of Russia, and holds about a third of all bank assets in Russia.  Under Directive 2, which takes effect on March 26, 2022, OFAC is requiring all U.S. financial institutions to close any Sberbank correspondent or payable-through accounts and to reject any future transactions involving Sberbank or its foreign financial institution subsidiaries.  The sanctions apply to Sberbank and 25 Sberbank foreign financial institution subsidiaries.  These subsidiaries include banks, trusts, insurance companies, and other financial companies located in Russia and six other countries, namely Austria, Belarus, Cyprus, Kazakhstan, Luxembourg, and Ukraine.

B. Blocking of VTB Bank and its Subsidiaries and Other Financial Institutions

VTB Bank and 20 subsidiaries were designated Specially Designated Nationals and Blocked Persons (“SDNs”), thereby prohibiting U.S. persons from conducting any business, directly or indirectly, with any of these entities and blocking their property in the United States.  The sanctioned VTB Bank subsidiaries include banks, holding companies, and other financial companies located in Russia and eight other countries. 

The U.S. government also designated three other major Russian financial institutions – Public Joint Stock Company Bank Financial Corporation Otkritie (“Otkritie”), Open Joint Stock Company Sovcombank (“Sovcombank”), and Joint Stock Commercial Bank Novikombank (“Novikombank”) and 34 subsidiaries – as SDNs.  These three financial institutions play significant roles in the Russian economy, holding combined assets worth $80 billion. 

Pursuant to General License 11, U.S. persons may engage in transactions that are ordinarily incident and necessary to the wind down of transactions with VTB Bank, Otkritie, and Sovcombank until March 25, 2022 as long as no other SDN is involved.  Under General License 3, March 23 is the wind-down deadline for transactions with VEB and its listed subsidiaries.

C. Debt and Equity Restrictions on Critical Russian Entities

The U.S. imposed new debt and equity restrictions on thirteen critical Russian companies, including Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank, Gazprom, Gazprom Neft, and Transneft.  The new restrictions, which are set forth in Directive 3, prohibit transactions and dealings by U.S. persons or within the United States in new debt of longer than 14 days maturity and new equity of these Russian state-owned enterprises, entities that operate in the financial services sector of the Russian Federation economy, and other entities determined to be subject to the prohibitions in Directive 3. 

Russian entities designated under Directive 3 include Public Joint Stock Company Rostelecom, Russia’s largest telecommunications provider; Joint Stock Company Sovcomflot, the largest maritime and freight shipping company in Russia; and Open Joint Stock Company Russian Railways, one of the world’s largest railway companies.  A full list of the companies subject to the restrictions are listed in Annex I of Directive 3.  As a result of these designations, payments involving these designated entities may be held for compliance checks at U.S. financial institutions for longer than 14 days potentially resulting in a violation.

D. General Licenses Authorizing Certain Activities

To ensure that the new Russia sanctions and debt restrictions do not impose unintended harm on third parties and humanitarian efforts, OFAC issued eight general licenses authorizing certain transactions related to international organizations and entities (General License 5); agricultural and medical commodities and the COVID-19 pandemic (General License 6); overflight payments, emergency landings and air ambulance services (General License 7); energy (General License 8); dealings in certain debt or equity (General License 9); derivative contracts (General License 10); the winding down of transactions involving certain blocked persons (General License 11); and the rejection of transactions involving certain persons (General License 12).

E. Sanctions on Members of the Russian Elite and Their Families

Further designations of members of the Russian elite and their family members as SDNs were also imposed. Full blocking sanctions were imposed against Sergei Ivanov (and his son, Sergei), Andrey Patrushev (and his son, Nikolai), Igor Sechin (and his son, Ivan), Andrey Puchkov, Yuriy Solviev (and two real estate companies he owns), Galina Ulyutina, and Alexander Vedyakhin.  As a result of the designations, these individuals are effectively blocked from the U.S. financial system, their property or interests in property held by U.S. persons are frozen, and they are barred from any travel to the United States.

F. Sanctions on Belarusian Individuals and Entities

Sanctions on certain individuals and entities in Belarus were imposed for their support for and facilitation of the Government of Russia’s invasion of Ukraine.  The sanctions designate as SDNs 24 Belarusian individuals and entities, including two significant Belarusian state-owned banks, nine defense firms, and seven regime-connected official and elites and are aimed at targeting Belarus’ military and financial capabilities.  The U.S. also issued two Belarus General Licenses to authorize the official conduct of U.S. Government business with Belarus (Belarus General License 6) and official activities of certain international organizations with Belarus (Belarus General License 7).  Those organizations include the United Nations, International Committee of the Red Cross, and various international development banks.

G. Sanctions on Nord Stream 2 AG and Chief Executive

On February 23, 2022, the U.S. government designated Nord Stream 2 AG, the company behind the Nord Stream 2 pipeline between Russia and Germany, and its German chief executive officer Matthias Warnig as SDNs, thereby prohibiting U.S. persons from conducting any business with them and blocking their property in the United States.  Nord Stream 2 AG is a Swiss firm which is a wholly owned subsidiary of Russian gas conglomerate Gazprom.  Mr. Warnig is a German national who is reported to be a close ally of Russian President Putin.

General License 4 (“GL 4”), also issued on February 23, allows U.S. persons to wind down business involving Nord Stream 2 AG.  GL 4 license authorizes U.S. persons to engage in transactions that are ordinarily incident and necessary to the wind down of transactions by March 1, 2022, so long as no other SDN is involved in the winding down of such transactions.  

Appendix II:

Export Controls: Imposition of License Requirements on U.S. and Foreign Items

U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) also significantly strengthened export controls on U.S.-origin and non-U.S.-origin products subject to the Export Administration Regulations (“EAR”) (collectively “Items”) exported, reexported or transferred (in-country) to Russia.  These export controls affect not only companies exporting or reexporting U.S.-origin Items to Russia, but also foreign companies that export certain foreign-produced Items to Russia that are subject to the EAR, because either U.S.-origin technology or source code was used in producing the foreign Items or because they incorporate controlled U.S.-origin content. 

A. Export Licenses Now Required for Most Controlled Items Subject to the EAR Destined to Russia

Although exports and reexports of some commodities, technology and software on the Commerce Control List (“CCL”) previously required a license for export or reexport to Russia, the February 24 amendments significantly expanded the license requirements to apply to all Items in seven of the 10 categories of the EAR’s CCL, i.e., Categories 3-9. As a result, license requirements now apply to a much broader array of  Items, including microelectronics, telecommunications Items, sensors, navigation equipment, avionics, marine equipment, and civil aircraft.  Accordingly, it is now particularly critical that U.S. companies that export to Russia, as well as foreign companies that purchase U.S.-origin products that may be reexported to Russia, classify their Items and verify whether a license from BIS is required.  Further, the availability of license exceptions, which would cure the need to obtain a license, has been materially narrowed.

Importantly, the new Categories 3- 9 licensing requirements described above do not apply to deemed export and deemed reexports, e.g., exports of technology and source code to Russian foreign person employees or individual contractors in countries other than Russia.

BIS has applied a review policy of denial with respect to exports and reexports of most Items with a case by case review for exports and reexports of Items related to safety of flight, maritime safety, humanitarian needs, government space cooperation, civil telecommunications infrastructure, government-to-government activities, and to support the operations of Russian subsidiaries or joint ventures of U.S. companies or of companies headquartered in certain countries; those listed in Country Group A:5 or A:6 as denoted in Supplement No. 1 to Part 740 of the EAR.  When preparing applications for BIS export licenses involving Russia, especially given the complex and rapidly changing regulatory and foreign policy landscapes, it is advisable to seek assistance from experienced export controls counsel, including to discuss the likelihood of approval.

B. Expansion of the Military End-Use and End-User Rule

The U.S. government expanded the military end-use and end-user controls to now restrict exports and reexports of all Items subject to the EAR, including those classified as EAR99, if those Items are intended for military end-users or military end-uses in Russia.  Items classified as EAR99 include almost every U.S.-origin item that is not on the CCL.  Consistent with the military end-user and end-uses rules for China and other countries, Russian “military end-users” include not only national armed services but also “any person or entity whose actions or functions are intended to support military end uses,” which, practically speaking, could include any company that conducts business with the Russian military.  The only exception to this restriction is with respect to food and medicine classified as EAR99 and to Items classified under ECCN 5A992.e or 5D992.c, and then, only so long as the export is not to a Russian “government end-user” or a state-owned enterprise.  Thus, even food, medicine, and personal communications devices may require a BIS license.

The military end-use and end-user expansion also included the addition of 47 Russian companies to the BIS Entity List and designated of these companies as military end-user subject to the new foreign direct product rule discussed below.  Forty-five of these companies were moved from the Military End-User List to the BIS Entity List, while two of the entities are newly designated.  Further, two entities which were already on the Entity List were designated as military end-users. 

This move coupled with the new Foreign Direct Product Rule for Russian military end-users, which is discussed below, will significantly increase the scope of Items, whether of U.S.-origin or foreign-produced, that now require a license from BIS. 

C. Many Foreign-Origin Products Are Now Subject to the EAR if Exported from Abroad to Russia

The new export controls also introduce sweeping changes to the treatment of foreign-produced Items – changes that will directly affect companies that have not in the past had much of a reason to be concerned about U.S. export control laws and regulations.  This is because the new rules include two new foreign direct product rules specific to exports of foreign-produced Items from abroad to Russia, as well as changes to the EAR’s so-called “de minimis” rule.  These rules make certain foreign-produced Items subject to the EAR, and thus, to the broad reach of U.S. export control laws and regulations, even if they contain little to no U.S.-content.  As a result, foreign companies will now have to pay much closer attention to whether their products are subject to the EAR, and whether they could be liable for violations of U.S. export controls laws and regulations, including significant fines, inclusion on proscribed persons lists, and other penalties.  This includes addition to the BIS List of Denied Persons.  Companies on the BIS List of Denied Person may not participate in activities subject to the EAR.  BIS estimates that the first foreign direct product rule alone will result in an additional 2,000 license applications being submitted to BIS annually.

D. New Foreign Direct Product Rules Subject to Foreign-Produced Items Exported from Foreign Countries to Russia to U.S. Export Control Laws and Regulations

As a general rule, foreign direct product rules subject certain products, even if produced abroad, to the EAR, and thus, to U.S. jurisdiction, if they are the “direct product” of a certain narrow set of U.S. technologies and software or if they are produced by a plant or a “major component” of a plant that is itself a direct product of such U.S technologies and software.  The new foreign direct product rules applicable to Russia expand the EAR’s jurisdiction with respect to foreign-produced Items destined to Russia and/or to military end-users, and thus, much broader range of foreign-produced Items are now subject to U.S. export control laws and regulations.  If subject to the EAR, foreign-produced Items are subject to the same licensing requirements as those in place for U.S.-origin Items.  These new foreign direct rules are comparable to the Huawei foreign product rule as license requirements may be imposed on multiple parties to the same transaction and there are specific rules for Items going to select entities on the BIS Entity List.

The first Russia foreign direct product rule subjects to the EAR a wider range of foreign-produced Items because they are destined to Russia; or to “any destination” (emphasis added) where the Item will be incorporated into or used in the production or development of any part, component, or equipment produced in or destined to Russia.  These foreign-produced Items include any foreign-produced Item classified as anything other than EAR99 that is a direct product of U.S.-origin technology or software classified under an ECCN in Categories 3-9 of 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).  It is important to note that the rule captures foreign-produced Items subject to the EAR that are not only destined for Russia but to “any destination” when Russia is the ultimate destination.  Thus, BIS can “address situations involving multi-step manufacturing processes that occur in more than one country and in which the parties involved have ‘knowledge’ that the foreign-produced Item being produced will ultimately be reexported or exported from abroad to Russia.”  Accordingly, many foreign produced items produced or developed from U.S.-origin technology or software will now require a BIS license if going to Russia. 

The second Russia foreign direct product rule, subjects to the EAR exports, reexports, and transfers of foreign-produced Items when there is knowledge that the foreign-produced Item “will be incorporated into, or used in the ‘production’ or ‘development’ of any ‘part,’ ‘component,’ or ‘equipment’ produced, or ordered by an entity” that is designated as a Russian military end-user per a footnote 3 designation in the license requirement column of the Entity List contained in Supplement No. 4 to Part 744 of the EAR. These are the 49 entities discussed above that are on the BIS Entity List.   The new rule also applies to export transactions that involve any of these 49 entities as either a purchaser, intermediate consignee, ultimate consignee, or end-user.  This second foreign direct product rule goes further than the first Russia foreign direct product rule as it includes all foreign-produced Items subject to the EAR (including EAR99 Items) that are the direct product of U.S.-origin technology or software classified under any ECCN in any of the 10 categories on the CCL (Categories 0-9) (or produced by a plant or “major component” of a plant that is itself a direct product of such U.S technologies and software).  Thus, essentially any foreign-produced item developed or produced from U.S. technology or software will require a BIS license for a Russian military end-user on the BIS Entity List.   

Also quite important is that for the moment several countries, including Canada and the United Kingdom, are excluded from application of these two foreign direct product rules with respect to exports and reexports between one another.  This is a result of their commitment to implement substantially similar export controls on Russia under their own laws.  These countries are listed in Supplement No. 3 to Part 746 of the EAR. 

E. De Minimis Rule Changes Subject Foreign-Produced Items Incorporating U.S.-Origin “Controlled Content to U.S. Export Control Laws and Regulations

Under the de minimis rule, foreign-produced products may also be subject to the EAR if they contain more than a de minimis amount of U.S.-origin “controlled content”  As a result of the Russia Sanctions, Russia is moved into Country Group D:5 meaning that, among other things,  any foreign-produced Item destined to Russia described under paragraphs .a through .x of a 9x515 or a “600 series” ECCN that  incorporates any U.S. “controlled content” whatsoever will require a BIS license.  This rule change will have significant consequences for foreign companies selling “600 series” or 9x515 Items caught under this amendment, including, but not limited to, companies in the aerospace sector. 

In addition, more foreign-produced Items destined to Russia will be subject to the EAR under the de minimis rule because “controlled content” now includes Items classified under Category 3-9 ECCNs that were not controlled for export to Russia prior to the February 24 amendments.  Thus, foreign companies exporting to Russia will need to be much more mindful of the U.S. “controlled content” that may be incorporated into the Items that they produce and export to Russia to ensure that it does not exceed the de minimis threshold.

Also, generally speaking for Items exported or reexported from one of the select countries set forth in Supplement No. 3 to Part 746 of the EAR,  the “controlled content” calculation need not include U.S.-origin Items classified under ECCNs in Categories 3-9 controlled only for anti-terrorism reasons.

Analysis of whether Items are subject to the EAR under the de minimis rule has long been complex, and if uncertainty exists, foreign companies should consult legal counsel or experienced trade compliance professionals.

F.  Embargo on Exports and Reexports of Items to Donetsk and Luhansk

Consistent with changes to the OFAC sanctions laws and regulations that were announced earlier in the week, the EAR amendments also include imposing a license requirement for the export or reexport of any Item subject to the EAR to the Donetsk People’s Republic (“DNR”) and the Luhansk People’s Republic (“LPR”).  These licensing requirements are very similar to those already in place with respect to exports and reexports of Items to the Crimea Region of Ukraine.  The licensing requirement applies to all Items subject to the EAR other than food and medicine designated as EAR99 and certain software and Internet-based personal communications.  Licenses from both BIS and OFAC will likely need to be obtained for any export, reexport, or transfer (in-country) subject to the Russia Sanctions involving the LPR and DNR regions.

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