New Export Restrictions to Russia: What You Need to Know

by Miku H. Mehta and

New Export Restrictions to Russia: What You Need to Know

In response to the Russian Federation’s further invasion of Ukraine, the Biden Administration issued a sweeping series of new export control measures on technology and products against Russia and Russia-related entities. The measures, which are quite extensive, have the potential to impact a wide range of companies and industries. It’s critical for leaders of exporting companies to familiarize themselves with these new regulations, an update of the U.S. government’s Export Administration Regulations (“EARs”), and ensure compliance.

The Bureau of Industry and Security (“BIS”) of the U.S. Commerce Department issued a Final Rule, which includes the following restrictions:

New Commerce Control List (CCL)-based license requirements for Russia;
One foreign direct product (FDP) Rule for all of Russia (“Russia FDP Rule”) and another foreign direct product rule for Russian military end users (“Russia-MEU FDP Rule.”) with the exclusion of Partner Country;
A license review policy of denial applicable to all of the license requirements being added in this rule, with certain limited exceptions;
Restriction on the use of EAR license exceptions;
Expansion of the existing Russia “military end use” and “military end user” control scope to all items and “military end user” control scope to all items “subject to the EAR” other than (i) food and medicine designated EAR99, or (ii) items classified as ECCN 5A992.c and 5D992.c so long as they are not for Russian “government end users” and Russian state-owned enterprises (SoEs);
Adds 49 new entities to the Entity List, with the footnote 3 designation; and
Comprehensive export, reexport and transfer (in country) restrictions for the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republics (LNR) regions of Ukraine (“Covered Regions of Ukraine”) and makes conforming revisions to export, reexport transfer (in-country) restrictions for Crimea Region of Ukraine provisions.

As a result of these new export control measures, it is important for importers and exporters to understand:

That the scope of technologies for which export to Russia is restricted has been significantly expanded;
How foreign direct product rules work and apply;
Which countries are considered partner countries, for the purpose of application of the FDP rules;
That there is a very strong likelihood that the license applications will be denied under the general policy of denial;
Which license exceptions are available, as well as the specific situations in which they are available; and
That the Entity list has been expanded.

Exporters can take certain steps to reduce risk and comply with the Final Rules. Generally speaking, it is recommended to maintain a written export control compliance policy, and effective internal implementation, management, training and self-audit processes. Additionally, exporters may wish to consider some specific actions based on the Final Rule.

For companies involved in the export of technology to Russia, it is important to carefully determine the ECCN of the technology from the CCL, and confirm whether the Final Rule implicates that technology. If the technology is implicated by the Final Rule, it is important to understand that many of the license exceptions that would typically apply may not be available.
To the extent that a license is required under the Final Rule, the BIS license review policy of denial will be applied.
Companies will also need to carefully examine the entities to which technology is being exported, to ensure that there is no export to restricted entities.
Because the restricted entities may include not only companies but also individuals, there may also be deemed export risks (e.g., employment of Russian nationals). Thus, it is crucial to ensure that hiring processes properly screen the most up-to-date version of the Entity List from the BIS website.
With respect to the FDP rules, it is important to evaluate all technology being exported, and to understand which technologies could potentially fall within the FDPs. If a technology falls within the FDPs, the export to foreign entities that are using the technology should be evaluated for prohibited uses under the FDPs. In some cases, a Letter of Assurance may be requested from the foreign entity.

By understanding the Final Rules in terms of the technology, implicated entities, processes for classification and licensing, exporters can address and minimize risk at an earlier stage. It is also recommended to monitor for potential BIS updates, as well as understanding other areas of regulation, such as OFAC sanctions.

About the Authors

Miku H. Mehta

Partner

Miku advises clients in the U.S. and Asia on intellectual property, patent prosecution and counseling, as well as trademarks and copyrights. His practice focuses on the preparation and prosecution of patent applications, due diligence projects, including preparation of opinions in the areas of patentability, validity, infringement and product clearance, and patent licensing. Miku has extensive experience in technology including computer software and hardware, networks, internet-related applications, environmental technologies, optics, mechanical engineering, business processes and medical devices, as well as registration and renewal of trademarks and counseling on export control matters. He is the leader of Procopio’s Intellectual Property team and its Asia Pacific practice.