U.S. Suspends Processing of Export and Reexport Licenses to Russia
By Doug Jacobson and Michael Burton, Jacobson Burton PLLC
While it has been widely reported that the U.S. has imposed targeted sanctions on certain persons and a bank in Russia as a result of the recent developments in Ukraine, the U.S. Government has also taken other actions that will have a significant impact on U.S.-Russia trade.
Today the Bureau of Industry and Security (BIS) posted the following announcement on its website:
Since 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.No further explanation was provided. We have confirmed with BIS, however, that this practice applies to the processing of new license applications only. Existing licenses issued by BIS in the past that are still valid are not affected by this policy.
In addition, this policy does not currently impact the use of license exceptions under Part 740 of the Export Administration Regulations for exports or reexports to Russia, although Russia has never been an eligible destination for the use of license exception Strategic Trade (STA).
We understand that the Directorate of Defense Trade Controls (DDTC) has implemented a similar policy for licenses and other export authorizations involving the export to Russia of defense articles and technical data subject to the licensing jurisdiction of the ITAR, but no announcement has yet been issued by DDTC [see update below]. We have also received information indicating that DDTC has recently denied or returned without action (RWA) export licenses to Russia that have been routinely approved in the past.
March 27, 2014 Update: Today the Directorate of Defense Trade Controls posted the following announcement on its website:
Industry Notice: The Department of State has 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. (03.27.14)Impact on U.S. Companies
Because Russia is included in Country Group D, many U.S. origin items require licenses from BIS to be exported or reexported to Russia. For example, as indicated from the statistics contained in BIS's 2013 Annual Report reprinted below, in fiscal year 2013 BIS issued 1,832 licenses to destinations in Russia. The licenses covered 83 ECCNs on the Commerce Control List and had a total value of nearly $1.5 billion.
More than 73% of the licenses issued by BIS in FY 2013 (1338) involved optical sights for firearms classified in ECCN 0A987. A large number of licenses were also issued for chemical manufacturing equipment classified in ECCN 2B350, electronic products classified in 3A001 and space launch vehicles and “spacecraft” classified in ECCN 9A004. The largest licensed exports to Russia by value (nearly $800 million) involved “devices designed to initiate energetic charges” classified under ECCN 1A007.
It is important to note that most U.S.-origin items classified as EAR99 or subject to AT controls only do not require a license to be exported or reexported to Russia and will be unaffected by this policy change.
U.S. manufacturers and exporters of products destined for customers in Russia, however, should review their products to confirm they are properly classified and continue to monitor the rapidly changing U.S. sanctions and export control developments involving Russia. Exporters should also perform due diligence to guard against the possible diversion of controlled items to Russia through third countries.
Pages From BIS Annual Report 2013