On Friday, February 24, 2023, the US Department of Commerce, Bureau of Industry and Security (BIS) published in the Federal Register four new Final Rules amending the Export Administration Regulations (EAR) (15 CFR parts 730-774) to implement additional sanctions against Russia and Belarus, refine existing controls, implement export control measures on Iran, and add new entities to the Entity List.
Beginning on February 24, 2022, BIS amended the EAR to impose its first in a series of rules targeting Russia for actions in Ukraine. (See 87 FR 12226) (See our alert here) Since that initial rule, BIS has further amended the EAR to: (1) impose the same licensing restrictions on Belarus as BIS imposed on Russia for its complicity in the invasion (see 87 Fed. Reg. 13048); (2) expand existing sanctions against the Russian industry sector to target the oil refinery sector in Russia (see 87 Fed. Reg. 12856); (3) add 91 entities to the Entity List (see 87 Red. Reg. 13141); (4) add a license requirement for the export, reexport, or transfer of certain luxury goods destined for Russia and Belarus and for Russian and Belarusian oligarchs and malign actors (see 87 Fed. Reg. 14785); (5) add four additional countries to the list of countries excluded from certain license requirements (Supp. No. 3 to part 746) (see 87 Fed. Reg. 21554); and (6) impose several new controls on exports, reexports, and transfers (in-country) of items to or within Russia and Belarus, and make twelve corrections and clarifications to existing Russian and Belarusian controls. (see 87 Fed. Reg. 57068).
Through these new Final Rules, BIS makes several amendments to the EAR.
Additional Sanctions Against Russia and Belarus
In addition to making certain corrections and clarifications, the Final Rule makes certain amendments to the EAR’s sanctions against Russia and Belarus, including the Russian and Belarusian industry sector sanctions and “luxury goods” sanctions, as follows:
Russian and Belarusian Industry Sector Sanctions changes, § 746.5
- Changes to Supplement No. 2 to part 746:
- Clarifying changes to the heading of Supplement No. 2 to part 746 to add Belarus and a reference to § 746.5(a)(1)(i)
- Replaces the columns for “Schedule B” and “Schedule B description” from Supplement No. 2 to part 746 with the HTS-6 Code and HTS Description to describe the same set of items, thereby aligning these controls with U.S. allies’ and partners’ controls
- Revises the introductory text to Supplement No. 2 to part 746 to remove references to Schedule B numbers and descriptions, and add reference to the HTS-6 Codes and HTS Descriptions that replaced the Schedule B numbers and descriptions
- Expands the scope of items subject to the Russian and Belarusian Industry Sector Sanctions by revising the introductory text to specify that the items captured include any modified or designed components, parts, accessories, and attachments, regardless of their HTS Code or HTS Description
- Clarifies the introductory text to Supplement No. 2 to part 746 to specify that the items identified in the HTS-6 Code column require a license under § 746.5(a)(1)(i)
- Changes to Supplement No. 4 to part 746:
- Expands of the scope of the Russian and Belarusian Industry Sector Sanctions pursuant to § 746.5(a)(1)(ii) by adding 322 HTS-6 Codes to Supplement No. 4 to part 746
- Removes Schedule B and Schedule B Description columns under Supplement No. 4 to part 746, while retaining the existing HTS Code and HTS Description columns, thereby aligning these controls with U.S. allies’ and partners’ controls
- Revises the license requirement under Supplement No. 4 to part 746 to apply to items classified under an HTS Code listed in the HTS-6 Code column, rather than the HTS Description column
- Changes to Supplement No. 6 to part 746:
- Expands the list of items that require a license under § 746.5(a)(1)(iii)
Luxury Goods Sanctions Against Russia and Belarus and Russian and Belarusian Oligarchs and Malign Actors, § 746.10
- Expands the scope of the Luxury Goods Sanctions by adding 276 additional items to Supplement No. 5 to part 746 that require a license for export or reexport to or transfers within Russia or Belarus and for designated Russian and Belarusian oligarchs and malign actors worldwide under § 746.10(a)(1) and (2)
In addition to the above changes, the EAR is amended to add Taiwan to the list of countries identified in Supplement No. 3 to part 746, which are excluded from certain of the new licensing requirements pertaining to certain foreign-produced items under § 746.8, because the identified countries have committed to implementing substantially similar export controls on Russia and Belarus under their domestic laws.
Export Control Measures on Iran
In addition to the above changes regarding the controls on items destined to or within Russia and Belarus, BIS also amends the EAR to impose new export control measures on Iran. These measures address the use of Iranian Unmanned Aerial Vehicles (UAVs) by Russia in its ongoing war against Ukraine. Specifically, these controls impose license requirements for a subset of EAR99 items that are used in Iranian UAVs and that are destined to Iran. Such items, identified by HTS-6 Codes in new Supplement No. 7 to part 746, require a license under § 746.7 when destined for Iran and under § 746.8 when destined for Russia or Belarus. Additionally, BIS expands the product scope of the Russia/Belarus Foreign Direct Product (FDP) Rule in § 734.9 to include items identified in new Supplement No. 7 to part 746, even if such items are classified as EAR99.
BIS also creates a new Iran FDP Rule, which is generally modeled after the Russia/Belarus FDP Rule, but with slight differences to make the Iran FDP rule more narrowly targeted at Iran’s UAV activities of concern. The Iran FDP rule establishes jurisdiction over foreign-produced items identified in Supplement No. 7 to part 746 that are the direct product of US-origin software or technology classified in Categories 3 through 5 and 7 of the Commerce Control List (CCL), or are produced by a plant or major component of a plant which itself is the direct product of such software or technology.
Finally, as a conforming change, BIS also revises Supplement No. 2 to part 734 to specify that exporters must use the license requirements in part 746 for identifying US-origin controlled content for determining whether a foreign-produced item is subject to the EAR under the de minimis rule.