Russia Sanctions and Export Controls Compliance
Although there is no outright ban on doing business in Russia as of this writing (July 27, 2022), sanctions and restrictive export controls imposed by the United States and its allies and partners have made it essential for any company contemplating business with Russian counterparts to conduct thorough due diligence to ensure compliance with applicable laws and regulations. Companies should be aware that the U.S. Government has also imposed stringent economic and financial restrictions on Belarus, including new export controls, in response to its substantial enabling of Russia’s attack on Ukraine. Companies should also be aware that certain activities are exempt or authorized by general license, including the provision of humanitarian aid, trade in agricultural commodities and medicine, the provision of medicine and medical devices, and the provision of certain telecommunications services to support the free flow of information and access to the Internet.
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is the lead agency for implementing and enforcing sanctions. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) is the lead agency for implementing and enforcing export controls, which generally take the form of restrictive export licensing requirements under the Export Administration Regulations (EAR). As a general matter, OFAC administers and enforces economic sanctions programs primarily directed at jurisdictions and groups of individuals and entities. Consistent with U.S. foreign policy and national security objectives, BIS regulates the export from the United States and the reexport (shipment between two foreign countries) of items (commodities, software, technology). Such items are primarily dual-use items, i.e., items with both commercial and military or proliferation applications. BIS’s jurisdiction covers U.S.-origin items, wherever located, and all items located in the U.S. BIS also regulates the reexport of foreign-made items that have greater than a certain (de minimis) level of U.S. content and the export from abroad of foreign-produced items that are derived from U.S.-origin technology. Additionally, BIS maintains export licensing requirements on transfers or releases of technology and source code to foreign nationals (“deemed” exports and reexports) both within and outside of the United States.
U.S. companies are encouraged to undertake due diligence, including as appropriate through the retention of qualified U.S. counsel, and use available U.S. Government resources to ensure compliance with sanctions and export controls. The U.S. Department of Commerce offers a useful due diligence tool for checking entities and individuals against U.S. sanctions and export controls – the Consolidated Screening List search tool, which is located on the International Trade Administration’s website: https://www.trade.gov/consolidated-screening-list.
It is important for U.S. exporters to ensure that their products are properly classified and that they do not require a BIS license due to any of the recently expanded export controls against Russia (and Belarus, which been made subject to substantially similar restrictions under the EAR) or pursuant to already-existing requirements set forth in the EAR.
Specific questions on product classification and BIS export controls may be directed to an export counselor at: (202) 482-4811 (Washington, DC outreach office), (949) 660-0144 (Western regional office), or ECDOEXS@bis.doc.gov. Also, BIS’s website offers useful information on the EAR at: https://www.bis.doc.gov, as well as specific information on the Russia-related (and Belarus-related) export controls at: https://bis.doc.gov/index.php/policy-guidance/country-guidance/russia-belarus.
OFAC publishes various lists of prohibited persons and property, including the Specially Designated Nationals and Blocked Persons List (or “SDN List”), that can be checked using OFAC’s Sanctions List Search tool - https://sanctionssearch.ofac.treas.gov. OFAC has also published A Framework for OFAC Compliance Commitments in order to provide organizations subject to U.S. jurisdiction, as well as foreign entities that conduct business in or with the United States or U.S. persons or that use U.S.-origin goods or services, with OFAC’s perspective on the essential components of a sanctions compliance program.
OFAC administers and enforces a range of U.S. sanctions programs including comprehensive sanctions against certain jurisdictions and regimes as well as targeted sanctions with respect to persons engaged in activities that pose a threat to the national security, foreign policy or economy of the United States. OFAC’s blocking sanctions impose an across-the-board prohibition against transfers or dealings of any kind with regard to blocked property. Other less restrictive sanctions, including sectoral and non-SDN menu-based sanctions, place more limited restrictions on activities involving sanctioned individuals and entities or on the provision of goods or services. As these are complex restrictions, U.S. exporters (as well as U.S. persons, including individuals and businesses, wherever located), will benefit from regularly checking OFAC’s website for updates to its sanctioned persons lists, including the SDN List, and a current list of sanctions programs and information, https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information.
Financial and logistical considerations apart from sanctions: Certain Russian financial institutions representing over 80% of Russia’s financial sector are currently sanctioned by the United States. In this context, based on their internal risk calculus decisions, financial institutions may make their own internal decision to refrain from conducting transactions with any Russian financial institutions, regardless of whether a particular Russian financial institution entity is subject to sanctions. This can complicate receiving payment from Russian customers. U.S. exporters are strongly encouraged to check with their financial institutions prior to contracting for payment from Russia, to ensure that the financial institution’s own policies will allow them to receive a payment.
Similarly, when it comes to transporting products, many maritime carriers have suspended operations in, from, or to Russia due to operational and safety concerns. In addition, the United States has banned Russian-flagged, -owned, or -operated vessels from entering U.S. ports, and both the U.S. and Russian Governments have banned the other’s passenger and cargo flights from their air space. While it is possible to move cargo to and from Russia, it can be more difficult and time consuming than in years past, thus requiring appropriate planning by U.S. exporters.
As the number and scope of sanctions designations and restrictive licensing requirements and policies grow, and the reach of sanctions and exports controls touch more areas of the Russian economy, we encourage U.S. exporters to take advantage of U.S. Government information resources when making decisions about business involving Russia. We encourage U.S. exporters to:
- Sign up for automatic e-mail notifications from OFAC and BIS,
- Check the Federal Register for BIS and OFAC actions, and set up an account that will allow you to receive automatic e-mail notification of U.S. Government actions regarding Russia, and
- Contact the U.S. Department of Commerce’s Office of Russia, Ukraine and Eurasia in Washington, DC (https://www.trade.gov/russia).
For more information contact Agnes Pawelkowska, Russia/Ukraine Desk Officer, Office of Russia, Ukraine and Eurasia U.S. Department of Commerce at Agnes.Pawelkowska@trade.gov.