By: Danielle McClellan and John Black
Without reading the details of this guidance, you should get this message: You better be careful so you do not end up being the first one caught with a significant violation of the new, complicated US sanctions and export controls put in place in response to Russia’s actions in Ukraine and the situation in Crimea.
If you have not studied the complicated array of various new BIS and OFAC rules, you should do so immediately
If you do not understand that these BIS and OFAC rules can have a dramatic impact in your business activities in Russia, Ukraine, Crimea and nearly every other country in the world, you need to study the rules again and study the guidance from the departments of Commerce and Treasury regarding the scope of their respective rules.
The new rules have a remarkably broad potential scope when compared to other US sanctions and export controls. The broad scope is at least partially due to the new, prohibited parties lists that target important and large Russian entities and the multitude of the unlisted affiliates of the listed parties that often are subject to the same restrictions as the listed parties.
Now, you add to that the BIS guidance that says if you are dealing with a company in Panama and that company’s website says or hints that it is related to a certain listed party, you may have a problem.
And don’t fail to notice that for purposes of these sanctions BIS says “Exporters.”
Finally, one purpose of the guidance may be to give exporters and reexporters friendly advice. Another purpose may be to put exporters and reexports officially on notice regarding how to comply with the complex rules so as to remove the “we didn’t know BIS wanted us to do that” argument from the list of possible arguments to use to negotiate smaller penalties if you end up doing something BIS doesn’t like.
Anyway, enough of the warnings. Here is the news:
BIS recently released guidance related to the current export restrictions imposed on Russia due to the “ongoing situation in Crimea.” In August 2014, BIS placed restrictions on exports of certain items to Russia and expanded some licensing requirements later in December 2014.
BIS is now providing additional guidance to US exporters in order to prevent unauthorized reexports to Russia, mainly those involving NS-controlled items or items listed in Supplement No. 2 to Part 744 of the EAR. BIS advised that exporters should remember that when a party who is not going to use the item is listed as the final destination (e.g., a freight forwarder), exporters have an affirmative duty to inquire about the end use, end user, and ultimate destination of the item(s) to ensure their transaction fully complies with the EAR. BIS is reminding exporters to do the following:
- When inquiring into the ultimate destination of the item consider e-mail addresses, telephone number country codes and languages used in communications as well as the customers website
- Research the intermediate and ultimate consignees and purchaser (addresses, business registers, company profiles, websites etc.)
- Screen all customers using an export screening tool
- Pay attention to the countries that freight forwarders serve
- Look into industry sectors and distributors or non-end user customer supplies
If you have any concerns about suspicious inquires that come to your company, BIS encourages you to contact local BIS Export Enforcement Office or use BIS’s online tip form. Of course, before you contact the BIS law enforcement agents, it would be prudent to discuss the situation you are considering and the related history with your management and legal counsel.
BIS Guidance: http://www.bis.doc.gov/index.php/compliance-a-training/export-management-a-compliance/russia-due-diligence-guidance