Archive for the ‘Russia’ Category

Rosoboronexport Added to Nonproliferation Act by State

Thursday, May 11th, 2017 by Danielle McClellan

On March 21, 2017, the Department of State applied the measures authorized in Section 3 of the Iran, North Korea, and Syria Nonproliferation Act against Rosoboronexport (ROE) (Russia) and any successor, sub-unit, or subsidiary thereof. The measures below will remain in place for two years from the effective date unless the Secretary of State determines otherwise.

Rosoboronexport accounts for more than 90% of Russia’s annual arms sales and India is their major client, other leading clients include China, Algeria, Syria, Vietnam, Venezuela and recently Iraq.

Section 3 of the Act, imposes the following measures against Rosoboronexport:

  1. No department or agency of the United States Government may procure or enter into any contract for the procurement of any goods, technology, or services from this foreign person, except to the extent that the Secretary of State otherwise may determine. This measure shall not apply to subcontracts at any tier with ROE and any successor, sub-unit, or subsidiary thereof made on behalf of the United States Government for goods, technology, and services for the maintenance, repair, overhaul, or sustainment of Mi-17 helicopters for the purpose of providing assistance to the security forces of Afghanistan, as well as for the purpose of combating terrorism and violent extremism globally. Moreover, the ban on U.S. government procurement from the Russian entity Rosoboronexport (ROE) and any successor, sub-unit, or subsidiary thereof shall not apply to United States Government procurement of goods, technology, and services for the purchase, maintenance, or sustainment of the Digital Electro Optical Sensor OSDCAM4060 to improve the U.S. ability to monitor and verify Russia’s Open Skies Treaty compliance. Such subcontracts include the purchase of spare parts, supplies, and related services for these purposes;
  2. 2. No department or agency of the United States Government may provide any assistance to this foreign person, and this person shall not be eligible to participate in any assistance program of the United States Government, except to the extent that the Secretary of State otherwise may determine;
  3. No United States Government sales to this foreign person of any item on the United States Munitions List are permitted, and all sales to this person of any defense articles, defense services, or design and construction services under the Arms Export Control Act are terminated; and;
  4. No new individual licenses shall be granted for the transfer to this foreign person of items the export of which is controlled under the Export Administration Act of 1979 or the Export Administration Regulations, and any existing such licenses are suspended.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-03-29/pdf/2017-06224.pdf

BIS Adds 23 Russian Entities to Entity List & Explains License Review Policy

Tuesday, January 31st, 2017 by Danielle McClellan

On December 27, 2016 the Bureau of Industry and Security published a final rule adding 23 Russian Entities to the Entity list and revises the licensing policy in three sections of part 742 of the EAR to clarify that BIS’s review of license applications for exports, reexports and transfers (in- country) to Russia.

BIS revised the CCL based controls sections of the EAR to clarify that it will review license applications to export or reexport to Russia items subject to the EAR and controlled for chemical and biological weapons proliferation (CB), nuclear nonproliferation (NP) or national security (NS) reasons under a presumption of denial, if the items proposed for export or reexport would make a direct and significant contribution to Russia’s military capabilities.

This final rules revises 742.2 and 742.3 of the EAR to clarify that license applications for items controlled for CB and NP reasons will be reviewed in accordance with the revised licensing policies in paragraph (b)(4) of both 742.2 and 742.3 and with the revised licensing policy in paragraph (b)(7) of 742.4 of the EAR. This rule revises 742.4(b)(7) of the EAR to clarify that license applications for items controlled for NS reasons will be reviewed under a presumption of denial if the items would make a direct and significant contribution to Russia’s military capabilities, including but not limited to, the major weapons systems described in Supplement No. 7 to part 742 of the EAR.

This final rule adds the following twenty-three entities to the Entity List:

Crimea Region of Ukraine:

  1. Crimean Ports, a.k.a., the following three aliases:
  • State Unitary Enterprise of the
  • Republic of Crimea ‘Crimean Ports’;
  • Sue RC ‘KMP’;
  • Sue RK ‘Crimean Ports’

28 Kirov Street, Kerch, Crimea Region of Ukraine 98312

 

  1.  Crimean Railway, a.k.a., the following three aliases:
  • Federal State Unitary Enterprise ‘Crimean Railway’;
  • Krymzhd;
  • The Railways of Crimea

34 Pavlenko Street, Simferopol, Crimea Region of Ukraine 95006.
Russia:

  1.  DJSC Factory Krasnoe Znamya, a.k.a., the following five aliases:
  • OJSC Factory Krasnoe Znamya;
  • OAO Zavod Krasnoe Znamya;
  • AO Krasnoye Znamya;
  • Krasnoye Znamya Plant OAO;
  • Krasnoye Znamya Plant JSC.

Shabulina Travel 2a, Ryazan, 390043, Russia

  1.  Ekran Scientific Research Institute, FSUE, a.k.a., the following one alias:
  • FGUP Ekran.

Kirov Avenue 24, Samara 443022, Russia; and Krzhizhanovskogo Street 20/30, Moscow, 117218, Russia;

  1. ElTom Research and Production Company, a.k.a., the following one alias:
  • NPP ElTom

Garshin Street 11, Tomilino, Lyuberetsky, Moscow, 140070, Russia

  1.  FSUE FNPC Nizhegorodsky Scientific Research Institute of Radiotechnics (NNIIRT),

Shaposhnikov Street 5, Nizhny Novgorod, 603950, Russia

  1.  Institut Stroiproekt, AO, a.k.a., the following six aliases:
  • Aktsionernoe Obshcestvo Institut Stroiproekt;
  • AO Institut Stroiproekt;
  • AO Institute Stroyproekt (f.k.a., Institut Stroiproekt Zakrytoe Aktsionernoe Obshchestvo);
  • Institute Stroyproect;
  • Stroyproekt;
  • Stroyproekt Engineering Group

D. 13 Korp. 2 LiteraA Prospekt Dunaiski, St. Petersburg 196158, Russia; and 13/2 Dunaisky Prospect, St. Petersburg 196158, Russia

  1. JSC GOZ Obukhov Plant, a.k.a., the following one alias:
  • GOZ Obukhov Plant

Prospekt Obukhovskoi Oboroni 120, Saint Petersburg, 192012, Russia

  1. JSC Institute of Instrumentation— Novosibirsk Plant Comintern (NPO NIIP–NZIK), Planetnaya Street 32, Novosibirsk, 630015, Russia
  2.  JSC Scientific Research Institute of Aircraft Equipment (NIIAO), a.k.a., the following three aliases:
  • SRIAE;
  • NIIAO;
  • Aviation Instrument Scientific Research Institute

Tupoleva 18, Zhukovsky, Moscow, 140182, Russia

  1.  Kaluga Scientific Research Radio Technology Institute (KRRTI), a.k.a., the following two aliases:
  • KNIRTI;
  • KRRTI

Lenin Street 2, Zhukov, Kaluga Oblast, 249192, Russia

  1.  Karst, OOO, a.k.a., the following four aliases:
  • Construction Holding Company Old City—Karst;
  • Karst Ltd.;
  • LLC Karst;
  • Obshcestvo S Ogranichennoi Otvetstvennostyu Karst

D. 4 Litera A Pomeshchenie 69 ul. Kapitanskaya, St. Petersburg 199397, Russiaand 4 Kapitanskaya Street, Unit A, Office 69–N, St. Petersburg 199397, Russia

  1. LLC Ruschemtrade, St. Mashinostroitelnyj, 3, Rostov-on- Don 344090, Russia; and 86/1, Temryuk, Krasnodar 353500, Russia
  2.  OAO All-Russia Research Institute of Radio Equipment (JSC VNIIRA), a.k.a., the following three aliases:
  • OJSC VNIIRA;
  • OAO All-Russia Research Institute of Radio Technology;
  • All-Russian Scientific Research Institute of Radio Equipment

Shkipersky Protok 19, V.I. St. Petersburg, 199106, Russia

  1.  OJSC Ural Production Company Vector (UPP Vector), a.k.a., the following two aliases:
  • JSC ‘SCP’ Vector;
  • JSC PPM Vector

Gagarin Street 28, Ekaterinburg, 620078, Russia

  1.  Olid Ltd., a.k.a., the following one alias:
  • OOO Solid

ul Mira 4, Novorossiysk, Krasnodarskiy kray 630024, Russia

  1.  Research and Production Association KVANT, a.k.a., the following one alias:
  • NPO Kvant

Bolshaya Saint Petersburg 73, Velikii- Novgorod 173003, Russia

  1.  Research and Production Association M.V. Frunze, a.k.a., the following two aliases:
  • NNPO Frunze;
  • NZIF

Gagarin Prospect 174, Nizhny Novgorod, 606950, Russia

  1.  Ryazan State Instrument Enterprise (RSIE), a.k.a., the following two aliases:
  • RSIE;
  • GRPZ

Seminarskaya Street 32, Ryazan, 390000, Russia

  1.  Scientific and Production Association ‘‘Lianozovo Electromechanical Plant’’ (NPO LEMZ), a.k.a., the following four aliases:
  • JSC LEMZ R&P Corporation;
  • OAO Design Bureau Lianozovsky Radars Moscow;
  • Lianozovsky Electromechanical factory;
  • OAO Design Bureau Lianozovsky

Radars Moscow. Dmitrovskoye Shosse 110, Moscow, 127411, Russia

  1.  Svyaz Design Bureau, OJSC, a.k.a., the following one alias:
  • KB Svyaz. Prospect Sokolova 96

Rostov-on-Don 344010, Russia

  1.  Trans-Flot JSC, a.k.a., the following one alias:
  • JSC Trans-Flot

ul Ventseka 1/97, Samara 443099, Russia

  1.  Transpetrochart Co. Ltd., Prospekt Engelsa 30, St. Petersburg 194156, Russia.

 

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-12-27/pdf/2016-31124.pdf

White House Posts Actions in Response to Russian Malicious Cyber Activity and Harassment

Tuesday, January 31st, 2017 by Danielle McClellan

(Source: White House) [Excerpts.]

(Former) President Obama authorized a number of actions in response to the Russian government’s aggressive harassment of U.S. officials and cyber operations aimed at the U.S. election in 2016. Russia’s cyber activities were intended to influence the election, erode faith in U.S. democratic institutions, sow doubt about the integrity of our electoral process, and undermine confidence in the institutions of the U.S. government. These actions are unacceptable and will not be tolerated.

Sanctioning Malicious Russian Cyber Activity

In response to the threat to U.S. national security posed by Russian interference in our elections, the President has approved an amendment to Executive Order 13964. As originally issued in April 2015, this Executive Order created a new, targeted authority for the U.S. government to respond more effectively to the most significant of cyber threats, particularly in situations where malicious cyber actors operate beyond the reach of existing authorities. The original Executive Order focused on cyber-enabled malicious activities that:

  • Harm or significantly compromise the provision of services by entities in a critical infrastructure sector;
  • Significantly disrupt the availability of a computer or network of computers (for example, through a distributed denial-of-service attack); or
  • Cause a significant misappropriation of funds or economic resources, trade secrets, personal identifiers, or financial information for commercial or competitive advantage or private financial gain (for example, by stealing large quantities of credit card information, trade secrets, or sensitive information).

The increasing use of cyber-enabled means to undermine democratic processes at home and abroad, as exemplified by Russia’s recent activities, has made clear that a tool explicitly targeting attempts to interfere with elections is also warranted. As such, the President has approved amending Executive Order 13964 to authorize sanctions on those who:

  • Tamper with, alter, or cause a misappropriation of information with the purpose or effect of interfering with or undermining election processes or institutions.

Using this new authority, the President has sanctioned nine entities and individuals: two Russian intelligence services (the GRU and the FSB); four individual officers of the GRU; and three companies that provided material support to the GRU’s cyber operations. …

Read full Release: https://www.whitehouse.gov/the-press-office/2016/12/29/fact-sheet-actions-response-russian-malicious-cyber-activity-and

Living out Your Fantasy to Work with Russian Spies Can Cost You

Tuesday, August 9th, 2016 by Danielle McClellan

By: Danielle McClellan

Gregory Allen Justice, 49 of Culver City, worked the night shift at Boeing Satellite Systems in El Segundo as an engineer. He felt unappreciated after over a decade with the company and had a sick wife who had mounting medical bills. To get away from the perils of his life he found a special love for “The Americans,” the FX series about KGB spies in the US and a mysterious woman in Long Beach.

Justice had access to sensitive technical data about military and commercial satellites; he tried to sell them to a Russian spy, who just happened to be an undercover FBI agent. It is unclear how Justice met the agent but over the course of 5 meetings he provided the agent with USB drives that contained satellite information in exchange for payments of cash, in stacks of $500 or $1,000 bills. Justice told the agent that he needed the money to pay for his sick wife’s huge medical bills; however, it was found that he provided an unnamed woman in Long Beach with over $21,000 in cash as well as TVs, a $900 IPhone and a purse among other things.

Justice told the agent on numerous occasions that he loved the “The Americans,” and the agent told him, “You’re very, very important to the Russians.” There was also a secret recording of Justice released where he expressed his frustration with his inability to grow within his current position at Boeing, “I’m going to stop trying…Why put out the effort if there’s not going to be any reward? I’m tired and I’m done…What I can’t do is keep putting myself out, without being rewarded for it.” It seems that this was a perfect storm of events for Justice, live out a life similar to his favorite TV show and make money while getting back at the company he felt so unappreciated by.

Justice’s father, William Justice, told journalist, “He’s a good kid…I’ve never known him to do anything that was inappropriate.” When asked about his son’s wife, William Justice explained that she had a variety of health problems, including diabetes and chronic accident-related back pain.

Gregory Allen Justice has been arrested and is being held without bail. He faces 15 years in prison if convicted of a charge of economic espionage, in addition to 20 years on charges of violating the Arms Export Control Act (AECA).

Criminal Complaint: http://www.courthousenews.com/2016/07/11/US%20v%20Justice.pdf

More Information: http://www.latimes.com/local/lanow/la-me-ln-espionage-charges-20160709-snap-story.html

Military Importers and Exporters Beware: State Department Modifies Sanctions against Rosoboronexport

Tuesday, January 19th, 2016 by Danielle McClellan

By: Danielle McClellan

It is the significance of the target, Rosoboronexport, that makes this a noteworthy development.   According to its own website:

The Joint Stock Company Rosoboronexport, part of the Russian Technologies State Corporation, is the sole Russian state intermediary agency responsible for import/export of the full range of defense and dual-use end products, technologies and services.

Rosoboronexport was set up by RF President’s Decree 1834 of 4 November 2000 as a federal state unitary enterprise tasked to implement the national policy in the area of military-technical cooperation between Russia and foreign countries. Since 1 July 2011 Rosoboronexport has been operating as an open joint stock company.
Rosoboronexport operates under the strict supervision of the Russian President, the Russian Government, and in full conformity with the UN arms control treaties and the relevant international agreements.
Only Rosoboronexport has the right to supply the world market with a full range of arms and military equipment manufactured by Russia’s defense industrial complex and approved to be exported. Rosoboronexport accounts for more than 85% of Russia’s arms exports.
Rosoboronexport is among the major operators in the world market for arms and military equipment. Rosoboronexport cooperates with more than 70 countries.

The official status of the exclusive state intermediary agency gives Rosoboronexport unique opportunities to expand long-term mutually beneficial cooperation with foreign partners, provide guaranteed state support of all export-import operations, and strengthen Russia’s leadership in the world arms market.

On September 2, 2015 the US Government  released the following notice: ‘No department or agency of the United States Government may procure or enter into any contract for the procurement of any goods, technology, or services from [Rosoboronexport (ROE) (Russia) and any successor, sub-unit, or subsidiary thereof], except to the extent that the Secretary of State otherwise may determine .  .  .  .’’

The Department of State has now released (November 19, 2015) the following modification to the September notice: “The United States Government has decided to modify the measure described above against ROE and any successor, sub-unit, or subsidiary thereof as follows. The measure described above shall not apply to subcontracts at any tier with ROE and any successor, sub-unit, or subsidiary thereof made on behalf of the United States Government for goods, technology, and services for the maintenance, repair, overhaul, or sustainment of Mi-17 helicopters for the purpose of providing assistance to the security forces of Afghanistan, as well as for the purpose of combating terrorism and violent extremism globally.”

This modification includes subcontracts for the purchase of spare parts, supplies, and related services for these purposes and can be applied retroactively as of the effective dates of the sanctions (they will remain in place for 2 years unless otherwise determined by the US Government).

This change does not apply to any other measures imposed pursuant to INKSNA.

Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2015-11-25/pdf/2015-30058.pdf

No Means No…and So Does a TDO!

Thursday, October 1st, 2015 by Danielle McClellan

By: Danielle McClellan

On March 19, 2015, a Temporary Denial Order (TDO) was put in place for Flider Electronics LLC, d/b/a Trident International Corporation, Pavel Semenovich Flider (President of Trident), and Gennadiy Flider (Trident office manager) for 180 days. The TDO denied the export privileges of the above mentioned parties as well as prohibited them from participating in any way, in any transaction involving any item subject to the EAR that is to be exported from the US, including carrying on negotiations concerning, ordering or buying any such items…this is important to this story.

Beginning in 2013, Flider and/or Trident repeatedly exported Xilinx field programmable gate array (FPGA) circuits (ECCN 3A001.a.2.c) to Russia without the required export license. CBP ultimately seized some of the shipments. After additional seizures, another detained shipment and interviews by Pavel Flider and Gennadiy Flider, OEE had reason to believe that Trident had been making transshipments to Russia. In addition, Trident and Pavel Flider were indicted for smuggling and money laundering. There is much more to this story…but I have kept it short for the purposes of this article. View more details at: http://learnexportcompliance.bluekeyblogs.com/2015/04/27/potential-poster-child-for-violating-us-export-controls-on-russia-flider-electronics-put-on-the-u-s-denial-list-for-shipments-to-russia/

Now comes the interesting part of the story. The TDO denies negotiations concerning, and ordering items subject to the EAR as mentioned above. After laying low for a few months after the initial TDO, on July 10, 2015, Trident, via Pavel Flider, contacted employees of their previous electronics distributor requesting their account to be reestablished so that additional purchases could be made. The distributor declined to accept or fill any orders following several solicitations by Pavel Flider, including a phone call by him to the company where he was strictly informed that the company’s corporate policy was that they could not conduct business with a company such as Trident.

After this information came to light, OEE requested the TDO be renewed on August 21, 2015.

View both TDO’s: http://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents/7-electronic-foia/227-export-violations

No More Oil from Yuzhno-Kirinskoye Field

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

The Bureau of Industry and Security (BIS) has added the Russian oil and gas field, the Yuzhno-Kirinskoye Field to the Entity List. This field is located in the Sea of Okhotsk and has been reported to contain substantial reserves of gas and oil. Due to this information the US Government has decided that exports, reexports, and transfers (in-country) of items subject to the EAR to Yuzhno-Kirinskoye will require a BIS license.

This field will be listed on the Entity List under the destination of Russia effective August 7, 2015. The rule will also change the following:

Clarify the introductory text of the Entity List to specify that the embargoes and other special controls part of the EAR is also used to add entities to the Entity List

  • The first sentence of the introductory text of the Entity List to add a reference to part 746. This clarification to the introductory text will make it clear that this Supplement lists certain entities subject to license requirements for specified items under this part 744 and part 746 of the EAR.

Change the Russian industry sector sanctions by clarifying the additional prohibition on those informed by BIS also includes end-uses that are within the scope of the Russian Industry sector sanctions.

  • In § 746.5 (Russian industry sector sanctions), this final rule revises the second sentence of paragraph (a)(2) for the additional prohibition on those informed by BIS to add the term ‘‘end- use’’ after the term ‘‘end-user.’’ This change clarifies that the additional prohibition described in this paragraph (a)(2), as part of the BIS ‘‘is informed’’ process, may be based on an end-user or end-use when BIS determines there is an unacceptable risk of use in, or diversion to, the activities specified in paragraph (a)(1) of this section in Russia. This clarification does not change the scope of § 746.5, but rather clarifies the cases in which BIS will use the ‘‘is informed’’ process to assist exporters, reexporters, and transferors to ‘‘know’’ when an export, reexport, or transfer (in-country) is subject to the license requirements specified in § 746.5.

Federal Register Notice: http://www.gpo.gov/fdsys/pkg/FR-2015-08-07/pdf/2015-19274.pdf

Russia/Crimea Restrictions…You Are Responsible—You Can’t Say BIS Didn’t Officially Warn You

Tuesday, June 2nd, 2015 by Danielle McClellan

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

Potential Poster Child for Violating US Export Controls on Russia?: Flider Electronics’ Put on the U.S. Denial List for Shipments to Russia

Monday, April 27th, 2015 by Brooke Driver

By: Brooke Driver

BIS recently issued a temporary denial order suspending Californian-based Flider Electronics, LLC’s export privileges for 180 days, due to two of its officers’ illegal activities, who are accused of smuggling and money laundering.

BIS claims that the company exported items subject to the EAR to Russia without a license by transshipment through third countries, listing in AES filings Estonian and Finnish end-users who, in reality, acted as freight forwarders. In addition, BIS discovered no licensing history from the company of controlled U.S.-origin electronics to Russia.

BIS chose to issue the temporary denial order due to its belief that a violation of the EAR was “imminent in both time and degree of likelihood.”  This temporary denial leaves the door open for BIS to impose further penalties.

Russia likely is joining China and Iran at the top of the list of countries that will get you in the most trouble for violating US export or reexport controls.  The US Government is certainly looking for a more well-known company to be the “Don’t Let This Happen to You” poster child for violations of US trade controls on Russia.

BIS Embargoes Crimea: No Vodka for You!

Wednesday, February 4th, 2015 by Brooke Driver

By: John Black

In the January 29, 2015 Federal Register the Bureau of Industry and Security (BIS) amended the Export Administration Regulations to impose a comprehensive embargo on exports and reexports to, and transfers inside, “the Crimea region of Ukraine (CRU”).  The EAR now requires a license for all items destined to or moving inside CRU, except for medicine and food classified as EAR99.

In an unprecedented assault on a famous stereotypical hobby of Russians in Crimea and around the world, the EAR requires a license for exports and reexports to, and transfers inside, CRU of alcoholic beverages.  The EAR definition of food that does not require a license explicitly excludes alcoholic beverages from the definition of food, thus extending the US embargo to apply to any kind of booze, in addition to machine tools, military aircraft parts, and teflon-lined valves.

The EAR defines CRU to include “the land territory in that region as well as any maritime area over which sovereignty, sovereign rights, or jurisdiction is claimed based on purported sovereignty over that land territory.”

In addition to the new license requirement, the EAR prohibits the use of license exceptions except when the new 746.6 specifically authorizes license exceptions.  EAR 746.6(c) authorizes these license exceptions:

  • TMP for items for use by news media (including booze)
  • GOV for the US Government (but not to the other national governments typically GOV-eligible) , the International Atomic Energy Agency, or the European Atomic Energy Community (including booze)
  • GFT for gift parcels and humanitarian donations (not including booze)
  • TSU for operation technology and software (not including booze, but including instructions on how to open and consume booze previously lawfully exported or reexported to, or transferred within, CRU)
  • BAG for exports by people leaving the United States (including booze, but BAG requires the items be for use by the traveler, so don’t get any ideas)
  • AVS for civil aircraft and vessels (not including booze)

While generally speaking the EAR has imposed a comprehensive embargo on CRU, there are important differences between the long-standing EAR embargoes on Cuba, Iran, North Korea, Sudan and Syria and the new embargo on CRU.  For example, for CRU, there is a 25% US controlled content de minimis rule for foreign items with US content, compared to the 10% level for the long standing embargoed countries.
This new regulation partially implements the December 19, 2014 executive order in which President Obama targeted the Russian-occupied region of Ukraine, Crimea. In the first section of this order, Obama effectively shut down any trade or business relationship between the United States and Crimea, stating that imports, exports, new investments—any kind of business transaction—between the U.S. and Crimea is strictly prohibited. Likewise, the president froze all U.S. assets of entities operating in the Crimea region or associated with individuals or entities in that region. As an extra measure of precaution, Obama also prohibits these entities from entering the United States.