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Restrictions on Exports to Russia to be Further Eased

Tuesday, April 11, 2017
Sandler, Travis & Rosenberg Trade Report

U.S. officials said recently they will soon move to further facilitate certain exports to Russia to ease an unintended impact on U.S. businesses from economic sanctions imposed by the U.S.

In January the Bureau of Industry and Security and the Office of Foreign Assets Control imposed sanctions against Russian entities that included a broad prohibition on engaging in transactions with, or providing technology to, Russia’s Federal Security Service (FSB) without U.S. government approval. The FSB is involved in reviewing and granting licenses, permits, and notifications for the importation of encryption items (which can include consumer items) into Russia, so the BIS/OFAC actions essentially prohibited U.S. companies from seeking the FSB approvals required to import such goods into Russia.

In February OFAC issued a general license allowing U.S. companies to work with the FSB to file required notifications or secure required import licenses. Specifically, the GL authorizes all transactions and activities otherwise prohibited pursuant to Executive Order 13694 that are necessary and ordinarily incident to requesting, receiving, utilizing, paying for, or dealing in licenses, permits, certifications, or notifications issued or registered by the FSB for the importation, distribution, or use of information technology products in Russia.

However, it has been a challenge for some U.S. exporters to take advantage of this GL because one of its conditions is that any item provided to the FSB must be in compliance with the Export Administration Regulations. Since the FSB is on the BIS’ Entity List, providing the FSB with the technical information necessary to file a notification or secure an import license (which is controlled under the EAR) requires an export license, but BIS reviews applications for such licenses with a presumption of denial.

Deputy Assistant Secretary of Commerce for Export Administration Matt Borman told a recent meeting of the BIS Regulations and Procedures Technical Advisory Committee that BIS plans to issue within the next few weeks a regulatory exception mirroring the OFAC GL. This exception would authorize the submission of otherwise restricted technical information to the FSB to file a required notification or secure a required import license.

Only such information that is not otherwise restricted for export to Russia would be authorized under this exception. Even so, said Sandler, Travis & Rosenberg export controls practice leader Steven Brotherton, the forthcoming exception is expected to be a significant benefit for U.S. exporters.

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