Background

Exporters should be aware that the financial institutions that facilitate their shipments have been advised to be on the lookout for particular business practices and products as part of an increasing effort to prevent the evasion of the export controls the U.S. has imposed against Russia.

A recent alert issued by the Bureau of Industry and Security and the Financial Crimes Enforcement Network states that financial institutions (banks, credit card operators, foreign exchange dealers, etc.) may be involved in performing services associated with international trade, including processing payments for exported goods, issuing lines of credit for exporters, providing or handling the payments supported by letters of credit, processing payments associated with factoring of accounts receivables by an exporter, providing general credit or working capital loans, and issuing or paying insurance on the shipping and delivery of goods to protect the exporter from nonpayment by the buyer.

The alert lists nearly two dozen red flags that such financial institutions should consider, along with appropriate risk-based customer and transactional due diligence, to help determine whether a shipment is connected to evasion of Russian export controls and should be reported. These include:

- using trade corridors known to serve as possible transshipment points for exports to Russia (e.g., Brazil, China, India, Mexico, Singapore, Taiwan, Turkey, and the United Arab Emirates);

- transactions involving a change in shipments or payments previously scheduled to go to Russia or a company in Russia but now going to a different country or company;

- transactions involving payments being made from entities in third-party countries not otherwise involved with the transactions and known to be a potential transshipment point for exports to Russia;

- transactions involving freight forwarders listed as the product’s end-customer, especially items going to traditional Russian transshipment hubs;

- transactions associated with atypical shipping routes for a product and destination;

- new or existing accounts and transactions by individuals with previous convictions for violating U.S. export control laws, particularly if appearing to involve export and import activities or services; and

- large dollar or volume purchases of items designated as EAR99.

The alert also lists the following commodities as presenting special concern because of their potential diversion to and end-use by Russia to further its military and defense capabilities.

- aircraft parts and equipment (ECCN 9A991)

- antennas (ECCN 7A994)

- breathing systems (ECCN 8A992)

- cameras (ECCN 6A993)

- GPS systems (ECCN 7A994)

- inertial measurement units (ECCN 7A994)

- integrated circuits (ECCNs 3A001, 3A991, and 5A991)

- oil field equipment (EAR99)

- sonar systems (ECCN 6A991)

- spectrophotometers (ECCN 3A999)

- test equipment (ECCN 3B992)

- thrusters (ECCN 8A992)

- underwater communications (ECCN 5A991)

- vacuum pumps (ECCN 2B999)

- wafer fabrication equipment (ECCNs 3B001 and 3B991)

- wafer substrates (ECCN 3C00x)

The alert notes that while this is not a complete listing of commodities sought by or prohibited for end-users in Russia, they all require a BIS license prior to export or reexport to Russia. The use of certain of these items by third countries to create final products that may be subsequently exported to Russia is also prohibited.

For more information on the wide range of trade restrictions the U.S. has imposed on Russia and how to ensure your company is in compliance, please contact attorney Kristine Pirnia at (202) 730-4964 or via email.

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