By Joan Koenig and Mollie D. Sitkowski
On August 6, 2014, the Bureau of Industry and Security (BIS) of the Department of the Treasury published a rule on export prohibitions to Russia on items for use in its energy sector. The rule also added one person, United Shipbuilding Corporation (along with aliases), to the Entity List. The rule became effective August 6, 2014.
This rule imposes controls on certain items intended for exploration or production from deepwater (greater than 500 feet), Arctic offshore, or shale projects that have the potential to produce oil or gas for Russia. BIS added a new section to the EAR, Section 746.5, to impose controls on the export, reexport or transfer (in-country) of any item subject to the EAR listed in Supplement No. 2 to this part and items specified in ECCNs 0A998, IC992, 3A229, 3A231, 3A232, 6A991, 8A992, and 8D999 when the exporter knows (or is informed) that the item will be used directly or indirectly in Russia’s energy sector. BIS provided some examples of items subject to this Rule, such as drilling rigs, Artic-capable marine equipment, software for hydraulic fracking, remotely operated vehicles, and valves.
The Entity List is used to notify the public about entities that have engaged in activities that could result in a risk of diversion of items to activities sanctioned by the State Department and contrary to U.S. national security or foreign policy interests. United Shipbuilding Corporation is a Russian state-owned company that operates in its defense or related-material sector. Exports, re-exports and transfers to individuals or companies designated on the Entity List require licenses from BIS and are usually subject to a policy of denial. However, it is important to review the specific terms of a party’s listing on the Entity List, as some parties are restricted only for items that are other than EAR99.
For more questions on the increasing sanctions and controls against Russia, please contact Joan Koenig, Mollie Sitkowski or any other member of Drinker Biddle’s Customs and International Trade team