On February 24, 2020, in a final rule (the “Rule”) that took immediate effect, the Commerce Department’s Bureau of Industry and Security (“BIS”) revised the country group designations for Russia and Yemen under the Export Administration Regulations (“EAR”), increasing license restrictions for both countries. The Rule is part of a larger effort within BIS that involves a “comprehensive review” of all country groups to ensure they appropriately reflect current US national security and foreign policy.
Russia: Moved from Country Group A:2 and A:4 to Country Group D:2 and D:4
The Rule removes Russia from more favorable export treatment under Country Groups A:2 (Missile Technology Control Regime) and A:4 (Nuclear Suppliers Group) and adds it to country groups of concern D:2 (Nuclear) and D:4 (Missile Technology). According to BIS, the changes address US concerns about Russia’s lack of cooperation and accountability for US-origin items and the diversion of exports/reexports/transfers to unauthorized or prohibited end-users and end-uses.
The impact of these changes is as follows:
- a number of license exceptions are no longer available for exports/reexports/transfers to Russia, and
- a license requirement for certain items that previously did not require a license for exports/reexports/transfers to Russia.
BIS also announced a policy of presumption of denial for all exports/reexports/transfers controlled under the EAR for proliferation of chemical and biological weapons (CB), nuclear nonproliferation (NP) and missile technology (MT). However, BIS will review on a case-by-case basis the applications for exports/reexports/transfers of items in support of US-Russia civil space cooperation activities or commercial space launches (with respect to NP and MT controls only).
Russia’s designation to Country Groups D:2 and D:4 also triggers certain US-person prohibitions contained in the EAR. In contrast to the broad prohibitions that apply to activities of “US persons” under US sanctions laws, the EAR’s “US person” prohibitions are limited to certain activities related to nuclear weapons involving countries listed in Country Group D:2 and missiles involving countries listed in Country Group D:4, and chemical or biological weapons involving any country. This means that going forward US persons (i.e., entities organized under US laws and their non-US branches; parties physically located in the United States; and US citizens or permanent residents wherever located or employed) will not be able to engage in activities that include: (i) exporting/reexporting items to Russia without a BIS license with knowledge that such items will be used in the design, development, product, or use of nuclear explosive devices or missiles in or by Russia, and (ii) performing any contract, service, or employment with knowledge that it will directly assist in the design, development, production, or use of missiles in or by Russia.
In addition, Russia’s designation to country group D:4 prohibits export/reexport/transfer of items subject to the EAR without a BIS license with knowledge that such items will be used in the design, development, production, or use of rocket systems or certain unmanned aerial vehicles in or by Russia.
Despite Russia’s designation to Country Groups D:2 and D:4, Russia remains a member of the Missile Technology Control Regime and the Nuclear Suppliers Group, the informal multilateral export control regimes implemented by member states that seek to, respectively, limit the proliferation of missiles and missile technology and prevent nuclear proliferation.
Yemen: Moved from Country Group B to Country Group D:1
The Rule removes Yemen from more favorable treatment under Country Group B and places it in the country group of concern Country Group D1 (National Security). According to BIS, the changes address concerns about diversion of US-origin items in Yemen for unauthorized purposes, including prohibited proliferation activities, end uses and end users, taking place in the context of an ongoing conflict fostering international terrorism and instability in the Arabian Peninsula.
As a result of this change, a number of license exceptions or portions thereof are no longer available for shipments to Yemen, including LVS (shipments of limited value), GBS (shipments to country group B countries), TSR (technology and software under restrictions), TMP (temporary imports, exports, and reexports/transfers), RPL (servicing and replacement of parts and equipment), GFT (gift parcels and humanitarian donations), BAG (baggage), AVS (aircraft and vessels), APR (additional permissive reexports/transfers), and ENC (encryption, commodities, software, and technology). Shipments to Yemen that previously relied on these license exceptions will need to be reassessed for their eligibility for these license exceptions.
BIS announced that it will approve license applications for NS-controlled exports/reexports/transfers to Yemen when the agency determines, on a case-by-case basis, that the goods will be used for civilian purposes or will not otherwise contribute to Yemen’s military potential that would provide detrimental to the national security of the United States. The Rule further imposes license restrictions on exports/reexports/transfers of certain microprocessors to military end-uses and end-users in addition to restrictions on exports/reexports/transfers to vessels and aircraft at Yemeni ports or registered in Yemen and expands licensing requirements for certain reexports of foreign-produced direct products of US-origin technology and software.