On March 2, 2022, in response to Belarus’s enabling of Russia’s further invasion of Ukraine, the US Commerce Department’s Bureau of Industry and Security (“BIS”) issued a final rule (“Final Rule”) effective on the same day, that implements sweeping export controls measures targeting Belarus. This Final Rule subjects Belarus to substantially the same export controls that were imposed on Russia and became effective on February 24, 2022. (Our blog post summarizing those export controls targeting Russia is here). As stated in the White House statement announcing these new controls (among other future actions), by implementing these measures, the US Government aims to “prevent the diversion of items, including technology and software, in the defense, aerospace, and maritime sectors to Russia through Belarus, and degrade both nations’ ability to sustain military aggression.”
The new export controls imposed on Belarus in the Final Rule can be categorized as follows:
- License requirement for items in the Commerce Control List (“CCL”) Categories 3-9, with a licensing policy of denial (except in limited cases) and only limited license exceptions available;
- Extension of the new Foreign Direct Product (“FDP”) Rules imposed on Russia to Belarus and Belarusian military end use/end users (“MEUs”);
- Expanded MEU and military-intelligence end use/end users (“MIEU”) restrictions to Belarus;
- Additions of two Belarusian Entities to the Entity List; and
- Country Group change for Belarus from A:4 to D:2 and D:4.
In addition, the Final Rule contains the following updates related to Russia:
- Revisions to the Entity List to remove previously available exclusions for Russian entities; and
- the narrowing of the availability of license exceptions/end-users for encryption-related items, as further explained below.
License Requirement for CCL Categories 3-9 – Section 746.8(a)(1) of the EAR
Exports, reexports, and transfers (in-country) of all items subject to the EAR and classified in CCL Categories 3 through 9 now require a license to Belarus (excluding deemed exports and reexports), subject to limited license exceptions and a licensing policy of denial (except in limited cases). CCL Categories 3 through 9 include many items that are not particularly sensitive from an export controls perspective and did not previously require a license to Belarus, such as telecommunications items and low-level encryption items.
Licensing Policy of Denial
Items requiring a license under these new controls will be reviewed under a licensing policy of denial, except that the following license applications will be reviewed by BIS on a case-by-case basis to determine whether the transaction would benefit the Belarusian government or defense sector or present a risk of diversion to Russia:
- related to safety of flight or maritime safety
- for civil nuclear safety
- to meet humanitarian needs
- in support of government space cooperation
- for companies headquartered in Country Groups A:5 and A:6 to support civil telecommunications infrastructure
- involving government-to-government activities
- companies in Belarus that are:
- wholly-owned US subsidiaries;
- foreign subsidiaries of US companies that are joint ventures with other US companies;
- joint ventures of US companies with companies headquartered in Country Group A:5 and A:6;
- wholly-owned subsidiaries of companies headquartered in Country Group A:5 and A:6; or
- joint ventures of companies headquartered in Country Group A:5 and A:6 with other companies headquartered in Country Groups A:5 and A:6.
Limited License Exceptions, and Modification of End-Users for Encryption Items
Only the following EAR license exceptions are available:
- License Exception TMP for items for use by news media;
- License Exception GOV;
- License Exception TSU for software updates for civil end users that are subsidiaries or joint of ventures of companies headquartered in the United States or country or countries from Country Groups A:5 and A:6;
- License Exception BAG, excluding firearms and ammunition;
- License Exception AVS (which now excludes any aircraft registered in, owned, or controlled by, or under charter or lease by Belarus or a national of Belarus);
- License Exception ENC (though note narrowed application described below);
- License Exception CCD (which previously only included Cuba and Russia, but now also includes Belarus).
Notably, the Final Rule narrows License Exception ENC for both Belarus and Russia, Specifically, License Exception ENC is now only available for exports and reexports to, and transfers in, Belarus and Russia for a narrower subset of end-users — i.e., (i) civil end-users that are wholly-owned US subsidiaries, (ii) foreign subsidiaries of US companies that are joint ventures with other US companies, (iii) joint ventures of US companies with companies headquartered in countries from Country Group A:5 and A:6 in supplement, (iv) the wholly-owned subsidiaries of companies headquartered in countries from Country Group A:5 and A:6, or (v) joint ventures of companies headquartered in Country Group A:5 and A:6 with other companies headquartered in Country Groups A:5 and A:6 (“Authorized ENC End-Users“).
Moreover, language has been added to the Russian sanctions provision (i.e., EAR § 746.8(a)(1)) to clarify that items controlled under ECCNs 5A992 and 5D992 (which previously required a license given their inclusion in Category 5 and the inapplicability of License Exception ENC for such items) can be exported/reexported, but only to Authorized ENC End-Users.
Adding Belarus to the Scope of the New Russia FDP Rules – Sections 734.(9)(f) and (g) of the EAR
As described in our February 25 blog post (see here), the new export controls imposed against Russia on February 24, 2021 created new FDP rules: the first focused on reexports and transfers involving Russia (“Russia FDP Rule”), and the second focused specifically on Russian MEUs newly listed on the Entity List (“Russia-MEU FDP Rule”) (collectively, the “New Russia FDP Rules”).
In the Final Rule, BIS has added Belarus as a second country subject to the New Russia FDP Rules, resulting in a near total ban on exports of items to both Russian and Belarusian MEUs. Specifically, the Russia FDP Rule has added Belarus as a destination, whereas the Russia-MEU FDP rule now also targets Belarusian MEUs in addition to Russian MEUs.
Expanded MEU and MIEU Restrictions – Section 744.21 and 744.22 of the EAR
The Final Rule adds Belarus to the the Russia MEU restrictions in Section 744.21 of the EAR, thereby requiring a license for all items subject to the EAR (including EAR99 times), except for food and medicine designated as EAR99. The Final Rule also added Belarus to the MIEU restrictions in section 744.22 of the EAR, identifying The Main Intelligence Directorate of the General Staff of the Armed Forces of Belarus as an MIEU.
Additions of Belarusian Entities to the Entity List
The Final Rule has added two entities, (i) JSC Integral and (ii) the Ministry of Defense of the Republic of Belarus (which encompasses the national armed services, including the army, navy, marine, air force, or coast guard; national guard and police; and government intelligence or reconnaissance organizations of Belarus), to the Entity List with a license requirement for all items subject to the EAR.
These two entities are added for “being closely aligned with the Russian military and helping to facilitate Belarus’s substantial enabling of Russia’s further invasion of Ukraine.” License applications involving parties on the Entity List are subject to a policy of denial. A footnote 3 designation was added to the entries for these two entities to establish that they are considered “military end users” for the Russia-MEU FDP Rule discussed above.
Country Group Change for Belarus
The Final Rule revises the Commerce Country Groups in supplement no. 1 to part 740 to remove Belarus from Country Group A:4 under the EAR and add it to Country Group D:2 and D:4 to reflect that Belarus is now a country of concern for both nuclear proliferation and missile technology proliferation. The inclusion of Belarus in these two Country Groups would mean additional and more stringent export license requirements and limited availability of license exceptions.
Revisions to the Entity List to Remove Exclusions for Russian (and Belarusian) Entities
The Final Rule modifies eight existing entries in the entity list under Russia to remove the exclusion that was previously available for ECCN 5A992.c and 5D992.c when not for Russian or Belarusian “government end users” and Russian or Belarusian state-owned enterprises (SoEs). In other words, such items can no longer be exported/reexported to parties on the Entity List, regardless of whether associated with a government end user or not.
Baker McKenzie will continue closely monitoring developments related to the Russia-Ukraine situation and will update this blog accordingly.