BIS Implements New Export Controls to Combat Russia Sanctions Evader

A fresh wave of Russia sanctions and export controls aimed at further degrading Russia's military capabilities and preventing sanction evasion has been introduced by the U.S Commerce Department’s Bureau of Industry and Security (BIS). 

The new BIS regulations build upon previous restrictions, expanding their scope to target additional entities and technologies crucial to Russia's defense industry. Additionally, these new controls not only broaden existing export controls but also introduce new guidelines to assist businesses in ensuring compliance with international trade agreements.  

It can be challenging to stay on top of these changes, so we’ll be breaking down the latest export controls and how the U.S. commitment to enforcing Russia sanctions affect businesses. 

• The BIS has escalated its Russia sanctions and export control regulations, further constraining Russia's capacity to sustain its military aggression in Ukraine. 

• The updated export controls expand the BIS Entity List by targeting numerous foreign companies implicated in aiding Russia. 

• New guidelines have been issued to assist exporters in incorporating protective clauses in contracts, ensuring that re-exports to Russia and Belarus are prevented. 

• Export control violations can lead to severe penalties, highlighting the importance of adhering to these controls. 

• For businesses accessing the global supply chain, implementing advanced export compliance software solutions is key to successfully navigate these stringent restrictions. 

The latest BIS export control measures reflect the United States' long-standing focus on restricting exports that support Russia's military but also push forward new priorities around sanction evasion and diversion risks. These rules include significant expansions to the Entity List, particularly targeting foreign entities involved in supporting Russia.  

In addition to tightening export regulations, the BIS has provided detailed guidance to help exporters and re-exporters navigate these complex rules and avoid inadvertent violations. Let’s explore what’s new. 

The BIS has tightened two key rules, extending the reach of export controls to restrict Russia’s access to military-grade technology. The Military End User (MEU) rule now covers more entities in Russia and Belarus. Additionally, the Foreign Direct Product (FDP) rules have been updated to impose stricter licensing requirements on hardware and software used to produce military equipment. 

The changes to the FDP rule means the BIS can more aggressively target third-country companies involved in procuring controlled goods that are ultimately sent to Russia. Starting September 16, 2024, new controls on Computer Numerically Controlled (CNC) machine tools will prevent Russia and Belarus from receiving certain software updates for these tools. 

A total of 123 new unique entities have been added to the BIS’s entity list, with 8 listed in multiple countries making a total of 131 entries. These entries target organizations outside of Russia that play a role in its procurement networks. The additions include: 

• 63 entities in Russia and the Crimea region 

• 42 entities in China, including Hong Kong 

• 26 entities spread across Turkey, Canada, Iran, and Cyprus 

Newly added organizations have been identified as suppliers of U.S.-origin products to Russian military and industrial sectors. These additions are part of broader efforts to close loopholes and prevent indirect shipments of critical technology to Russia. 

To prevent Russia sanction evasion, the BIS focuses on shell companies that use high-risk addresses to bypass restrictions. The agency has expanded its address-only list, which targets locations frequently used by these companies rather than listing each company individually. 

The use of ‘address-only’ designations on the Entity List poses screening challenges for businesses without advanced denied party screening systems. 

The BIS has issued updated recommendations for exporters and re-exporters, emphasizing the importance of integrating compliance clauses into contracts to prevent unauthorized re-exports to Russia and Belarus.  

The Export Administration Regulations (EAR) now offer specific language suggestions to ensure adherence to these new rules. Foreign corporate service providers are advised to screen their addresses against updated denied party and address-only lists to maintain compliance with the latest Russia sanctions. 

The expanded export controls and Russia sanctions present significant challenges for businesses involved in international trade. The inclusion of numerous foreign entities, from countries such as Canada and Turkey, on the Entity List impacts global supply chains, requiring businesses to strengthen their denied party screening processes, manage export licenses more effectively, and enhance third-party risk management. 

Additionally, companies servicing equipment in Russia and Belarus must navigate new restrictions on software updates, increasing compliance complexity and operational costs. Stricter due diligence and enhanced supply chain oversight are now critical for maintaining compliance and avoiding severe penalties. 

As Russia sanctions become more stringent and complex, relying on manual compliance processes poses great risks for businesses. With evolving export controls and the expansion of denied parties lists, manual checks are time-consuming and prone to errors. To mitigate these risks, businesses must adopt advanced export compliance software. These tools automate key tasks such as denied party screening, export license management, and risk assessment, ensuring real-time updates and seamless compliance. 

Violating export restrictions, intentionally or not, can result in severe financial penalties and lasting reputational damage. Companies that breach these regulations may lose customers and partners and, in extreme cases, be forced to cease operations. 

These BIS export controls mark a significant tightening of restrictions on entities supporting Russia’s war efforts through illicit procurement networks.  As the U.S. continues to impose trade restrictions to undermine Russia’s economic and military capabilities, organizations must be proactive with their compliance efforts as it is not only a legal necessity but a strategic move to safeguard their business future. 

Transforming your export compliance processes to robust automated solutions is a step towards ensuring compliance and mitigating risk. Descartes is a provider of an industry-leading suite of denied party screening, 3rd-party risk management, export classification and documentation automation solutions, as well as trade content for leading business systems. 

Our solutions are designed to address each of these new measures. With automated integrated screening, you can quickly identify newly listed entities. Our export solutions help your organization comply with the FDP rule changes, ensuring accurate licensing for controlled software.  

Descartes’ Russia-Ukraine resource center is valuable channel for keeping up with the rapidly changing landscape of Russia sanctions. Book a demo today to learn more about how Descartes keeps your trade operations compliant.