Effective August 6, 2014, the United States Department of Commerce’s Bureau of Industry and Security (“BIS”) issued new regulations, identified as the “Russian Industry Sector Sanctions,” restricting exports and other transfers of certain items subject to the Export Administration Regulations (“EAR”) that may benefit Russia’s energy sector. Newly added EAR section 746.5 imposes licensing requirements on the export, reexport, or in-country transfer of a wide range of items that may be used in Russia in the exploration or production of deepwater, Arctic offshore, or shale projects having the potential to produce oil or gas. The new regulations also clarify that applications for pertinent export licenses are subject to a presumption of denial, and that no EAR license exceptions – aside from license exception GOV – apply to covered shipments. The BIS rule took effect immediately upon issuance. Any in-process shipments of restricted items that fall within the restrictions will be considered violations after August 6, 2014; this means that shipments that are in-transit on or after the effective date would be considered violations.
In section 746.5(a)(1), BIS provides a list of Export Control Classification Numbers (“ECCNs”) and a list of EAR99 items identified as the Russian Industry Sector Sanction List. The specific ECCNs restricted for export to Russia are ECCNs 0A998 (newly added), 1C992, 3A229, 3A231, 3A232, 6A991, 8A992, and 8D999 (also newly added). The Russian Industry Sector Sanction List, consisting of items identified by their Schedule B numbers and descriptions, includes, but is not limited to, drilling rigs, parts for horizontal drilling, drilling and completion equipment, subsea processing equipment, Arctic-capable marine equipment, wireline and down hole motors and equipment, drill pipe and casing, software for hydraulic fracturing, high pressure pumps, seismic acquisition equipment, remotely operated vehicles, compressors, expanders, valves, and risers.
U.S. and non-U.S. exporters and reexporters should carefully examine the Russian Industry Sector Sanction List and relevant ECCNs to determine whether any items recently shipped, in process, or intended for future export, reexport, or transfer, are covered.
As a result of U.S. and European Union (“EU”) cooperation, the list of restricted items is virtually identical to the items included in Annex II of the EU Regulation issued July 31, 2014. However, the items actually controlled under the respective lists may differ because of divergent classification interpretations between the United States and the EU. For further details on EU restrictions, see Reed Smith’s recent update here.