Expansion of Sanctions Against Russian Industry Sectors Under the Export Administration Regulations (EAR)

AGENCY:

Bureau of Industry and Security, Department of Commerce.

ACTION:

Final rule.

SUMMARY:

In response to the Russian Federation's (Russia's) ongoing aggression against Ukraine, the Department of Commerce is expanding the existing sanctions against Russian industry sectors by imposing a license requirement for exports, reexports, or transfers (in-country) to and within Russia for additional items subject to the Export Administration Regulations (EAR) identified under specific Schedule B numbers or Harmonized Tariff Schedule codes. The Bureau of Industry and Security (BIS) is taking these actions to further restrict Russia's ability to withstand the economic impact of the multilateral sanctions, further limit sources of revenue that could support Russia's military capabilities, and to better align with the European Union's controls.

DATES:

This rule is effective on May 9, 2022.

FOR FURTHER INFORMATION CONTACT:

For questions on this final rule, contact Eileen Albanese, Director, Office of National Security and Technology Transfer Controls, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-0092, Fax: (202) 482-482-3355, Email: rpd2@bis.doc.gov. For emails, include “Russia Industry Sector Sanctions Expansion” in the subject line.

SUPPLEMENTARY INFORMATION:

I. Background

In response to Russia's February 2022 invasion of Ukraine, BIS imposed extensive sanctions on Russia under the Export Administration Regulations (15 CFR parts 730-774) (EAR) as part of the final rule Implementation of Sanctions Against Russia Under the Export Administration Regulations (EAR) (the Russia Sanctions rule), effective on February 24, 2022, and published on March 3, 2022 (87 FR 12226). Since the publication of the Russia Sanctions rule, BIS has published a number of final rules imposing additional stringent export controls on Russia. These actions reflect the U.S. Government's position that Russia's invasion of Ukraine flagrantly violated international law, was contrary to U.S. national security and foreign policy interests, and undermined global order, peace, and security, all of which necessitated the imposition of stringent and expansive sanctions.

The export control measures in this final rule build upon the policy objectives set forth in one of the subsequent rules, a final rule effective on March 3, 2022, and published on March 8, 2022 (87 FR 12856), Expansion of Sanctions Against the Russian Industry Sector Under the Export Administration Regulations (EAR) (Russian Industry Sector Sanctions rule). Among other things, the Russian Industry Sector Sanctions rule revised part 746 of the EAR (Embargoes and Other Special Controls) by adding a new paragraph (a)(1)(ii) which imposed an additional license requirement for exports, reexports, and transfers (in-country) to or within Russia of any items subject to the EAR if identified under certain Schedule B or Harmonized Tariff Schedule 6 (HTS) codes. The Russian Industry Sector Sanctions rule also added supplement no. 4 to part 746—HTS Codes and Schedule B Numbers that Require a License for Export, Reexport, and Transfer (in-country) to or within Russia pursuant to § 746.5(a)(1)(ii)—which identifies HTS codes and Schedule B numbers that are subject to the license requirement set forth in paragraph (a)(1)(ii). The four columns added in supplement no. 4 to part 746 consisted of: The Harmonized Tariff Schedule (HTS)-6 Code, HTS Description, Schedule B and Schedule B Description to assist exporters, reexporters, and transferors in identifying the items subject to this license requirement.

This final rule builds upon the policy objectives set forth in the Russian Sanctions rule and the Russian Industry Sector Sanctions rule by expanding upon the latter to further restrict Russia's access to items that it needs to support its military capabilities. The expansion of these export controls under the EAR, implemented in parallel with similarly stringent measures by partner and ally countries, further limits sources of revenue that could support Russia's military capabilities, as well as Russia's ability to withstand the economic impact of the multilateral sanctions.

II. Revisions to the Export Administration Regulations (EAR)

1. Expansion of Russian Industry Sector Sanctions

This final rule amends part 746 of the EAR (Embargoes and Other Special Controls) to further expand the scope of the Russian industry sector sanctions by adding additional HTS codes and Schedule B numbers to supplement no. 4 to part 746 of the EAR, thereby imposing a license requirement for all exports, reexports, and transfers (in-country) to or within Russia for such items. In this final rule, BIS is adding 205 HTS codes at the 6-digit level and 478 corresponding 10-digit Schedule B numbers to better align with the European Union's controls.

2. Clarifications to Supplement No. 4 to Part 746 Controls

This final rule revises supplement no. 4 to part 746 by re-organizing the list of items subject to a license requirement under § 746.5(a)(1)(ii) in order to make it easier for exporters to determine whether a particular item is described in this supplement. Specifically, the columns in supplement no. 4 were previously listed in the following order: Harmonized Tariff Schedule (HTS)-6 Code, HTS Description, Schedule B, Schedule B Description. This final rule re-organizes the columns to list them in the following order: Schedule B, Schedule B Description, HTS Code, and HTS Description. In addition, this final rule is individually listing the existing Schedule B numbers so each number corresponds with a single HTS Code; previously, some of these Schedule B numbers were listed with multiple HTS Codes. It also reorganizes the list of items by ordering them numerically by Schedule B number; previously they had been organized alphabetically by HTS Description.

This final rule revises the existing language in the introductory text in supplement no. 4 to part 746 to reflect the reorganization of the list. In addition, this final rule adds Schedule B number 8705200000 to the introductory text to indicate it is also listed in both supplements no. 2 and 4 and adds a sentence to indicate that Schedule B number 8412294000 is listed in both supplements no. 4 and 5 to this part.

This final rule also adds a second paragraph to the introductory text in supplement no. 4 to part 746 to clarify the relationship between the four columns included in supplement no. 4 to part 746 by further explaining the scope of the items controlled under § 746.5(a)(1)(ii). The first sentence being added clarifies that under the Foreign Trade Regulations (15 CFR 30.6(a)(12)), exporters can use either the referenced HTS Code or Schedule B number from supplement no. 4 to part 746 when filing Electronic Export Information (EEI) in the Automated Export System (AES). The Russian Industry Sector Sanctions Rule included the applicable HTS-6 Code and Schedule B number and descriptions of items listed in supplement no. 4 to part 746 to assist exporters, reexporters, and transferors who may be more familiar with one or the other of the HTS Code or Schedule B number identification systems. The second sentence being added clarifies that only the items identified in the HTS Description column are subject to the license requirement under § 746.5(a)(1)(ii), which is consistent with how the European Union (EU) applies its comparable controls. Lastly, the third sentence being added clarifies that the other three columns—HTS Code, Schedule B, and Schedule B Description—are only intended to assist exporters with their AES filing responsibilities and does not indicate that all items classified under those HTS Codes or Schedule B numbers are subject to § 746.5(a)(1)(ii)'s restrictions.

3. Conforming Changes

This final rule revises the last sentence of the introductory text of supplement no. 2 to part 746—Russian Industry Sector Sanction List—to provide guidance on certain Schedule B numbers that are identified in both supplement no. 2 and supplement no. 4 to part 746. It now clarifies that in addition to Schedule B number 8479899850, Schedule B number 8705200000 is also listed in both supplements no. 2 and 4, and that exporters, reexporters, and transferors must comply with the license requirements under both § 746.5(a)(1)(i) and (ii), as applicable, for these Schedule B numbers.

In addition, this final rule adds one sentence at the end of the introductory text of supplement no. 5 to part 746—`Luxury Goods' That Require a License For Export, Reexport, and Transfer (In-Country) to or Within Russia or Belarus Pursuant to § 746.10(a)(1) and (2)—to provide guidance on one Schedule B number that is identified in both supplements no. 4 and no. 5 to part 746. This sentence clarifies that exporters, reexporters, and transferors must comply with the license requirements under both §§ 746.5(a)(ii) and 746.10 as applicable, for Schedule B number 8412294000.

In § 746.5 (Russian industry sector sanctions), this final rule revises the license review policy in paragraph (b)(2) to specify that applications involving items that meet humanitarian needs will be reviewed under a case-by case license review policy. This case-by-case license review policy will allow for discretion in approving licenses for items that meet humanitarian needs while also providing discretion to deny licenses for items that could generate revenue to support Russia's military capabilities.

Savings Clause

For the changes being made in this final rule, shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on May 9, 2022, pursuant to actual orders for export, reexport, or transfer (in-country) to or within a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR).

Export Control Reform Act of 2018

On August 13, 2018, the President signed into law the John S. McCain National Defense Authorization Act for Fiscal Year 2019, which included the Export Control Reform Act of 2018 (ECRA) (codified, as amended, at 50 U.S.C. Sections 4801-4852). ECRA provides the legal basis for BIS's principal authorities and serves as the authority under which BIS issues this rule.

Rulemaking Requirements

1. This final rule is not a “significant regulatory action” because it “pertain[s]” to a “military or foreign affairs function of the United States” under sec. 3(d)(2) of Executive Order 12866.

2. Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number.

This rule involves three collections of information. BIS believes there will be minimal burden changes to two of these collections—Five-Year Records Retention Requirement for Export Transactions and Boycott Actions (OMB control number 0694-0096) and Automated Export System (AES) Program (OMB control number 0607- 0152).

However, Multi-Purpose Application (OMB control number 0694-0088) will exceed existing estimates currently associated with this collection as BIS believes the respondent burden could increase the estimated number of submissions by 670 for license applications submitted annually to BIS. BIS estimates the burden hours associated with this collection would increase by 331 hours ( i.e., 670 applications × 30.6 minutes per response) for a total estimated cost increase of $9,930 ( i.e., 331 hours × $30 per hour). The $30 per hour cost estimate for OMB control number 0694-0088 is consistent with the salary data for export compliance specialists currently available through glassdoor.com (glassdoor.com estimates that an export compliance specialist makes $55,280 annually, which computes to roughly $26.58 per hour). BIS is in the process of updating this information collection to account for the increase in burden hours and costs posed by this rule. Comments on the methodology associated with calculating the cost or burden increases or any other aspect of this collection can be submitted via www.regulations.gov by searching for OMB Control Number 0694-0088.

3. This rule does not contain policies with federalism implications as that term is defined in Executive Order 13132.

4. Pursuant to section 1762 of the Export Control Reform Act of 2018 (50 U.S.C. 4821) (ECRA), this action is exempt from the Administrative Procedure Act (APA) (5 U.S.C. 553) requirements for notice of proposed rulemaking, opportunity for public participation, and delay in effective date. While section 1762 of ECRA provides sufficient authority for such an exemption, this action is also independently exempt from these APA requirements because it involves a military or foreign affairs function of the United States (5 U.S.C. 553(a)(1)).

5. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., are not applicable. Accordingly, no regulatory flexibility analysis is required and none has been prepared.

List of Subjects in 15 CFR Part 746

• Exports
• Reporting and recordkeeping requirements

For the reasons stated in the preamble, part 746 of the Export Administration Regulations (15 CFR parts 730 through 774) is amended as follows:

PART 746—EMBARGOES AND OTHER SPECIAL CONTROLS

1. The authority citation for 15 CFR part 746 continues to read as follows:

Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50 U.S.C. 1701 et seq.; 22 U.S.C. 287c; Sec 1503, Pub. L. 108-11, 117 Stat. 559; 22 U.S.C. 2151 note; 22 U.S.C. 6004; 22 U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. 12854, 58 FR 36587, 3 CFR, 1993 Comp., p. 614; E.O. 12918, 59 FR 28205, 3 CFR, 1994 Comp., p. 899; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13338, 69 FR 26751, 3 CFR, 2004 Comp., p 168; Presidential Determination 2003-23, 68 FR 26459, 3 CFR, 2004 Comp., p. 320; Presidential Determination 2007-7, 72 FR 1899, 3 CFR, 2006 Comp., p. 325; Notice of May 6, 2021, 86 FR 26793 (May 10, 2021).

2. Section 746.5 is amended by revising paragraph (b)(2) to read as follows:

3. Supplement no. 2 to part 746 is amended by revising the last sentence of the introductory text to read as follows:

Supplement No. 2 to Part 746—Russian Industry Sector Sanction List

* * * Schedule B numbers 8479899850 and 8705200000 are listed in both this supplement and supplement no. 4 to this part, so exporters, reexporters, and transferors must comply with the license requirements under both § 746.5(a)(1)(i) and (ii) as applicable.

4. Supplement no. 4 to part 746 is revised to read as follows:

Supplement No. 4 to Part 746—HTS Codes and Schedule B Numbers That Require a License for Export, Reexport, and Transfer (In-Country) to or Within Russia Pursuant to § 746.5(a)(1)(ii)

(a) The source for the Schedule B numbers and descriptions and Harmonized Tariff Schedule (HTS)-6 codes and descriptions in this list comes from the Bureau of the Census's Schedule B concordance of exports 2022. Census's Schedule B List 2022 can be found at www.census.gov/foreign-trade/aes/documentlibrary/#concordance. The Introduction Chapter of the Schedule B provides important information about classifying products and interpretations of the Schedule B, e.g., NESOI means Not Elsewhere Specified or Included. In addition, important information about products within a particular chapter may be found at the beginning of chapters. This supplement includes four columns consisting of the Schedule B, Schedule B Description, HTS Code, and HTS Description to assist exporters, reexporters, and transferors in identifying the products in this supplement. For information on HTS codes in general, you may contact a local import specialist at U.S. Customs and Border Protection at the nearest port. Schedule B numbers 8479899850 and 8705200000 are listed in both this supplement and supplement no. 2 to this part, so exporters, reexporters, and transferors must comply with the license requirements under both § 746.5(a)(1)(i) and (ii) as applicable. Schedule B number 8412294000 is listed in both this supplement and supplement no. 5 to this part, so exporters, reexporters, and transferors must comply with the license requirements under both §§ 746.5(a)(ii) and 746.10 as applicable.

(b) Under the Foreign Trade Regulations (FTR) (15 CFR part 30), exporters can use either the HTS Code or Schedule B number when filing Electronic Export Information (EEI) in the Automated Export System (AES), therefore the applicable HTS Codes and Schedule B numbers and descriptions are included in this supplement to assist exporters, reexporters, and transferors who may be more familiar with one or the other of the HTS-6 Code or Schedule B number identification systems. Only the items identified in the HTS Description column of this supplement are subject to the license requirement under § 746.5(a)(1)(ii). The other 3 columns—HTS Code, Schedule B and Schedule B Description—are intended to assist exporters with their AES filing responsibilities. If an item is classified under one of these HTS Codes or Schedule B numbers, but it is not described by the relevant entry in the HTS Description column, it is not subject to the license requirement set forth in § 746.5(a)(1)(ii).

5. Supplement no. 5 to part 746 is amended by adding a sentence to the end of the introductory text to read as follows:

Supplement No. 5 to Part 746—`Luxury Goods' That Require a License For Export, Reexport, and Transfer (In-Country) to or Within Russia or Belarus Pursuant to § 746.10(a)(1) and (2)

* * * Schedule B number 8412294000 is listed in both this supplement and supplement no. 4 to this part, so exporters, reexporters, and transferors must comply with the license requirements under both §§ 746.5(a)(ii) and 746.10 as applicable.