Implementation of Additional Sanctions Against Russia and Belarus Under the Export Administration Regulations (EAR); and Corrections

<RULE> DEPARTMENT OF COMMERCE <SUBAGY>Bureau of Industry and Security</SUBAGY> <CFR>15 CFR Parts 734, 740, 744, and 746</CFR> <DEPDOC>[Docket No. 240820-0220]</DEPDOC> <RIN>RIN 0694-AJ78</RIN> <SUBJECT>Implementation of Additional Sanctions Against Russia and Belarus Under the Export Administration Regulations (EAR); and Corrections</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Bureau of Industry and Security, Department of Commerce. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> In this final rule, the Bureau of Industry and Security (BIS) makes changes to the Russian and Belarusian sanctions under the Export Administration Regulations (EAR). This final rule expands the scope of the Russia/Belarus-Military End User (MEU) Foreign-Direct Product (FDP) rule, and renames it accordingly, so that the rule will also apply to transactions involving entities on the Entity List that pose a significant risk of involvement in the supply or diversion of items subject to the EAR to procurement networks for Russia's and Belarus's defense industry or intelligence services. This final rule also adds controls on the export, reexport, or transfer (in-country) to or within Russia or Belarus of “software” for the operation of computer numerical control (CNC) machine tools. In addition, this final rule makes corrections and clarifications to certain aspects of the EAR's Russia and Belarus sanctions. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This rule is effective August 27, 2024 except for amendatory instruction 11, which is effective September 16, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> For general questions on this final rule, contact Collmann Griffin, Senior Policy Advisor, International Policy Office, Bureau of Industry and Security, Department of Commerce, Phone: 202-482-1430, Email: <E T="03">william.griffin@bis.doc.gov.</E> For questions on the Entity List changes in this final rule, contact Chair, End-User Review Committee, Office of the Assistant Secretary for Export Administration, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-5991, Email: <E T="03">ERC@bis.doc.gov.</E> For emails, include “Russia and Belarus, August 2024 export control measures” in the subject line. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> <HD SOURCE="HD2">A. Export Controls Implemented Against Russia and Belarus</HD> In response to Russia's February 2022 full-scale invasion of Ukraine, BIS imposed extensive sanctions on Russia under the EAR as part of the final rule, “Implementation of Sanctions Against Russia Under the Export Administration Regulations (EAR)” (“Russia Sanctions Rule”) (87 FR 12226, March 3, 2022). To address Belarus's complicity in the invasion, BIS imposed similar sanctions on Belarus under the EAR in a final rule, “Implementation of Sanctions Against Belarus” (“Belarus Sanctions Rule”) (87 FR 13048, March 6, 2022). Since March 2022, BIS has published numerous final rules strengthening the export controls on Russia and Belarus, including measures undertaken in coordination with U.S. allies and partners. <HD SOURCE="HD2">B. Overview of This Final Rule</HD> BIS is amending the EAR (15 CFR parts 730 through 774) to strengthen export controls against Russia and Belarus by targeting entities that pose a risk of supplying items to the Russian and Belarusian defense industry or intelligence services by making them subject to foreign direct product rule-related restrictions. This final rule also imposes licensing requirements on certain operation “software” designated as EAR99 that is destined for Russia or Belarus and corrects or clarifies certain Russia and/or Belarus export controls that were added to the EAR by rules issued earlier this year. The three sets of changes this final rule makes are described in section II as follows: A. Expansion of FDP rule to apply to Russia and Belarus Procurement Entities; B. Addition of License Requirements for Operation “Software” for Machine Tools; <E T="03">and</E> C. Corrections and clarifications to the EAR's Russia and Belarus controls that are related to a January 2024 Final Rule and a June 2024 Final Rule. <HD SOURCE="HD1">II. Amendments to the EAR</HD> <HD SOURCE="HD2">A. Expansion of FDP Rule To Apply to Russia and Belarus Procurement Entities</HD> The EAR's jurisdiction extends to certain foreign-made items that meet the criteria under one of the FDP rules under § 734.9 that are the “direct product” of certain “technology” or “software” or produced by a complete plant or `major component' of a plant that itself is a “direct product” of certain “technology” or “software.” Each FDP rule also includes a product scope, and certain FDP rules include an end-user or end-use scope. Among these different FDP rules, there are two that are specific to Russia and Belarus that were added to the EAR to address Russia's full-scale invasion of Ukraine: (1) the FDP rule under § 734.9(f) (Russia/Belarus/Temporarily occupied Crimea region of Ukraine FDP rule); and (2) the FDP rule under § 734.9(g) (Russia/Belarus-Military End User FDP rule). The Russia/Belarus/Temporarily occupied Crimea region of Ukraine FDP rule applies to the destinations of Russia/Belarus/Temporarily occupied Crimea region of Ukraine, and the Russia/Belarus-Military End User FDP rule has a broader product scope that is specific to Russian and Belarusian Military End Users, wherever located. As described in this section II.A, this final rule expands the scope of the Russia/Belarus-Military End User FDP Rule to further address the national security and foreign policy concerns due to the significant risk of procurement entities (as described below) supplying items to the Russian and Belarusian defense industry or intelligence services. Specifically, this final rule is modifying the name of the Russia/Belarus-Military End User FDP rule in § 734.9(g) to the “Russia/Belarus-Military End User and Procurement FDP rule,” so that the rule, as renamed, applies to both Russian and Belarusian military end users as defined in § 744.21 of the EAR, as well as to a second, new category of entities under the EAR: Russian or Belarusian Procurement Entities ( <E T="03">i.e.,</E> an entity that poses a significant risk of involvement in the supply or diversion of items subject to the EAR to procurement networks for Russia's or Belarus's defense industry or intelligence services) (as described below). Such Russian or Belarusian Procurement Entities are entities placed on the Entity List under § 744.11 of the EAR and that pose a significant risk of involvement in the supply or diversion of items subject to the EAR to procurement networks for Russia's or Belarus's defense industry or intelligence services. Entities affected by the Russia/Belarus-Military End User and Procurement FDP rule will continue to be identified with footnote 3 on the Entity List in supplement no. 4 to part 744. The standard for a footnote 3 designation, as revised and expanded to refer to Russian or Belarusian Procurement entities, is described in note 3 to paragraph (g) in § 734.9. All footnote 3 designated entities will be subject to the (now renamed) Russia/Belarus-Military End User and Procurement FDP rule set forth in § 734.9(g), along with the license requirements set forth in § 746.8(a)(3) of the EAR. The creation of this new category of Russian and Belarusian Procurement Entities addresses the continuing efforts of Russia and Belarus to obtain items needed to support Russia's war against Ukraine. As the U.S. and its partners and allies have steadily expanded the scope of export controls against Russia and Belarus since Russia's unprovoked full-scale invasion of Ukraine in February 2022, Russia and Belarus have in turn developed extensive procurement networks to obtain restricted items from third countries. These procurement networks have been used to funnel controlled items, including those described on the Common High Priority List (see <E T="03">https://www.bis.doc.gov/index.php/all-articles/13-policy-guidance/country-guidance/2172-russia-export-controls-list-of-common-high-priority-items</E> ), and including microelectronics and other items that have been recovered from Russian weapons systems found on the battlefield in Ukraine, to Russia's defense industrial base. Due to the elongated nature of these supply chains, entities involved in this procurement may be multiple steps removed from military production, even as they supply items critical to Russia's war effort. This has been especially true as Russia and Belarus have shifted their economies to a wartime footing, converting large sectors of their industry to support the production of weapons systems and other items needed by the military. As a result, many of the items (including foreign-produced items that may be U.S.-branded) that are sought out by these procurement networks ( <E T="03">e.g.,</E> the kinds of items described in § 744.21(f) of the EAR) are likely destined for military end uses in Russia or Belarus, or to intelligence services in furtherance of Russia's war. It is possible that third-country intermediaries may not have actual knowledge of the intended end use of the items they are providing to Russia or Belarus. This rule will enable the United States to more aggressively target such intermediaries and other procurement entities that are not directly involved in supplying the Russian or Belarusian defense industry or intelligence services, but that obtain items that ultimately support military production or use by intelligence services. For example, as a result of the change made by this rule, an entity in a third country that sends U.S.-branded electronic “components” produced outside the United States to a Russian trading company with a record of sup ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 41k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━