Worldwide: U.S. Department Of Commerce Joins With Allied And Partner Countries To Recommend Best Practices, Including Specific End User Assurances, To Prevent Diversion Of 45 High Priority Items To Russia

On September 28, 2023, the U.S. Department of Commerce's Bureau of Industry and Security (BIS), alongside the UK, Australia, Canada, New Zealand (termed the "Export Enforcement Five" or "E5,"), as well as the EU, issued new guidance with recommended best practices to help prevent a list of "high-priority items" from being diverted to Russia.

These "high-priority items" include forty-five Harmonized System (HS) codes identified by BIS and partner countries, organized into tiers, with tiers one and two containing nine "particularly sensitive" HS codes determined to be "the most significant to Russian weaponry requirements." The nine prioritized HS codes all fall under parent code 85: "electrical machinery and equipment and parts thereof; sound recorders and reproducers, television recorders and reproducers, parts and accessories."

The new BIS guidance recommends that, at least for transactions involving these nine highest priority items with parties in countries outside the Global Export Controls Coalition (GECC), exporters seek assurances of compliance with U.S. export controls in writing through a signed certification statement. A list of GECC countries can be found in Supplement No. 3 to Part 746 of the U.S. Export Administration Regulations, and currently includes Australia, Canada, the EU, Iceland, Japan, Liechtenstein, New Zealand, Norway, Singapore, South Korea, Switzerland, Taiwan, and the United Kingdom.

The BIS guidance, unlike that issued by the E5 or the EU, includes a sample certification statement. For exporters that already are using customer certification or end-user statements, BIS recommends that the new guidance still be reviewed to consider adding any of the suggested questions to the existing documentation to help prevent diversion through third countries to Russia.

The new guidance also highlights how exporters who incorporate such signed certification statements into their export compliance programs will increase the likelihood of identifying errors, omissions, or red flags in the necessary customs documents. The new BIS guidance further notes how such signed certification statements can, when used in conjunction with the actions identified in Supplemental Alert: FinCEN and the U.S. Department of Commerce's Bureau of Industry and Security Urge Continued Vigilance for Potential Russian Export Control Evasion Attempts and BIS's Guidance to Prevent Evasion of Prioritized Harmonized System Codes to Russia, help exporters more effectively harden their supply chains to prevent Russian evasion efforts.

The joint guidance issued by the E5 "requests" that exporters conduct enhanced due diligence when opening accounts for new customers engaged in trade or located in non-GECC countries, to include, among other standard Red Flag indicators, an evaluation of the new customer's date of incorporation, with enhanced scrutiny for any incorporated post Russia's invasion of Ukraine on February 24, 2022.

In summary, exporters should:

• Be mindful of any exports of items classified within the 45 HS codes, with particular emphasis on the nine prioritized items, as they pose a heightened risk of unlawful diversion to Russia (or Belarus).
• Ensure that customer certifications or end-user statements are incorporated as a part of their trade compliance programs, particularly for customers in countries outside of the GECC that purchase such "high-priority items."
• Determine whether updates to pre-existing customer certification or end-user statements are warranted based on this new guidance.

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