Current export control hotspot questions answers

Since the conflict between Russia and Ukraine, the United States has issued a series of export control sanctions on Russia, and some companies have brought a certain risk of overflowing trade with Russia. The Chinese government has clearly stated that it has always resolutely opposed unilateral sanctions and “long -arm jurisdictions” without international law. The United States shall not harm China’s legitimate rights and interests when dealing with Ukraine issues and relations with Russia. Chinese enterprises can carry out normal trade with Russian companies in accordance with my country’s laws and regulations. In response to the possible impact of the United States’ relevant measures on our company’s business, we have recently organized relevant experts to conduct framework and technical analysis and answers on issues that experts are generally concerned about the general concern of the company. Expert interpretation. The answers to the experts are not formal legal opinions, and do not represent the viewpoints of the unit and experts. When carrying out specific businesses, enterprises also need to pay attention to their own actualities, pay close attention to the latest trends of related countries such as the United States, comprehensively and judge various factors, and steadily carry out foreign economic and trade cooperation.

The basic situation of US export control sanctions on Russia

What are the main contents of the US export control and sanctions on Russia?

From February 24th to June 6th, 2022, the United States issued a total of 15 rounds of export control sanctions on Russia.

From the perspective of the field, it focuses on Russia’s defense, aerospace, maritime, energy, industry and other fields; from the perspective of objects, it has expanded the scope of the item that requires a license to apply for exports to Russia, and strengthened the “long -term length of foreign products “Arms jurisdiction” stipulates; from the perspective of the transaction object, Russian -related military users and entities involved in the military are included in the “entity list” to implement strict export control measures; from the perspective of permit review policies, export review policies in key areas of Russia are from from the permit review policy. “Pume the rejection” plus strictness to “refusal approval”, and at the same time further limit the scope of application of “Permit Exception”.

Judging from the recent regulations on export control against Russia in the United States, the products focusing on the focus are:

1. It is all ten categories of high-tech products listed in the “Control List of the Department of Commerce” by the United States. Mainly include nuclear materials and related facilities and equipment, microbial chemical materials and related equipment, material processing, electronic equipment, high-performance computers, telecommunications and information security, lasers and sensors, navigation and avionics equipment, ships, aerospace and propulsion systems and other fields .

2. The key equipment in the petroleum refining industry. Mainly include drilling machinery, oil and gas field cables, natural gas separation equipment, etc.

3. Luxury products. For example, expensive tobacco and alcohol, high-end clothing, jewelry, precious metals, luxury cars, expensive clocks and antiques, etc.

4. Industrial products. For example, some forestry products, steam turbines, compressors, bulldozers, general machine tools, bearings, etc.

What is the so-called “long-arm jurisdiction” of the US on Russia’s export control?

U.S. export control regulations also provide jurisdiction over foreign products containing “American elements” located outside the United States. This mainly includes three types of products, one is the US-made controlled items that are directly resold without processing; the other is foreign products that use specific US software and technology in the production process (the so-called “foreign direct product rule”); Foreign products subject to “US ingredient” content standards (the so-called “minimum content rule”).

“Foreign Direct Product Rules”. The United States has added two “foreign direct product rules” specifically targeting Russia, as follows:

“Russian Military End-User Direct Product Rules” for specific Russian military users. This rule stipulates that all foreign products that directly use the software and technologies listed in the U.S. “Ministry of Commerce Control List” in the process of R&D and production, or are produced by factories built using the above software and technologies or their main equipment, are prohibited in principle. Exports to certain military users in Russia. It is worth noting that the U.S. export control sanctions against Russia issued on February 24 excluded food and drugs from the rules, but the U.S. issued the latest regulations on June 6, clarifying that food and drugs are no longer exempt. , the export of food and medicines produced by foreign countries to Russian military users needs to consider this rule.

“Russian foreign direct product rules” for other users in Russia. Strictly control the export of foreign products that meet the following two conditions to other users in Russia:

1. The foreign products directly use the software and technologies listed in the U.S. “Ministry of Commerce Control List” in the process of R&D and production, or are produced by factories or their main equipment built using the above-mentioned software and technologies.

2. The foreign products produced are within the scope of the US Department of Commerce Control List.

The U.S. export control regulations stipulate that if a foreign product produced outside the U.S. meets a certain “U.S. ingredient (U.S.-controlled components, software and technology)” content standard, and the product falls under the license control scope of the U.S. Department of Commerce, Exports to Russia are strictly restricted. The following two situations are mainly applicable:

1. The foreign product “assembles” U.S.-origin components, “pre-installs” U.S.-origin software, or “integrates” U.S.-origin technologies. These components, software, and technologies are within the scope of U.S. control, and their value content exceeds 25%;

2. If the U.S.-origin components, software, and technologies “assembled”, “pre-installed” and “fused” by foreign products are closely related to high-performance computers, special encryption, military products, aerospace, etc., they will apply regardless of their value content.

Challenges businesses may face

First of all, companies need to be extra cautious about directly resale of U.S.-made controlled items from Russia. Secondly, if the products exported to Russia use U.S.-specific software and technologies in the production process (the U.S. “Foreign Direct Product Rule” applies) or meet a certain “U.S. ingredient” content standard (the U.S. “Minimum Content Rule” applies), there is a greater risk of Uncertainty.

What should enterprises pay attention to when exporting products that contain “US ingredients”?

If companies export products to Russia that contain “US ingredients” (components, software and technology), they need to consider the so-called “minimum content rule”. First of all, it is necessary to determine whether the export product falls within the scope of the license control of the US Department of Commerce. If yes, then consider the value ratio of “US ingredients” to determine whether the value of the exported products contains US-controlled components, software, and technologies exceeds 25%; or whether it is related to high-performance computers, special encryption, military products, aerospace and other fields. closely related. If the above conditions are met, it may be affected by the so-called “minimum content rule” of the United States.

What should enterprises pay attention to when exporting products that use American software, technology and equipment in R&D and production?

If the export products of the enterprise use the software and technologies listed in the “Control List of the Ministry of Commerce” of the United States, or are produced by factories or their main equipment built using the above-mentioned software and technologies, the export to some specific military users in Russia may be subject to the restrictions of the United States. Export Control Impact.

For exports to other users in Russia, if the software and technologies listed in the U.S. “Ministry of Commerce Control List” are used in the production process, and the products produced are within the control scope of the U.S. “Ministry of Commerce Control List”, exports to Russia may be subject to U.S. Export Control Impact.

In addition, the control of the above-mentioned foreign products by the United States is not limited to the case of direct shipment to Russia, but also includes the case of entering the supply chain of a third country, and finally shipping to Russia after cooperation, research and development, and production.

Will the company’s export products contain “US ingredients”, will it be affected?

Under normal circumstances, enterprises export products to Russia that do not contain U.S.-controlled components, software or technologies related to high-performance computers, special encryption, military products, aerospace, etc., or contain other U.S.-controlled components, software or technologies but are valuable The proportion is less than 25%; or even if the value of “US ingredients” exceeds 25%, but the export product itself is not within the scope of the US Department of Commerce’s license control, the impact is limited.

Will it be affected if a company’s export products fall within the scope of the U.S. Department of Commerce Control List?

First of all, it is necessary to consider the relationship between export products and the United States. If the production and development process of the product and the product itself do not involve “American elements”, it will not be affected by the US export control.

Secondly, if the export product has a degree of correlation with the United States, but meets the following two conditions at the same time, it is generally not affected:

1. The “US ingredients” contained in the exported products do not belong to controlled components, software or technologies related to high-performance computers, special encryption, military products, aerospace, etc. 25%.

2. In the process of R&D and production of exported products, the software, technology or equipment listed in the US “Ministry of Commerce Control List” is not used.

How can enterprises prevent risks by establishing and improving export internal control mechanisms?

A good internal compliance system for export control includes nine basic elements: one is to formulate a policy statement, the other is to establish an organizational structure, the third is a comprehensive risk assessment, the fourth is to establish review procedures, the fifth is to formulate emergency measures, and the sixth is to carry out education and training, The seventh is to improve compliance audits, the eighth is to retain archives, and the ninth is to compile management manuals.

Under the current situation, it is recommended that relevant companies track domestic and foreign export control trends in a timely manner, strengthen the construction of internal compliance systems, and establish export control compliance departments or set up compliance positions as soon as conditions permit. Before signing the contract, in accordance with business principles, fulfill internal compliance requirements, strengthen external communication and due diligence, and pay attention to the risks related to compliance end users; when signing the contract, pay attention to protect themselves through appropriate means such as contractual disclaimers and compliance commitments of transaction partners. Legitimate rights and interests; after signing the contract, do a good job of archiving materials to prevent subsequent legal disputes caused by the “long-arm jurisdiction” of the United States.