US, CA, AU, NZ, UK – Export Enforcement Five
Ever heard of the Export Enforcement Five (or E5)?
E5 includes Australia, Canada, New Zealand, the United Kingdom, and the United States, who have put in place unprecedented packages of sanctions and export controls aimed at imposing economic costs against Russia, degrading its war machine, and showing solidarity with and support for Ukraine.
The E5 packages are being administered in coordination with the sanctions, and export controls specific to Russia implemented by all 39 members of the Global Export Control Coalition (GECC) partnership.
Together with international partners, including the European Union and Japan, the E5 has agreed to prioritize controlled items in specific Harmonized System (HS) codes Russia uses in its weapons systems. The E5 has either implemented sanctions and export controls or has increased scrutiny of these items to prevent potential sanctions and export control evasion.
The HS codes on the list include electronic components such as integrated circuits and radio frequency (RF) transceiver modules. The list consists of items essential for manufacturing and testing electronic components and circuits retrieved from the battlefield. The list, which is reproduced below, will be updated when required.
The list of six-digit HS codes (HS6) is divided into four tiers, with tiers one and two containing particularly sensitive items:
- Tier 1: Integrated circuits (also referred to as microelectronics).
- Tier 2: Electronics items related to wireless communication, satellite-based radio navigation, and passive electronic components.
- Tier 3: This tier is divided into electronic and non-electronic items to provide greater clarity to the different industries that may work with these items.
- Tier 4: Manufacturing, production and quality testing equipment of electric components and circuits.
Exporters are strongly encouraged to conduct additional due diligence when encountering one of the listed HS codes to ensure end-user legitimacy and mitigate attempts to evade the E5’s respective export controls and/or sanctions. HS codes can be found on trade documents, including commercial invoices, packing slips, airway bills, sea or house bills, or other supporting trade documentation.
Sep 2023, Source.
France – Report of dual-use exports in 2022
In 2022, more than 550 exporters submitted license applications, and 3,656 export licenses were issued (-10.4% in 2021), including 3,440 individual licenses. The average time taken to issue an individual license is 31 days.
The cumulative value of individual licences granted in France in 2022 is €8.8 billion (-2% compared with 2021). This represents the maximum value of authorized exports.
Authorizations for exports of dual-use goods to Russia have fallen by 85.5% compared with 2021.
There is a significant proportion of nuclear exports due to the large number of goods controlled and the scale of the projects. Exports in the nuclear sector contribute to the development of cooperation on the peaceful uses of nuclear energy, following the commitments made by the States Parties to the Treaty on the Non-Proliferation of Nuclear Weapons, while at the same time providing a source of excellence in terms of know-how and skills.
National control over helicopters also accounts for a significant proportion of the authorisations issued, due to the value of the goods initially exported but also to the maintenance activity that follows. Some of the exports authorised involve keeping aircraft in service outside the European Union in operational condition (sending equipment for repair, for example), in anticipation of a possible need for maintenance, the reactivity of which requires an authorisation in anticipation of the need. In the end, they are exported for the amount of maintenance required.
Cryptology goods and technologies, which come under part 2 of category 5 (information security) of the list of dual-use goods, i.e., products incorporating cryptology resources such as firewalls, routers, and modems, for example, account for almost 95% of the number and value of authorizations granted in 2022 for category five as a whole.
Cyber-surveillance goods and technologies, most of which come under part 1 of Category 5 (telecommunications) and, to a lesser extent, category 4 (computers), will account for around 5% of the value of authorizations granted in 2022 for Categories 4 and 5. While cyber-surveillance assets are subject to strict control, in particular, to take account of the risk of misuse for internal repression or the commission of grave and systematic violations of human rights and international humanitarian law, their use may also be legitimate in the fight against crime and terrorism in particular. The sensitive use of these goods requires exporters to be particularly vigilant, backed up by rigorous interministerial controls.
July 2023, Source.
US – Suspected evasion of Russian export controls
A recent Financial Trend Analysis (FTA) provides pattern and trend information in BSA reports filed between June 2022 and July 2023 on suspected evasion of Russian export controls.
The report mentions trade activity, likely involving sensitive goods, between end-users in Russia and other jurisdictions, particularly China, Hong Kong, Turkey, and the UAE. Companies in these jurisdictions have been directly trading with Russia or acquiring U.S. goods on behalf of Russian entities, with payments often flowing through U.S.-based correspondent accounts.
Most companies identified in the report as potentially associated with—or directly facilitating—Russian export control evasion are connected to the electronics industry and linked to several jurisdictions. Many U.S.-based companies in the report manufacture or sell electronic equipment, such as microelectronic components, imaging technology, electronic filters, and electromechanical instrumentation.
Other companies in the electronics industry identified in the report were located in Hong Kong and maintained bank accounts in China, Hong Kong, and Russia.
For example, a U.S.-based manufacturer of radio frequency products received wires from companies in Azerbaijan and China between March 2022 and January 2023. This U.S.-based company may be selling products within the airline, electronic warfare, government, military, and wireless industries to counterparties in Azerbaijan and China to circumvent global sanctions against Russia.
In addition to companies linked to the electronics industry, the report identified companies in the industrial machinery industry as potentially supplying Russia with equipment, such as fluid transfer system components, gas compressors, wood materials, plumbing equipment, precision tungsten rods, and welding equipment. These companies were identified as operating in China, Hong Kong, Singapore, the United States, and other countries.
September 2023, Source.
Reading for you – Our readings of the week
US-China
China firmly opposes the U.S. Department of the Treasury, adding Chinese companies and individuals to the “Specially Designated Nationals and Blocked Persons (SDN) List” for so-called connections to Iran’s unmanned aerial vehicle and military aircraft development. 26 Sep 2023 Source Meanwhile, China and the United States have also decided to establish two working groups in the economic field, including export control.
23 September 2023, Source.
Artificial intelligence
AI is poised to revolutionize economies, scientific research, and the power dynamics between governments and industries. As AI research expands and its capabilities grow, a nation’s prowess in AI will increasingly signify its overall strength. In a contribution, Ritwik Gupta and Andrew W. Reddie explain the export control performance thresholds introduced in 2022 by the US CHIPS and Science Act, detail how standard, powerful machine learning models work in terms of computation, and analyze how the use of DLAs might enable adversaries to make effective use of these models within export control regulations.
21 September 2023, Source.
