1. What factors need to be considered, and what actions need to be taken?
In the current situation, the relevant measures and sanction lists may change at any time, even at short notice. For this reason, in all instances we recommend a thorough review of the relevant circumstances, particularly sanction lists with a view to participating end customers and banks, as well as the relevant embargo regulations, both when initiating a business relationship, and then again just before goods are shipped.
The risks involved in doing business with or supplying goods to Russian/Belarusian individuals or companies are multiple in nature.
On top of the need to review individual sets of export control regulations and sanctions, which requires a high level of legal expertise, doing business with Russia and Belarus presents a high risk of criminal liability and economic risk. This is the case, for instance, in the following scenarios:
- If the customer or participating banks are listed.
- If intended end use for military purposes cannot be excluded or the purpose cannot be documented (when do I require an end use certificate (EUC), and is this adequate?).
- How do I deal with customers who are attributable directly to the Russian/Belarusian state or in which the state has a majority holding?
- If payments have already been made by the customer, but there is a ban on delivery of goods (repayment issues).
- If problems exist in relation to interpretation of legal texts.
In addition, there exist purely practical hurdles; for example, on the border with Belarus/ Russia, goods may not be cleared by the EU customs authorities because export control documents are missing or no carrier is available to transport the goods (on) into the two countries due to sanction rules having changed since the goods began their transportation journey
As a result, it is impossible to give a single specific recommendation for action that covers all potential circumstances, also due to the fact that the legal rules are continually changing. Every situation needs to be assessed on an individual basis.
However, we are able to give you the following general suggestions for doing business and on how to handle the current situation:
- Due to the uncertainty and the ever-changing sanctions position, which is evolving on a daily basis, we advise the utmost caution and restraint in business dealings that have a connection with Russia, Belarus and the territories of Ukraine occupied by Russia.
- First of all, our recommendation is that no business transactions should be entered into or work steps taken until they have first been reviewed in terms of legality with reference to the relevant regulations and sanction lists. A final check should also be undertaken on sanction lists and embargo regulations just before goods are shipped.
- At present, doing business with Russia and Belarus comprises a high level of financial risk. Due to the sanctions on Russian banks and the prohibition on provision of financial resources, making or receiving payments for goods already delivered may also breach applicable law. For this reason, you should also involve your company’s finance department in the decision-making process.
- In addition, we recommend that, for all transactions (not only for the supply of dual-use goods) with Russian or Belarusian business partners, you ensure that such partners sign an end use certificate prior to delivery.
We would be pleased to assist you with legal assessment of your particular circumstances and offer practical recommendations on your business relations with Russia and Belarus during these challenging times.
2. Restrictive measures against Russia
2.1Crimea and Sevastopol/Donetsk and Luhansk
In response to the unlawful annexation of the Autonomous Republic of Crimea and the city of Sevastopol in 2014 and recognition of the independence of the regions Donetsk and Luhansk by Russia, sanctions were enacted in order to exert pressure on the region. The sanctions comprise primarily measures intended to weaken the sectors of transport, telecommunications, energy, the prospection/exploration and extraction of oil, gas and mineral resources, plus infrastructure projects in the region. In addition, there are import restrictions on goods originating from all of the regions subject to sanctions. For Donetsk and Luhansk, there also exists a prohibition on the provision of financial resources.
2.2 Russia
2.2.1 Up to 2021
Back in 2014, in response to the threat to the territorial integrity, sovereignty and independence of Ukraine, the following sanctions were imposed on Russia:
› Listing of persons and organizations
- Travel restrictions
- Freezing of funds and resources
- Prohibition on provision (funds or economic resources may not be made available to nor benefit the listed individuals and organizations, either directly or indirectly)
› Arms embargo
› Restrictions on trade and services with regard to:
- Dual-use goods
- Equipment for the energy sector
- The sectors of crude oil exploration and extraction
› Restrictions on access to the capital markets of the European Union
› Authorization required for the export of certain goods
2.2.2 Current developments
Following the outbreak of the war of aggression against Ukraine, in 2022 numerous additional and wide-ranging measures have been enacted in a total of six sanction packages to date.
› Extension of measures relating to capital market restrictions
- Banknotes
- Cryptocurrencies
- Prohibition on transactions with the Russian central bank
- Exclusion of listed banks from the SWIFT payment system.
› Expansion of sanction lists to include individuals and organizations (e.g. Foreign Minister Sergei Lavrov, President Vladimir Putin, influential oligarchs, military officials, and numerous others).
› All Russian shipping companies and ships registered under the Russian flag, plus all transportation companies, have been banned from European air space, European airports and ports, and from transiting the EU.
› Listed Russian media companies and their establishments in the EU which participate in the distribution of propaganda and misinformation are prohibited from distributing content in the EU. In addition, the granting of broadcasting licences to such media companies is prohibited.
› Prohibition on rating services and all business dealings with companies controlled by the Russian state or the Russian central bank via a holding of 50% or more.
› Prohibition on the awarding of public contracts to Russian individuals or organizations.
› Prohibition on the registration of trusts which benefit Russian individuals or organizations.
› Prohibition on the rendering of services in the areas of auditing, including statutory auditing of annual accounts, accountancy and tax advice, as well as business consulting and public relations consulting.
› General export ban on:
- Dual-use goods
- Goods from the sectors of electronics, computers, telecommunications, information security, sensors and lasers, navigation and avionics, marine industry, aviation and aerospace, propulsion
- Oil refinery goods
- Aviation and aerospace goods and aviation turbine fuels
- Maritime goods and technologies
- Iron and steel products
- Luxury goods
- Goods that contribute to strengthening Russia’s industrial capacities
› General import ban on:
- Goods that generate significant revenues for Russia
- Coal and other fossil fuels
- Crude oil and petroleum products
- Here, there exist various exemptions intended to ensure supplies to Member States (e.g. exemption for imports via pipelines, exemptions for Bulgaria and Croatia, etc.).
› Exemptions from import and export bans are possible. However, such exemptions are always subject to approval and must therefore be agreed with the German Federal Office for Economic Affairs and Export Control (BAFA) prior to export.
3. Restrictive measures against Belarus
3.1.1. Up to 2021
Due to political developments in the country, sanctions were imposed on individuals and organizations, as well as on trade with Belarus, back in 2006 and then again in 2021 (in response to the forced landing of the Ryanair plane in Minsk).
› Listing of individuals and organizations
- Travel restrictions
- Freezing of funds and resources
- Prohibition on provision (funds or economic resources may not be made available to nor benefit the listed individuals and organizations, either directly or indirectly)
› Arms embargo
› Prohibition on the transfer of securities and money market instruments, new lending and credit facilities, as well as insurance and reinsurance.
› General export ban on
- Goods used for internal repression
- Dual-use goods to individuals listed in Annex V
- Communications monitoring equipment
- Goods for military end use
- Goods for the tobacco industry
- Mineral oil products
3.1.2. Current developments
In response to the support by Belarus for the war of aggression against Ukraine, the existing embargo measures against Belarus have been substantially tightened. The following measures have been adopted:
› Expansion of sanction lists to include additional individuals and organizations
› Additional restrictions on trade and services in respect of:
- Dual-use goods
- Goods for military end use
- Tobacco products
- Mineral oil products
- Potassium chloride products
- Wood products
- Cement products
- Iron and steel products
- Rubber products
- Machinery and equipment
› Expansion of measures relating to capital market restrictions
- Cryptocurrencies
- Shares and securities of all types
- Transactions with the central bank of Belarus are prohibited
- Deposit limit applicable to Belarusian citizens of a maximum of EUR 100,000.00 with EU financial institutions
- Legal entities in which a company listed in Annex XV of the Regulation has a holding of over 50% are excluded from the SWIFT payment system
- Ban on trading on European stock exchanges for securities of companies in which the Belarusian state has a holding of over 50%
- Ban on the sale and supply of securities and banknotes to Belarusian citizens, banks and other organizations
› Transit ban through the territory of the EU for Belarusian freight carriers (transportation companies)
We would be pleased to assist you with legal assessment of your particular circumstances and offer practical recommendations on your business relations with Russia and Belarus during these challenging times.
Read the WTS Global Customs Newsletter here.
