30 November 2023

Export Control in Russia: Legal Regulations and Licensing

November 30, 2023

BRACE Law Firm ©

Foreign trade involves oversight by regulatory authorities, which includes export control, currency control, customs control, and other types of supervision.

Under Federal Law No. 183-FZ dated July 18, 1999, On Export Control (the "Law No. 183-FZ" or the "Export Control Law"), export control is a set of measures ensuring the implementation of the procedure established by Law No. 183-FZ, other federal laws, and other Russian Federation regulatory acts for conducting foreign trade in goods, information, work, services, and intellectual property (including rights thereto) that may be used to create weapons of mass destruction, their delivery systems, other types of weapons and military equipment, or in the preparation or commission of terrorist acts.

The primary goals of export control are:

protecting the interests of the Russian Federation;
implementing the requirements of international treaties of the Russian Federation regarding the non-proliferation of weapons of mass destruction and their delivery systems, as well as the control over exports of military and dual-use products;
creating conditions for the integration of the Russian economy into the global economy;
combating international terrorism.

List of Goods and Technologies Subject to Export Control

Federal executive authorities develop lists of controlled goods and technologies with the involvement of representatives from the Federal Assembly of the Russian Federation, industrial and scientific organizations, and their associations and unions. These lists are approved by Russian Government decrees:

Government Decree No. 1284 dated July 16, 2022, On the Approval of the List of Chemicals, Equipment, and Technologies That May Be Used in the Creation of Chemical Weapons and Which Are Subject to Export Control;
Government Decree No. 1285 dated July 16, 2022, On the Approval of the List of Nuclear Materials, Equipment, Special Non-Nuclear Materials, and Related Technologies Subject to Export Control;
Government Decree No. 1286 dated July 16, 2022, On the Approval of the List of Dual-Use Equipment and Materials and Related Technologies Used for Nuclear Purposes Subject to Export Control;
Government Decree No. 1287 dated July 16, 2022, On the Approval of the List of Microorganisms, Toxins, Equipment, and Technologies Subject to Export Control;
Government Decree No. 1288 dated July 16, 2022, On the Approval of the List of Equipment, Materials, and Technologies That May Be Used in the Creation of Missile Weapons and Which Are Subject to Export Control;
Government Decree No. 1299 dated July 19, 2022, On the Approval of the List of Dual-Use Goods and Technologies That May Be Used in the Creation of Weapons and Military Equipment and Which Are Subject to Export Control.

Control over foreign trade activities regarding products included in these lists is carried out based on the following regulatory documents:

Government Decree No. 686 dated September 24, 2001, On the Approval of the Regulations on the Implementation of Control over Foreign Trade Activities Regarding Chemicals, Equipment, and Technologies That May Be Used in the Creation of Chemical Weapons;[1]
Government Decree No. 973 dated December 15, 2000, On the Export and Import of Nuclear Materials, Equipment, Special Non-Nuclear Materials, and Related Technologies;[2]
Government Decree No. 462 dated June 14, 2001, On the Approval of the Regulations on the Implementation of Control over Foreign Trade Activities Regarding Dual-Use Equipment and Materials, as well as Related Technologies Used for Nuclear Purposes;[3]
Government Decree No. 634 dated August 29, 2001, On the Approval of the Regulations on the Implementation of Control over Foreign Trade Activities Regarding Microorganisms, Toxins, Equipment, and Technologies;[4]
Government Decree No. 296 dated April 16, 2001, On the Approval of the Regulations on the Implementation of Control over Foreign Trade Activities Regarding Equipment, Materials, and Technologies That May Be Used in the Creation of Missile Weapons;
Government Decree No. 447 dated June 7, 2001, On the Approval of the Regulations on the Implementation of Control over Foreign Trade Activities Regarding Dual-Use Goods and Technologies That May Be Used in the Creation of Weapons and Military Equipment.[5]

Methods of Implementing Export Control

Russia implements export control through methods of legal regulation of foreign trade activities, [6] which include:

Identification of controlled goods and technologies,[7] which involves establishing whether specific goods, information, work, services, or intellectual property results (the objects of foreign trade operations) correspond to the goods and technologies included in the controlled lists, and determining the prohibitions and restrictions on foreign trade activities applicable to such objects as established by the Export Control Law, other federal laws, and other Russian Federation regulatory acts adopted in accordance with them;
A permit-based procedure for foreign trade operations with controlled goods and technologies, providing for licensing or other forms of state regulation;
Customs control during customs operations regarding controlled goods and technologies imported into or exported from the Russian Federation, in accordance with EAEU law and Russian legislation on customs regulation;
State control over compliance by Russian foreign trade participants with Russian legislation in the field of export control.

Licensing of Foreign Trade Operations with Controlled Goods and Technologies

The Federal Service for Technical and Export Control issues licenses for foreign trade operations with goods, information, work, services, and intellectual property results (including rights thereto) that may be used to create weapons of mass destruction, their delivery systems, other types of weapons and military equipment, or in the preparation or commission of terrorist acts, and which are subject to export control under the controlled lists. This process follows Government Decree No. 691 dated September 15, 2008, On the Approval of the Regulations on the Licensing of Foreign Trade Operations with Goods, Information, Work, Services, and Intellectual Property Results (Rights Thereto) Subject to Export Control (the "Decree No. 691").

FSTEC of Russia Order No. 74 dated May 3, 2023, On the Approval of Requirements for Executing an Application for a License for Foreign Trade Operations with Controlled Products, Requirements for Executing a License for Foreign Trade Operations with Controlled Products, as well as the Forms of Applications for the Issuance of a Permit from the Export Control Commission of the Russian Federation for the Temporary Export of Controlled Products from the Russian Federation, for the Issuance of a Permit from the Export Control Commission of the Russian Federation for the Export of Products Subject to Comprehensive Control, and the Rules for Filling Them Out, details the requirements for preparing licenses and applications, as well as documents for reissuing or extending licenses.

A license is an official document permitting the applicant to conduct foreign trade operations with controlled products under the license's terms for a set period. The legal owner may use the license only for the specific foreign trade operations for which it was issued.

Foreign trade operations with controlled products require either single-transaction or general licenses. A single-transaction license is issued for foreign trade operations with specific controlled products under one contract, specifying the quantity, country of end-use, seller, and buyer. The basis for issuing a single-transaction license is the conclusion of a state expert evaluation of the foreign trade transaction conducted by the licensing authority. The validity period of a single-transaction license is determined by the terms and circumstances of the operations but may not exceed one year from the date of issuance.

A general license is issued for foreign trade operations with a specific type of controlled product, specifying the maximum quantity (for goods) or the scope of transferred rights (for technologies) and the country of end-use without identifying a specific buyer (recipient). Only a Russian foreign trade participant registered as a legal entity or individual entrepreneur that has established an internal export control program and received a state accreditation certificate in the prescribed manner [8] may receive a general license. The Government of the Russian Federation decides on the issuance of a general license and establishes its validity period.

The licensing authority may refuse to issue a license on the following grounds:

incorrect execution of the license application;
non-compliance of the documents (copies) submitted by the applicant with established requirements;
presence of incomplete or inaccurate information in the documents (copies) submitted by the applicant;
a negative conclusion from the state expert evaluation of the foreign trade transaction;
concluding a foreign trade transaction under conditions that cause damage or threaten to cause damage to the interests of the Russian Federation or violate its international obligations regarding the non-proliferation of weapons of mass destruction, their delivery systems, or export control;
violation of Russian rights to intellectual property results obtained through federal budget funds or with their involvement, including the identification, securing, or use of such rights realized during the development or production of controlled products transferred to a foreign person;
failure to provide information on the execution of licenses within the established deadlines two or more times;
application of special economic measures in the form of prohibitions and restrictions on foreign trade operations provided for by Russian legislation, if the foreign trade transaction falls under such measures;
an effective Russian Government decision depriving the applicant of the right to engage in specific types of foreign trade activity, if such a decision applies to the foreign trade operations for which the license is requested;
the recipient (consumer) of controlled products imported into the Russian Federation lacks a license to engage in activities related to their circulation (use), if Russian legislation requires such licensing.

Controlled goods and technologies may be exported temporarily without a license for demonstration at exhibitions or for personal use, provided they are not transferred to a foreign person (including rights thereto). This is permitted as long as the goods and technologies remain under the direct control of the Russian foreign trade participant and are returned to Russia within the established deadlines.

A license-free export regime for certain types of controlled goods may be established for foreign states that adhere to universally recognized principles and norms of international law regarding the non-proliferation of weapons of mass destruction and their delivery systems, comply with international export control regimes, and/or participate in regional integration with Russia, provided this does not contradict Russia's security interests and international obligations.

Presidential Decree No. 577 dated December 4, 2019, On the Approval of the List of Foreign States and Types of Controlled Goods for Which a License-Free Export Regime Is Established, approves the list of states and types of goods eligible for this regime.

The President of Russia, upon the recommendation of the Russian Government, may terminate or suspend the license-free export regime for a specific foreign state. Only Russian legal entities included in the register of Russian foreign trade participants permitted to perform such exports may carry out license-free exports. The formation and maintenance of this register, including the inclusion and exclusion of Russian legal entities, are conducted in the prescribed manner. [9]

The conditions for including Russian legal entities in the register for license-free export are:

at least three years of experience in conducting foreign trade operations with goods, information, work, services, and intellectual property results subject to export control before applying to the specially authorized federal executive authority for inclusion in the register;
the absence of violations of Russian export control legislation by the legal entity during that period;
the absence of a criminal record for an intentional crime for the head of the legal entity and other officials performing management functions related to foreign trade activities;
the presence of an employee or employees holding a qualification certificate as an export control specialist.

Grounds for excluding a Russian legal entity from the register include:

failure to comply with the conditions for inclusion;
administrative liability for the legal entity, its head, or other officials for violating Russian export control legislation, or criminal liability for the head or other officials for intentional crimes.

Foreign trade activities under the license-free export regime are conducted in accordance with Government Decree No. 810 dated August 18, 2016, On the Approval of the Rules for Conducting Foreign Trade Activities in the Event of the Application of a License-Free Export Regime for Specific Types of Controlled Goods.

Authorized Bodies in the Field of Export Control

An interdepartmental coordination body for export control is established to implement state policy, coordinate federal executive authorities, and provide organizational and methodological guidance. This body is the Export Control Commission of the Russian Federation (the "Commission"). Presidential Decree No. 96 dated January 29, 2001, On the Export Control Commission of the Russian Federation, approved the Commission's regulations and composition.

The Commission's primary tasks are:

ensuring the protection of state interests in foreign trade regarding goods, information, work, services, and intellectual property results that may be used to create weapons of mass destruction, their delivery systems, or other types of weapons and military equipment;
preparing proposals for the main directions of state policy in export control to prevent the proliferation of weapons of mass destruction and their delivery systems and to ensure Russian national security;
ensuring effective interaction and coordination among federal executive authorities involved in export control in the Russian Federation;
developing recommendations for resolving problematic issues in export control.

Export control is carried out by a specially authorized federal executive authority.[10] Under Presidential Decree No. 1085 dated August 16, 2004, Issues of the Federal Service for Technical and Export Control, the Federal Service for Technical and Export Control (FSTEC) is the federal executive authority authorized to ensure the security of critical information infrastructure, counter technical intelligence, and provide technical protection of information, as well as the specially authorized body for export control. The Director of FSTEC of Russia heads the service and is appointed and dismissed by the President of Russia upon the recommendation of the Minister of Defense of Russia.

Export Control Programs

Law No. 183-FZ provides for internal export control programs and state control. Establishing internal export control programs is mandatory for organizations engaged in scientific and/or production activities to meet federal state needs for maintaining the defense and security of the Russian Federation and which systematically receive income from foreign trade operations with controlled goods and technologies.

FSTEC of Russia carries out state control over compliance with Russian export control legislation in the manner established by Government Decree No. 1572 dated September 7, 2022, On the Procedure for Implementing State Control over Compliance by Russian Foreign Trade Participants with the Legislation of the Russian Federation in the Field of Export Control and Repealing Russian Government Decree No. 582 dated June 13, 2012. State control is implemented through:

activities aimed at preventing violations of mandatory requirements;

The following preventive measures are conducted during state control:

posting a list of regulatory acts on the FSTEC official website, identifying sections that contain mandatory requirements subject to state control, as well as information on liability for violations;
informing stakeholders on compliance with mandatory requirements;
summarizing state control practices;
issuing warnings.

Audits may be planned or unscheduled and are conducted as:

documentary audits;
field audits.

Audits follow the requirements of Federal Law No. 294-FZ dated December 26, 2008, On the Protection of the Rights of Legal Entities and Individual Entrepreneurs During State Control (Supervision) and Municipal Control, taking into account the specifics established by the Export Control Law.

A planned audit of a controlled person is conducted no more than once every three years based on an annual plan. Grounds for an unscheduled audit include:

The expiration of the deadline for the controlled person to comply with a previously issued order to eliminate identified violations of mandatory requirements.
Receipt by the state control body of:

an application from a legal entity or individual entrepreneur for a license or permit for a foreign trade operation with controlled goods and technologies;
appeals or applications from citizens, including individual entrepreneurs, legal entities, or information from government bodies (officials), local authorities, or the media indicating signs of violations of mandatory requirements, including requirements (conditions, restrictions) of licenses and permits issued for operations with controlled goods and technologies, if such violations threaten the security of the Russian Federation or damage its political interests due to non-compliance with international obligations in non-proliferation or export control.

An order (instruction) from the head (deputy head) of the state control body to conduct an unscheduled audit, issued in accordance with a directive from the President or Government of Russia, or based on a prosecutor's demand for an unscheduled audit following appeals received by the prosecutor's office.

A documentary audit is conducted at the location of the state control body by analyzing documents of the controlled person already in the body's possession or obtained upon request.

A field audit is conducted at the location and/or actual place of business of the legal entity or at the place of business of the individual entrepreneur.

Additionally, federal executive authorities assist Russian foreign trade participants in creating internal export control programs and provide necessary informational and methodological assistance to ensure compliance with the established foreign trade procedure. Creating internal programs is mandatory for organizations engaged in scientific and/or production activities for federal needs in defense and security that systematically receive income from operations with controlled goods and technologies. [11] Government Decree No. 176 dated February 29, 2000, On the Approval of the Regulations on the State Accreditation of Russian Foreign Trade Participants That Have Created Internal Export Control Programs, defines the procedure for state accreditation.

Other Types of Control in Foreign Trade Activities

In addition to export control, entrepreneurs conducting foreign trade are subject to currency and customs control. Federal Law No. 173-FZ dated December 10, 2003, On Currency Regulation and Currency Control, regulates currency control, which is carried out by the Russian Government and currency control bodies and agents.

Chapter 44 of the Customs Code of the Eurasian Economic Union regulates customs control.

The objects of customs control are:

goods under customs control;
goods placed under the customs procedure of release for domestic consumption that have acquired EAEU status, goods placed under the re-import procedure, goods for personal use released into free circulation, and goods that retained EAEU status upon their re-import into the EAEU customs territory;
goods located in the Union's customs territory if customs authorities have information that such goods were imported and/or are located there in violation of international treaties and acts in customs regulation;
customs and other documents required to be submitted to customs authorities under international treaties and acts in customs regulation, treaties of member states with third parties, and/or member states' legislation, as well as information contained therein;
activities of persons, including authorized economic operators, related to moving goods across the EAEU customs border, providing services in customs matters, or carried out within individual customs procedures;
structures, premises (parts thereof), and/or open areas (parts thereof) intended for use or used as temporary storage warehouses, customs warehouses, free warehouses, or duty-free shops, or used for temporary storage by authorized economic operators, as well as those used as customs control zones.

Prohibitions, Restrictions, and Special Economic Measures

Prohibitions and restrictions on foreign trade activities regarding goods, information, work, services, and intellectual property results (rights thereto) that may be used to create weapons of mass destruction, their delivery systems, other weapons, and military equipment, or in terrorist acts, may be established to protect national interests and fulfill international obligations. [12] These are introduced to:

ensure national defense and state security (established by Presidential decrees and instructions);
fulfill Russia's international obligations in export control (established by Government decrees);
ensure compliance with UN Security Council resolutions providing for the introduction, modification, suspension, or cancellation of coercive measures, applied in the manner established by Federal Law No. 281-FZ dated December 30, 2006, On Special Economic Measures and Coercive Measures (the "Law No. 281-FZ").

Special economic measures are temporary and applied independently of other measures protecting Russian interests, security, or citizens' rights.[13] These measures include prohibitions on actions regarding a foreign state and/or foreign organizations and citizens, as well as stateless persons permanently residing in a foreign state, or the imposition of an obligation to perform such actions and other restrictions. Such measures may target:

suspending all or part of economic or technical assistance programs, as well as military-technical cooperation programs;
prohibiting or restricting financial operations;
prohibiting or restricting foreign trade operations;
terminating or suspending international trade treaties and other Russian international treaties in foreign economic relations;
changing export and/or import customs duties;
prohibiting or restricting the entry of ships into Russian ports and the use of Russian airspace or specific areas thereof;
restricting tourism activities;
prohibiting or refusing to participate in international scientific and technical programs and projects, or those of a foreign state.

The list of Presidential decrees on measures to implement UN Security Council resolutions is extensive; some examples include:

Presidential Decree No. 665 dated May 27, 2007, On Measures to Implement UN Security Council Resolution 1718 of October 14, 2006;
Presidential Decree No. 381 dated March 27, 2010, On Measures to Implement UN Security Council Resolution 1874 of June 12, 2009;
Presidential Decree No. 109 dated March 11, 2016, On Measures to Implement UN Security Council Resolution 2231 of July 20, 2015;
Presidential Decree No. 100 dated March 8, 2022, On the Application of Special Economic Measures in the Field of Foreign Trade Activity to Ensure the Security of the Russian Federation;
Presidential Decree No. 961 dated December 27, 2022, On the Application of Special Economic Measures in the Fuel and Energy Sector in Connection with the Establishment of a Price Cap on Russian Oil and Petroleum Products by Certain Foreign States, and others.

Liability for Violating Russian Export Control Legislation

Violations of Russian export control legislation include:

conducting foreign trade operations with objects subject to export control without licenses or permits;
obtaining licenses or permits for operations with controlled objects by providing forged documents or documents containing inaccurate information;
violating the requirements and conditions of licenses or permits for operations with controlled objects;
failing to comply or improperly complying with the orders of the specially authorized federal executive authority for export control;
obstructing officials of federal executive authorities from performing their export control functions;
unreasonably refusing to provide information requested by federal legislative and executive authorities for export control purposes, or intentionally distorting or concealing such information;
violating the established procedure for recording foreign trade transactions with controlled objects for export control purposes.

Officials and citizens guilty of violating Russian export control legislation bear criminal, administrative, and civil-law liability. If a violation causes significant damage to Russia's political and economic interests, defense, or security, or if it is a repeat offense, an organization may be deprived of the right to engage in specific types of foreign trade activity for up to three years.

The Russian Government, upon the recommendation of the interdepartmental coordination body for export control, decides on the deprivation of foreign trade rights.

______________________________

References

[1] Developed to protect national interests and ensure compliance with Russia's international obligations under the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction (Concluded in Paris on January 13, 1993).

[2] The export of nuclear goods and technologies to countries that do not possess nuclear weapons (except for the Republic of India) under contracts (agreements) concluded since April 4, 1992, may be carried out provided that the recipient country has an effective safeguards agreement with the International Atomic Energy Agency (IAEA) covering all its peaceful nuclear activities; before that date, it is subject to placing the nuclear export items under IAEA safeguards.

[3] The Regulations were developed to protect national interests and ensure compliance with Russia's international obligations on the non-proliferation of nuclear weapons and the security and safety of radioactive substances.

[4] Developed to protect national interests and ensure compliance with Russia's obligations under the Convention on the Prohibition of the Development, Production and Stockpiling of Bacteriological (Biological) and Toxin Weapons and on their Destruction (approved by the 26th session of the UN General Assembly, opened for signature on April 10, 1972, and entered into force on March 26, 1975).

[5] Developed to protect national interests and ensure compliance with Russia's international obligations arising from the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (established in July 1996 by 33 participating states and approved by the plenary meeting of participating countries on December 3, 1998).

[6] Article 7 of the Export Control Law.

[7] Article 24 of Law No. 183-FZ.

[8] Government Decree No. 176 dated February 29, 2000, On the Approval of the Regulations on the State Accreditation of Russian Foreign Trade Participants That Have Created Internal Export Control Programs.

[9] FSTEC of Russia Order No. 109 dated September 4, 2015, On the Approval of the Procedure for Forming and Maintaining the Register of Russian Foreign Trade Participants Permitted to Conduct License-Free Export of Specific Types of Controlled Goods.

[10] Article 11 of Law No. 183-FZ.

[11] Article 16 of the Export Control Law.

[12] Article 25 of Law No. 183-FZ.

[13] Clause 1 of Article 2 of Law No. 281-FZ.