On March 25, 2014, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced that it had placed a hold on the issuance of licenses authorizing the export or reexport of items destined for Russia. These include military items, “dual-use” items (goods, software, and technology that have capability of both a civilian and a military or proliferation-related use), and commercial items with an obvious military use. The BIS is responsible for implementing and enforcing export controls on items and activities subject to the Export Administration Regulations (EAR). The EAR identify “exports” not only as the shipping or transmitting of items out of the U.S., but also the release of technology or source code subject to the EAR to a foreign national in the U.S. or in a foreign country. Reexports include items subject to the EAR that originate in the U.S., foreign-made items that contain more than a de minimus level of content having U.S. origin, or foreign-made items that are a direct product of technology or software of U.S. origin. This licensing hold took effect on March 1, 2014 and will remain in effect until further notice. The hold affects only new export applications and does not affect licenses granted before the hold took effect or exports or reexports of items that do not require a license or that fall under a licensing exemption.

In a similar move, the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) announced on March 27, 2014 that it had also indefinitely halted the issuance of licenses for defense articles and defense services destined for Russia. The DDTC is responsible for controlling the export and import of defense articles and defense services covered by the International Traffic in Arms Regulations’ United States Munitions List (USML).

These measures are in addition to Congress’ passage of a bill last week authorizing loan guarantees and aid to Ukraine, and freezing assets and imposing visa bans on those found to be contributing to the situation in Ukraine. The bill supplements recent sanctions by the Obama administration that froze assets and banned travel to the U.S. by Russian leadership and others.

Violation of U.S. export controls and sanctions can result in severe civil and criminal penalties. U.S. companies that deal in items covered by the EAR or USML or that transact business with targeted individuals or entities should carefully consider the impact of the above developments on their contractual and other business obligations. We will continue to monitor the situation.