The most significant change announced today is the State Department’s decision to add Russia to the International Traffic in Arms Regulations’ (ITAR) list of “proscribed countries,” commonly known as the Section 126.1 list. Countries on this list are subject to a policy of denial for license applications, so the change will effectively subject Russia to a U.S. arms embargo, prohibiting the export of most ITAR-controlled defense articles and defense services to Russia. Limited exceptions to the policy of denial will be made for exports in support of government space cooperation. The State Department will also review licenses related to commercial space launches on a case-by-case basis, but only for six months, after which license requests related to commercial space launches will face a presumption of denial. As noted below, the Commerce Department has announced corresponding changes to its licensing policy regarding exports related to commercial space flight activities in Russia. Additionally, certain transactions with 126.1 countries are subject to mandatory disclosures to the DDTC, instead of the general rule that violations are subject to voluntary disclosures to the agency.

Below is a summary of the actions taken by other key U.S. regulators today, including the Treasury, State, and Commerce Departments:

• New SDNs: OFAC added seven Russian government officials and three entities to the Specially Designated Nationals (SDN) List and imposed new sanctions on existing Russian SDNs;
• Entity List Additions: The Commerce Department added 14 entities in Russia, Switzerland, and Germany to its Entity List due to their connection to WMD and chemical weapons production, barring exports of items subject to the Export Administration Regulations (EAR) to the designated entities.
• Dual Use Export Control License Restrictions: The Commerce Department will limit the availability of certain license exceptions and licenses for exports of NS-controlled items to Russia. Commerce indicated that exports of NS-controlled items to Russia will no longer be eligible for license exceptions Service and Replacement of Parts and Equipment (RPL), Technology and Software Unrestricted (TSU), and Additional Permissive Reexports (APR). Commerce will reverse its existing licensing policy and replace it with a presumption of denial to license requests related to exports of NS-controlled items for commercial end-users related to civil end-uses in Russia. In six months, Commerce will also adopt a policy of denial for license requests involving exports of NS-controlled items to Russia related to commercial space flight activities.
• Secondary Sanctions: The State Department added six scientific institutes to its Section 231 List of persons known to operate for or on behalf of the Russian defense or intelligence sectors. As a result of the designations, non-U.S. persons that conduct significant transactions with these parties could be subject to U.S. secondary sanctions in the future.

Specifically, the proposed rule targets for a move to the EAR products that are not inherently military, or do not possess characteristics that provide a military advantage to the U.S. These rules, once finalized, would reduce the compliance burden on exporters in the industry. However, the proposed rules do not represent a wholesale deregulation of the industry, as many items would remain highly controlled under the EAR’s “600-series” and other ECCNs, and would still require licenses to many destinations. Affected parties should carefully review the proposed rules and take the opportunity to comment on the proposed reforms.