Foreign Direct Product Rules for Russia – Yes, There Are Two!

The FDPR, once a rarely looked at rule, was expanded in 2020 to address national security concerns with specific Huawei entities on BIS’s Entity List. Apparently, the effectiveness of the enhanced rule with regards to Huawei has spurred the US Government to come up with not one but two FDPRs for Russia – one for Russian military end users and one for everybody else in Russia.

a. Everybody – Russia FDPR

If your industry overlaps with CCL Categories 3 (chips), 4 (computers), 5 (telecommunications and information security), 6 (sensors and lasers), 7 (navigation and GPS), 8 (vessels and various underwater stuff), and/or 9 (aircraft, avionics and similar), you need to read this:

If you have reason to know that your foreign-produced item is destined to Russia or will be incorporated into or used in the “production” or “development” of any “part,” “component,” or “equipment” not designated EAR99 and produced in or destined to Russia, you need to figure out:

1. Is your foreign-produced item the direct product of US technology or software in CCL Categories 3-9?

OR

2. Is it produced on equipment (any major component on your production line) that is the direct product of US technology or software in CCL Categories 3-9?

  • Note 1: If your foreign-produced item would be EAR99 if subject to the EAR, you don’t have to worry about the Russia FDPR.
  • Note 2: If your foreign-produced item is manufactured in one of the Supplement 3 Countries described above, the Russian FDPR rule does not apply.
  • If the answer to either of these questions is yes, and the notes do not apply, you will need to apply for a license from BIS for the export, reexport, or in-country transfer at issue.

b. Military End Users in Russia - Russia-MEU FDPR

Everybody has to worry about this rule except those who are sure they are not selling directly – or even very indirectly – to any Russian MEU that is now designated with a footnote 3 in the Entity List (“Footnote 3 Russian MEU”).

If you have reason to know that your foreign-produced item will be incorporated into or used in the “production” or “development” of any “part,” “component,’’ or “equipment” produced, purchased, or ordered by a Footnote 3 Russian MEU or where a Footnote 3 Russian MEU is a “purchaser,” “intermediate consignee,” “ultimate consignee,” or “end-user,” then you need to figure out:

1. Is your foreign-produced item the direct product of US technology or software ANYWHERE on the CCL?

OR

2. Is it produced on equipment (any major component on your production line) that is the direct product of US technology or software ANYWHERE on the Commerce Control List?

  • Note 1: If your foreign-produced item would be EAR99 if subject to the EAR, it would still be prudent to answer the two questions above if dealing with a Footnote 3 Russian MEU as there is no exception for foreign-produced items that are EAR99. Of course, a wooden desk made in South Korea is less likely to be produced on a South Korean lathe that is the direct product of US technology or software on the Commerce Control List, but it is not an impossibility!
  • Note 2: If your foreign-produced item is manufactured in one of the Supplement 3 Countries, the Russia-MEU FDPR does not apply.