Shipping banned goods from Russia could lead to blacklisting, US companies warn

A container ship is shown in the Port of Los Angeles
A container ship is shown at the Port of Los Angeles in Los Angeles, California, the United States, November 22, 2021. REUTERS/Mike Blake

March 7, 2022

By Karen Freifeld and Alexandra Alper

NEW YORK/WASHINGTON (Reuters) – The Biden administration is threatening to blacklist companies if they sidestep new export restrictions against Russia as it steps up efforts to keep a variety of technologies out of the country after it last went into the Ukraine has invaded month.

The US Department of Commerce, which oversees export controls, mobilizes personnel around the world to stop illegal shipments of computers, aircraft parts, marine equipment and other technology to Russia, and works with allied countries and US law enforcement agencies such as the FBI and the Department US officials say Homeland Security is cracking down on the illegal trade.

The aim is to enforce sweeping new restrictions on shipments to Russia of US and foreign goods, technology and software made with US equipment, technology or software. The restrictions also apply to Belarus.

Matthew Axelrod, the Commerce Department’s assistant secretary for export enforcement, told Reuters in a statement Monday that the United States “will use the full force of the law to hold accountable those who knowingly violate the new rules, including by the Placement of Additional Parties in Unit List,” a US trade blacklist.

Some of the biggest names in technology, such as Microsoft Corp and Intel Corp, have already announced that they will stop shipping to Russia.

U.S. exports to Russia were below $5 billion in 2020, according to the Commerce Department, but a senior official said multilateral cooperation means more than $50 billion in key inputs to Russia could be curtailed.

Axelrod said the Commerce Department has begun “working heavily with U.S. exporters and other partners to ensure they understand the new rules” aimed at keeping chips and other domestically and foreign-made items out of Russia.

He also pointed out that last week 91 parties in 10 countries were added to the Commerce Ministry’s entity list for supporting the Russian military, security services and defense sector.

The mostly Russian companies included in the list are not allowed to buy goods without a license, which they are denied.

The measures, coupled with tough bank sanctions and the attack on Russian oligarchs, have not deterred Moscow, whose forces have seized Europe’s largest nuclear power plant in Ukraine and besieged and bombed several cities while residents desperately try to escape Europe’s most devastating conflict on the planet to flee Second War.

However, export controls tend to have an impact over time, not days or weeks.

As part of the highly coordinated response to the invasion, foreign partners must either comply with US restrictions on items made with American equipment, or impose similar rules.

Noting the small universe of people who benefit from forming entities to disguise and send shipments to restricted companies, former Commerce Department official Bill Reinsch said there was no way to stop the illicit trade completely to prevent.

“If you want to make sure they’re getting a third of what they need, and it takes three times as long and costs ten times as much, that’s achievable,” Reinsch said.

Don Pearce, a former Commerce Department law enforcement officer who served as Moscow’s export control attache from 2004 to 2007, said the United States can rely on allies.

“It will especially depend on the partner countries that have land borders with Russia, because so much of that stuff ends up being called Helsinki and being driven across the border,” he said.

Pearce also referred to US shipping companies, whose decision to avoid Russia has already exerted pressure. United Parcel Service Inc and FedEx Corp, two of the world’s largest logistics companies, have announced they will suspend delivery service to the country.

The Commerce Department no longer has an export control officer in Russia, but export control officers are stationed in other strategic locations — including Germany, China and Turkey — and will be on the lookout for illegally diverted goods, a current US official said. They carry out pre-licensing checks and post-shipment checks to ensure, for example, that the company that would receive the goods is not a mailbox.

The department will also be on the lookout for anomalies in trading patterns and new parties, and will examine licensing and shipping documents to catch companies illegally shipping items to Russia, another official said.

(Reporting by Karen Freifeld and Alexandra Alper; Editing by Chris Sanders and Andrea Ricci) Shipping banned goods from Russia could lead to blacklisting, US companies warn

Caroline Bleakley

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