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Russia Diversion Risk: New BIS Best Practice for Screening Parties and New Requirement to Screen Addresses in Hong Kong
On July 10, 2024, the U.S. Department of Commerceโs Bureau of Industry and Security (โBISโ) issued critical new guidance (โthe Guidanceโ) aimed at enhancing due diligence to prevent the diversion of Common High Priority List (โCHPLโ) items to Russia. [1] A list of the CHPL items can be found on the BIS website. [2]
Most importantly, the Guidance announces a new best practice for identifying parties that present a high risk for diverting CHPL items to Russia, using a new database of parties that have exported such items to Russia since 2022. In addition, the Guidance explains BISโ use of โsupplier listโ letters, โProject Guardianโ requests, โred flagโ letters, and โis informedโ letters to put exporters on notice about parties that present national security concern (including Russia diversion risk), even when they are not listed on public screening lists.
The Guidance comes after another important change to BIS practice regarding identification of parties that present a national security concern: addition to the Entity List of eight addresses in Hong Kong (China) without an associated party name, with a requirement to obtain a license for transactions involving any party at one of those addresses for any item that are subject to the EAR and either on the Commerce Control List or designated as EAR99 and described in Supplement 7 to Part 746 of the EAR, as further explained below. [3]
[1] U.S. Depโt of Commerce, Bureau of Industry and Security, Guidance for Complying with BIS Letters Identifying Transaction Parties of Diversion Risk (v. 8) (2024), available at https://www.bis.gov/sites/default/files/files/Guidance-for-Complying-with-BIS-Letters-Identifying-Transaction-Parties-of-Diversion-Risk_v8.pdf.
[2] Common High Priority List, available at https://www.bis.gov/articles/russia-export-controls-list-common-high-priority-items.
[3] See BIS Final Rule, 89 Federal Register 51644, 51647 (June 18, 2024), available at https://www.bis.doc.gov/index.php/documents/federal-register-notices-1/3508-public-display-version-of-russia-and-belarus-sanctions-rule-on-public-display-and-effective-6-12-24-and-9-16-24-for-intruction-14-and-published-6-18-24/file.
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