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14 March 2022
Tax Messenger
Tax Edition
Expansion of sanctions against
Russia. Trade restrictions
USA
International Tax Review
ranked EY Russia Tax & Law On 3 March 2022 the US Bureau of Industry and Security
practice as a leading tax firm published new export administration rules1. In particular, the
(Tier 1) in Russia in its annual new rules concern the following aspects of export
World Tax guide for 2018. administration:
Expansion of the list of items for export, reexport, or
transfer to or within Russia for which a permit (licence)
must be obtained. The licensing requirements now cover
microelectronics, telecommunication equipment and
parts, sensors, navigation equipment, avionics, marine
equipment and aircraft components and other items with
ECCNs (export control classification numbers) in
categories 3, 4, 5, 6, 7, 8 or 9 of the Commerce Control
List (CCL).
A full prohibition on supplies of military goods to end
users in Russia, except for food and medicines.
1
Rule by the US Industry and Security Bureau on 3 March 2022
Restrictions on supplies to Russia of goods Previously, the ban only affected supplies
made in third countries (not the USA) in of dual-use goods to specified defence
which America technology is used. sector entities and end users. Exceptions
continue to apply to supplies of goods
Expansion of the list of items required for
intended for humanitarian or medical
oil refining that are subject to restrictions
purposes and the temporary export of
on export or reexport to Russia. This
items for use by news media or items used
extends the scope of the sanctions
as consumer communication devices.4
imposed in 2014.
Goods and technology for use in oil
The rules took effect from 24 February 2022.
refining. The purpose of these measures is
On 8 March 2022 the US Bureau of Industry and to limit Russia’s capacities to upgrade oil
Security published a rule approving a policy of refineries to meet Euro-6 standards,
denial in considering applications to export, thereby limiting the access of Russian
reexport or transfer to or within Russia items refined oil to the EU market. The
that are subject to the above-mentioned export performance of contracts concluded
administration restrictions. The rule came into before 26 February 2022 must be
force on 3 March 2022. Exceptions remain for completed by 27 May 2022.
the consideration of licence applications for
Goods and technology suited for use in
consumer communications devices (portable
aviation or the space industry, which are
devices, mobile applications and other consumer
mainly covered by Chapter 88 of the EU’s
goods, including those using encryption) if the
Combined Nomenclature. The ban on the
end user of the items is an individual or a legal
export of goods and technology applies
entity in the private sector. The rule takes effect
regardless of whether or not the goods
from 3 March 2022.2
originate in the EU.
According to official information from the US
These measures also include a ban on the
White House, on 8 March 2022 the President of
overhaul, repair, inspection, replacement,
the USA signed an order banning imports of
modification or defect rectification of an
Russian energy products into the USA and
aircraft or component. The performance of
banning US persons from providing any
contracts concluded before 26 February
investment, financing or assistance for such
2022 must be completed by 28 March
transactions. The document has not been
2022.5
officially published. 3
Maritime navigation goods and radio-
European Union
communications equipment. In particular,
The Council of the European Union (EU) has the ban applies to the sale, supply, transfer
imposed restrictions on exports of the following or export, directly or indirectly, of
products and related services: maritime navigation goods and technology
to any natural or legal person, entity or
Dual-use goods, regardless of the end
body in Russia for use in Russia or for the
users, and goods and technology which
placing on board of a Russian-flagged
might contribute to Russia’s military and
vessel. 6
technological enhancement or the
development of the defence sector. In addition, the EU has imposed restrictions on
Russian aircraft landing in, taking off from or
overflying EU territory. Exceptions are made for
2 4
Rule by the US Industry and Security Bureau on 8 March Council Regulation (EU) 2022/328 of 25 February 2022
2022 5
EU Council Decision (CFSP) 2022/327 of 25 February
3
Fact Sheet issued by the White House on 8 March 2022, 2022
White House Press Briefing on 8 March 2022 6
Council Regulation (EU) 2022/394 of 9 March 2022
2an emergency landing or overflight, and the previously existing prohibition on the export
authorisations may be received for flights for of dual-use goods to Russia now applies to all
humanitarian purposes or for any other dual-use goods, i.e., goods imported for both
purposes consistent with the objectives of the military and civilian use. 12
EU’s sectoral sanctions against Russia.7
The UK has imposed export bans/restrictions
The European Commission has announced a plan covering an extensive range of goods. The
of measures (REPowerEU) aimed at diversifying restrictions mainly target technology, computer
gas supplies to Europe and cutting the EU’s and telecommunications equipment, sensors,
reliance on Russian gas by two thirds by the end lasers, navigation equipment, and marine and
of 2022. 8 aerospace technology. Exceptions are made for
consumer goods and goods for personal use.
Canada
With effect from 1 March 2022, access/entry to
The Canadian Government has suspended the
British ports will be denied to any ship that is
issue of new permits for the export of controlled
owned, controlled, chartered or operated by any
goods and technology to Russia and cancelled
person connected with Russia, flies the Russian
permits issued before 24 February 2022. These
flag or is registered in Russia.13, 14
measures do not apply to permits and
applications related to supplies of goods for There is a ban on the export of aviation and
medical and humanitarian needs. Decisions space goods and technology, including technical
regarding such supplies will be made on a case- assistance. British companies are also prohibited
by-case basis. 9 from providing insurance services in relation to
such goods and technology. 14
Canada has imposed a ban on imports of crude
oil from Russia. Canada has not imported crude The UK is planning to phase out imports of
oil from Russia since 2019. The new ban is Russian oil by the end of 2022 and may also
intended to ensure that this remains the case phase out imports of Russian gas, which make
going forward. 10 up only 4% of the UK’s supplies. 15
In addition, the Canada Border Services Agency More details about sanctions previously imposed
has withdrawn entitlement to Canada’s Most- on Russia may be found in our previous alert.
Favoured-Nation Tariff from goods originating in
What does it mean?
Russia. This means that goods originating in
Russia that are imported into Canada will be In the current environment it is important for
subject to the standard import duty rate of 35 importers and exporter to understand and take
per cent. 11 into account the following aspects in planning
supplies and carrying on foreign trade activities:
UK
The UK Government has passed legislation,
effective from 1 March 2022, to the effect that
7
EU Council Decision (CFSP) 2022/335 of 28 February 13
Amendment No. 3 of 1 March 2022 to the Russia
2022
Sanctions Regulations of the Foreign, Commonwealth and
8
European Commission Press Release of 8 March 2022 Development Office
9 14
Official website of the Government of Canada Amendment No. 6 of 8 March 2022 to the Russia
10 Sanctions Regulations of the Foreign, Commonwealth and
Official website of the Government of Canada
Development Office от 8 марта 2022 № 6
11
Customs Notice 22-02 of the Canada Border Services 15
Press Release of 9 March 2022 published on the official
Agency of 3 March 2022
website of the UK Parliament
12
Amendment No. 3 of 1 March 2022 to the Russia
Sanctions Regulations of the Foreign, Commonwealth and
Development Office
3 The range of technology prohibited for Updating of due diligence procedures in
export to Russia has been significantly relation to parties to foreign transactions
expanded to check their compliance with current
sanctions
Licence applications are highly likely to be
rejected in accordance with the policy of Monitoring of new sanctions and changes
denial to current sanctions and restrictive
measures
Exceptions to export control and licensing
measures in place since 2014 and the It should be noted that sanctions may change
specific situations in which they apply have (be added/removed) in response to changes in
been narrowed the international situation. We are continuing to
monitor events and will keep you informed of
Logistical processes for transporting goods
any developments in trade restrictions.
from/to foreign ports are becoming more
challenging. Both importers and exporters Authors:
will need to review their supply chains Wilhelmina Shavshina
Vladislava Gritskova
Potential risk of redirection of exports to
Alina Rodionova
Russia
For more information, please contact the author of this publication:
Wilhelmina Shavshina
+7 (921) 940 2261
Wilhelmina.Shavshina@ru.ey.com
4Inquiries may be directed to one of the following executives:
Moscow
CIS Tax & Law Leader
Customs & Indirect Tax
Irina Bykhovskaya +7 (495) 755 9886
Vadim Ilyin +7 (495) 648 9670
Wilhelmina Shavshina +7 495 755 9700
Oil & Gas, Power & Utilities
Alexei Ryabov +7 (495) 641 2913
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Marina Belyakova +7 (495) 755 9948
Yuri Nechuyatov +7 (495) 664 7884
Vladimir Zheltonogov +7 (495) 705 9737
Financial Services
Irina Bykhovskaya +7 (495) 755 9886
Transfer Pricing and Operating Model Effectiveness
Alexei Kuznetsov +7 (495) 755 9687
Evgenia Veter +7 (495) 660 4880
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Maxim Maximov +7 (495) 662 9317
Ivan Sychev +7 (495) 755 9795
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Advanced Manufacturing & Mobility
Alexei Nesterenko +7 (495) 622 9319
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Law
Transportation
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Technology, Telecommunications, Media &
Entertainment; Tax Performance Advisory St. Petersburg
Ivan Rodionov +7 (495) 755 9719 Dmitri Babiner +7 (812) 703 7839
Tax Technology
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This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a
substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the g lobal
Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of
any material in this publication. On any specific matter, reference should be made to the appropriate advisor.
© 2022 Ernst & Young Valuation and Advisory Services LLC
http://www.ey.com/EY | Building a better working world EY exists to build a better working world, helping to create long-term value for clients, people and society and build trust in the capital markets. Enabled by data and technology, diverse EY teams in over 150 countries provide trust through assurance and help clients grow, transform and operate. Working across assurance, consulting, law, strategy, tax and transactions, EY teams ask better questions to find new answers for the complex issues facing our world today. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation are available via ey.com/privacy. For more information about our organization, please visit ey.com. EY works together with companies across the CIS and assists them in realizing their business goals. 5,500 professionals work at 19 CIS offices (in Moscow, Ekaterinburg, Kazan, Krasnodar, Novosibirsk, Rostov-on-Don, St. Petersburg, Togliatti, Vladivostok, Almaty, Atyrau, Nur-Sultan, Baku, Bishkek, Kyiv, Minsk, Tashkent, Tbilisi, Yerevan). © 2022 Ernst & Young Valuation and Advisory Services LLC ED None. This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global EY organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor. ey.com/ru
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