High priority items list subject to export controls

September 26, 2023

In response to Russia’s invasion of Ukraine, Australia, Canada, New Zealand, the United Kingdom, and the United States (collectively referred to as “the Export Enforcement Five” or “E5”) have put in place an unprecedented package of sanctions and export controls aimed at cutting off funding and support for Russia’s war machine, inflicting economic cost at scale and showing solidarity and support for Ukraine. The E5’s packages were implemented and are being administered in coordination with the sanctions and export controls specific to Russia implemented by all 39‑members of the Global Export Control Coalition (GECC)^{Footnote 1} partnership that has imposed substantially similar export controls on Russia and Belarus in response to Russia’s invasion of Ukraine.

The E5s respective export controls and sanctions have hindered Russia’s ability to wage its illegal war in Ukraine and have severely weakened Russia’s economy.

Our coordinated efforts seek to deny Russia access to the items and revenue necessary to pursue its illegal war and contribute to the degradation of its military capabilities by restricting Western items critical to Russian weapons development.

The list

Together with international partners including the European Union and Japan, the E5 have agreed to prioritize items controlled in certain Harmonized System (HS) codes that Russia is using in its weapons systems. The E5 have all either implemented sanctions and export controls or have increased scrutiny of these items to prevent potential sanctions and export control evasion. These HS codes on the list include electronic components such as integrated circuits and radio frequency (RF) transceiver modules. The list, which is reproduced below, will be updated when required. It also includes items that are essential for the manufacturing and testing of electronic components and circuits retrieved from the battlefield.

The list of six-digit HS codes (HS6) is divided into four tiers, with tiers one and two containing particularly sensitive items:

• Tier 1: Integrated circuits (also referred to as microelectronics).
• Tier 2: Electronics items related to wireless communication, satellite-based radio navigation, and passive electronic components.
• Tier 3: This tier is divided into electronic and non-electronic items to provide greater clarity to the different industries that may work with these items.
• Tier 4: Manufacturing, production and quality testing equipment of electric components and circuits.

Tier 1

Tier 2

Tier 3

Tier 4

Applying a risk-based approach to exporting

Exporters are strongly encouraged to conduct additional due diligence when encountering one of the listed HS codes to ensure end user legitimacy and mitigate attempts at evasion of the E5’s respective export controls and/or sanctions. HS codes can be found on trade documents including commercial invoices, packing slips, airway bills, sea or house bills, or other supporting trade documentation.

After reviewing export data related to the list’s tier one and tier two HS codes, the E5 have identified three patterns associated with importers in non-GECC countries that raise diversion concerns:

• the company never received exports prior to February 24, 2022;
• the company received exports that did not include any of the tier one and tier two HS codes prior to February 24, 2022; or
• the company received exports involving the tier one and tier two HS codes prior to February 24, 2022, but also saw a significant spike in exports thereafter.

Accordingly, all the E5 are requesting that exporters conduct customer and transactional due diligence prior to export. Specifically, when opening accounts for new customers engaged in trade and located in non-GECC countries, exporters are urged to:

• evaluate the customer’s date of incorporation (e.g., incorporation after February 24, 2022),
• evaluate the end user and end use of the item (e.g., whether the customer’s line of business is consistent with the ordered items), and
• evaluate whether the customer’s physical location and public-facing website raise any red flags (e.g., business address is a residence, no website is available).

For existing customers, exporters should pay particular attention to anomalous increases in the volume or value of orders. Exporters should also request and review additional information about the end-use and end-user, as well as inconsistencies between the items ordered and the customer’s line of business.

Select red flag indicators of export control and sanctions evasion

The E5 are providing an additional select list of potential red flag indicators of export control and/or sanctions evasion that may be relevant to exporters. (Consult your country’s export controls and/or sanctions authority to know your obligations.) Consideration of these indicators, in conjunction with conducting appropriate risk-based customer and transactional due diligence, will assist in determining whether an activity may be connected to export control and/or sanctions evasion. As no single red flag is necessarily indicative of illicit or suspicious activity, all the surrounding facts and circumstances should be considered before determining whether a specific transaction is suspicious or associated with potential export control and/or sanctions evasion.

New transactional and behavioral red flags

1. Transactions related to payments for defense or dual-use products (items that can be used for both civilian and military purposes) from a company incorporated after February 24, 2022, and based in a non-GECC country.
2. A new customer whose line of business is in trade of products associated with the tier one and two HS codes, is based in a non-GECC country, and was incorporated after February 24, 2022.
3. An existing customer who did not receive exports associated with the tier one and two HS codes prior to February 24, 2022, and is exporting or re-exporting such items now to known transshipment points.
4. An existing customer, based outside the Export Five, received exports associated with one or more of the tier one and two HS codes prior to February 24, 2022, and requested or received a significant increase in exports with those same codes thereafter.
5. A customer who lacks or refuses to provide details on banks, shippers, or third parties, including about end users, intended end-use, or company ownership.
6. Transactions involving smaller-volume payments, all from the same end user’s foreign bank account, to multiple, similar suppliers of dual-use products.
7. Parties to transactions listed as ultimate consignees or listed in the “consign to” field who do not typically engage in business consistent with consuming or otherwise using the subject commodities (e.g., other financial institutions, mail centers, or logistics companies).
8. A customer that significantly overpays for a commodity, as determined by known market prices.
9. A customer or address thereof that is similar to one of the parties on a proscribed party or sanctions list of one or all of the Export Five.

Responsibilities of the exporter

Failure to comply with these recommendations can result in reputational harm, future business relationship challenges, fines, and/or criminal charges. Know the laws and your obligations.

Considerations prior to export declaration

Many other items not captured by the HS codes listed above are subject to export controls and sanctions. It is the responsibility of the exporter to ensure compliance with all applicable legislation. There are a number of screening tools available that could be used to assist with preliminary compliance and due diligence:

• Consolidated List – Australia
• Consolidated Canadian Sanctions List
• Canadian Sanctions
• Restricted Goods and Technologies List - Canada
• United Nations Security Council Consolidated List
• Consolidated U.S. Screening Tool
• OFAC Sanctions List Search - U.S.
• D19-11-1 (Canadian sanctions)
• D20-1-1 (Canadian Export Reporting)
• Reporting of Exported Goods Regulations - Canada

A number of other resources are available to exporters including:

• Handbook of Export and Import Commodity codes - Canada
• Export and Brokering Controls Handbook - Canada
• A Guide to Canada’s Export Control List
• BIS Policy Guidance - U.S.
• The U.S. Export Administration Regulations
• BIS Compliance & Training- U.S.
• UK Export Control Guidance
• Australian Defence Export Controls (DEC)
• New Zealand Export Controls