EU sanctions against Russia – an update on Economically Critical Goods

The EU and its international partners responded to Russia’s war of aggression against Ukraine on 24 February 2022 with massive and comprehensive restrictive measures. The sectoral sanctions aim at curtailing Russia’s ability to wage the war, depriving it of critical technologies and markets and significantly weakening its industrial base.

Regulation 833/2014 imposing sanctions against Russia includes prohibitions to sell, supply, transfer or export, directly or indirectly, goods which could contribute to the enhancement of Russian industrial capacities. Therefore, the Economically Critical Goods List is comprised of mainly industrial goods subject to EU’s restrictive measures for which anomalous trade flows through certain third countries to Russia have been observed.

The creation of the list has been guided by the objective that, in addition to depriving Russia of prohibited dual-use goods and advanced technology items used in their military systems found on the battlefield in Ukraine or critical to the development, production or use of those military systems (Common High Priority List), EU sanctions also aim at weakening Russia’s industrial base; Russia has become a war economy and its industrial complex directly or indirectly supports Russia’s military efforts.

The List may support due diligence and effective compliance by exporters as well as targeted anti-circumvention actions by customs and enforcement agencies of partner countries determined to ensure that their territories are not being used for circumvention of EU sanctions purposes. These economically critical goods included in the list derive from selected groups of mainly industrial goods classified under HS chapters:

• 28 (Chemicals);
• 84 (Machinery);
• 85 (Electronics); and
• 87 (Vehicles).

The imports of these goods into third countries from the EU and the rest of the world show a significant increase since the start of the Russian invasion and the imposition of EU sanctions, which is mirrored by an increase in exports of those goods from those third countries to Russia.

The list includes goods where:

• Exports above the threshold of 1 million euro over a 12-month period (2022) has been recorded and
• At least a 100% increase in exports to Russia from third countries as compared to the average of the three preceding years periods before the Russian invasion of Ukraine has been observed.

The European Union (EU) recently implemented an update to the List of Economically Critical Goods.

• https://finance.ec.europa.eu/publications/list-economically-critical-goods_en
• https://finance.ec.europa.eu/system/files/2023-10/list-economically-critical-goods_en.pdf

Points of interest

Considerations for companies exporting said products:

1. Due Diligence:
1. Exporters should exercise due diligence when doing business. They must ensure they comply with EU sanctions. To do so, they must be aware of the goods listed under HS Chapters 28 (Chemicals), 84 (Machinery), 85 (Electronics) and 87 (Vehicles).
2. Prohibited Activities:
1. Companies must understand that selling, delivering, transferring or exporting goods listed on the List of Economically Critical Goods to Russia is strictly prohibited. This is according to Regulation 833/2014. Compliance with these regulations is crucial to avoid fines and legal consequences.
3. Anti-Circumvention Measures:
1. Customs and enforcement agencies of partner countries are determined to prevent the circumvention of EU sanctions. Exporters should be aware of possible anti-circumvention measures. To this end, they must take the necessary precautions to avoid it.
4. Responsible Export Practices:
1. Companies should prioritise responsible export practices by thoroughly assessing their operations. Ensure that no unintentional contributions are made to Russia. This includes scrutinising trade flows and monitoring changes in export patterns.

There has been an increase in exports of these goods to third countries. Exporters must take responsibility for preventing the trade of these goods for use in Russia, as specified in the list.

Conclusion

The List of Economically Critical Goods update highlights the EU’s commitment to dealing with Russia and promoting responsible export practices.

Companies exporting goods covered by the HS mentioned above codes need to stay abreast of the latest developments. They must comply with regulations to contribute to international peace and security.

Source

• https://tradecontrolscompliance.com/en/update-list-of-economically-critical-goods/
• https://finance.ec.europa.eu/publications/list-economically-critical-goods_en
• https://finance.ec.europa.eu/system/files/2023-10/list-economically-critical-goods_en.pdf