Export Controls: Global Security and Russia

In recent years, geopolitical tensions have resulted in stricter export controls on specific items that have the potential to be diverted to support military operations. The Department of Commerce’s Bureau of Industry and Security (BIS) has been at the forefront of implementing stringent measures to curb the illegal use of certain technologies, particularly in the context of Russia’s actions in Ukraine. To help shippers and industry stakeholders stay informed, we present a comprehensive guide to common high-priority items, export control tiers, and the responsibilities of global shippers.

The Common High Priority Items List

Since February 24, 2022, BIS has been actively involved in restricting Russia’s access to technologies and items crucial for sustaining its military operations in Ukraine. These restrictions also apply to Belarus due to its involvement in supporting Russia’s destabilizing activities. BIS has identified 45 “common high-priority items” by six-digit Harmonized System (HS) Codes that Russia seeks to acquire for its weapons programs.

The common high-priority items are categorized into four tiers based on their significance to Russia’s war efforts:

Tier 1: These items are of the highest concern due to their critical role in the production of advanced Russian precision-guided weapons systems. These items lack domestic production in Russia, and there are limited global manufacturers.

Tier 2: This tier includes additional electronic items that Russia may have some domestic production capability for but prefers to source from the United States and its allies.

Tier 3.A: Further electronic components used in Russian weapons systems, with a broader range of suppliers.

Tier 3.B: Mechanical and other components utilized in Russian weapons systems.

Tier 4: Manufacturing, production, and quality testing equipment for electric components, circuit boards, and modules.

Notably, BIS has given special attention to the nine HS codes in Tiers 1 and 2, as they have extensive commercial applications but have also been found in Russian missiles and drones on the battlefield in Ukraine. Items in Tiers 1 and 2 are subject to the most comprehensive controls under the Export Administration Regulations (EAR).

Understanding the Export Control Categories

The items in the 45 HS codes encompass a wide range of technology and components. These items include both lower technology items designated EAR99, as well as more sensitive items on the Commerce Control List (CCL), including items designated under Export Control Classification Numbers (ECCNs). Some of the ECCNs include 3A001, 3A002, 3A090, 3A991, 3A992, 3B001, 3B991, 3B992, 5A001, 5A991, 6A002, 6A003, 6A993, 7A003, 7A994, and 9A991.

Exporters and shippers dealing with these items need to be aware of the potential risks and compliance requirements, given the sensitive nature of these technologies and components.

Export Control Risks

Russia’s efforts to procure these high-priority items pose significant risks for individuals and entities, both inside the United States and globally. Inadvertent involvement in violations of U.S. export controls and sanctions laws can lead to severe civil or criminal liability. Additionally, foreign parties engaged in activities contrary to U.S. foreign policy and national security interests may be added to BIS’s Entity List or OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List.

Russia often employs evasive tactics such as third-party intermediaries or transshipment points to obscure the true identities of end-users and circumvent restrictions. Exporters, reexporters, and their service providers, including financial institutions, logistics companies, and transportation providers, need to be vigilant and take appropriate measures to mitigate these risks.

Guidance from BIS and U.S. Government Agencies

BIS and other U.S. government agencies have issued various guidance documents to assist industry stakeholders in understanding and addressing these export control challenges. These documents include:

An alert issued by FinCEN and BIS urging increased vigilance for potential Russian and Belarusian export control evasion attempts.
Frequently asked questions for exporters on commodities and red flags identified in previous alerts.
Tri-Seal Compliance Note jointly issued by the Department of Commerce, Department of the Treasury, and Department of Justice, aimed at cracking down on third-party intermediaries used to evade Russia-related sanctions and export controls.
A supplemental alert addressing potential Russian export control evasion attempts on the highest-priority nine HS codes.
BIS guidance specifically tailored to exporters and reexporters for the nine highest-priority HS codes.
Guidance from various U.S. government departments and agencies on items sought by Iran for the production of Unmanned Aerial Vehicles (UAVs) and the need to counteract Russia’s procurement efforts.

United States-Australia-Canada-New Zealand-United Kingdom Joint Guidance

The “Export Enforcement Five” or “E5” partnership, established in June 2023, comprises the governments of Australia, Canada, New Zealand, the United Kingdom, and the United States. These nations are working together to coordinate export control enforcement and combat Russia’s evasion tactics.

The E5 partnership has issued joint guidance to industry and academia, identifying high-priority items critical to Russian weapons systems and recommending actions to prevent their diversion to Russia through third countries. This collaborative effort emphasizes the importance of global cooperation in curbing illegal procurement of sensitive technologies.

Navigating the complex landscape of export controls is crucial for maintaining global security and stability. Shippers and industry stakeholders must remain informed about the common high-priority items and the stringent export controls associated with them. By adhering to compliance measures and staying vigilant, we can collectively contribute to global efforts to combat the illegal use of sensitive technologies and support international peace and security. For more detailed information and the full guidance document, please visit here.

At Future Forwarding, we are committed to helping our customers navigate the ever-changing landscape of international shipping and export controls. If you have questions or require assistance with your shipments, please don’t hesitate to reach out to our dedicated team of experts. Rest assured, we stay on top of the latest policy developments and industry updates to provide you with the most accurate and up-to-date guidance. Your peace of mind and the success of your shipments are our top priorities. Contact us today to experience the future of forwarding and ensure your shipments comply with all relevant regulations. Your journey to seamless and compliant international shipping begins with us.

Understanding MoCRA: A Guide to the Modernized Cosmetics Regulation Act of 2022

In the ever-evolving world of cosmetics, ensuring consumer safety and regulatory compliance is of paramount importance. Recognizing the need for modernization, the Modernization of Cosmetics Regulation Act of 2022 (MoCRA) has ushered in significant changes to the regulatory landscape governing cosmetic products in the United States. Aimed at enhancing safety, transparency, and oversight, MoCRA replaces outdated regulations from 1938 and introduces a range of new requirements that impact manufacturers and importers alike. In this blog, we will delve into the key updates brought about by MoCRA, providing valuable insights to beauty manufacturers and importers regarding compliance and industry best practices.

Under MoCRA, cosmetic facilities must register with the US Food and Drug Administration (FDA) and renew their registrations every two years. The registration requirement applies to establishments involved in manufacturing or processing cosmetic products distributed in the United States. Existing facilities have until December 29, 2023, to complete their registrations, while new facilities must register within 60 days of commencing manufacturing operations. It is crucial for facilities to initiate the registration process early to account for any unforeseen issues or potential delays from the FDA.

The FDA holds the authority to suspend a facility’s registration if it determines that a product manufactured or processed by the facility poses a reasonable probability of causing severe adverse health consequences or death. Moreover, if the agency believes that other products in the facility may be similarly affected due to an inability to isolate the failure or a pervasive failure concern, registration suspension is also applicable. In such cases, the facility is prohibited from selling or distributing cosmetics products in the United States.

Additionally, responsible persons, such as manufacturers, distributors, or packers whose names appear on the label, are required to list each cosmetic product with the FDA. This step promotes transparency and facilitates efficient monitoring of products in the market.

The Voluntary Cosmetic Regulations Program (VRCP), which allowed voluntary submission of product information to the FDA, is no longer accepting submissions. MoCRA mandates a more extensive volume of submissions, necessitating the development of a new program by the FDA to handle facility registrations and product listings. This change enables the FDA to manage regulatory oversight effectively, ensuring greater transparency and safety within the industry.

MoCRA places a strong emphasis on consumer safety by mandating cosmetic manufacturers to submit safety information about their products to the FDA. This includes reporting any adverse reactions experienced by consumers and disclosing information regarding potentially harmful ingredients used in the products. The FDA utilizes this data to evaluate product safety and take appropriate actions to protect consumers.

Furthermore, manufacturers must adhere to Good Manufacturing Practices (GMPs), which encompass guidelines ensuring the quality and safety of cosmetic products. Compliance with GMPs involves using clean equipment, proper handling and storage of ingredients, and implementing robust quality control measures.

Another crucial aspect of MoCRA is the requirement for cosmetic manufacturers to disclose the full list of ingredients used in their products on the product label. This shift from previous regulations, which allowed vague terms like “fragrance,” provides consumers with enhanced transparency, enabling them to make informed decisions about the products they use.

Under MoCRA, certain exemptions are granted to cosmetic/drug and cosmetic/device combination products, relieving them from specific requirements including compliance with Good Manufacturing Practices (GMPs), adverse event reporting, registration and listing obligations, safety substantiation, and recordkeeping. These exemptions do not extend to facilities involved in the manufacturing of both combination products and cosmetics.

Small businesses are exempt from GMP and registration and listing requirements. A small business is defined as having average gross annual sales in the U.S. for the previous three-year period of less than $1,000,000, adjusted for inflation. It is important to note that the small business exemption does not apply if the business manufactures products that come into contact with the eyes, are injected, are intended for internal use, or alter appearance for more than twenty-four hours.

The Modernization of Cosmetics Regulation Act (MoCRA) represents a crucial leap forward in the regulation of cosmetics in the United States. With its emphasis on safety, transparency, and compliance, MoCRA ensures that the beauty industry aligns with evolving consumer expectations. Manufacturers and importers must familiarize themselves with the updated requirements to ensure they meet the standards set forth by MoCRA.

At Future Forwarding, our expertise in supply chain management and deep understanding of regulatory compliance can help you stay on top of these complex requirements. By leveraging our industry knowledge and network, we ensure that you can effectively navigate the regulatory landscape, maintain compliance, and streamline your operations. With our reliable support, shippers can focus on core business while confidently meeting the obligations imposed by MoCRA. To find out more, reach out to Future Forwarding today.

The Importance of Supply Chain Mapping

With an increasing emphasis being placed by CBP on importers to know the source of every component and raw material in their supply chain, the agency now recommends that importers map their supply chain down to the fifth supplier level of raw materials to ensure that the product is free of forced labor. Beginning with the Customs Modernization Act in the mid-1990’s and now with a final rule published by CBP governing broker responsibilities in 19 CFR Part 111 and as part of their wider mission to update their regulations for today’s trade, there is a reinforcement and reiteration to importers – know where your goods are coming from.

According to the Global Slavery Index, the United States imports approximately $144 billion dollars worth of goods made with forced labor. These goods are, in fact, prohibited by Section 307 of the US Tariff Act and any goods that are reasonably suspected of being produced in such a way could be subject to a Withhold Release Order (WRO). A Withhold Release Order means that the goods will not be released for entry into the United States, and the goods could be subject to seizure and the IoR subject to steep fines.

It’s important to understand the definition of forced labor for these purposes. From the US Tariff Act: “All work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily.” Menace could be anything from verbal threats, to withholding pay, deception, retention of identity documents, debt bondage, and even excessive overtime to more insidious acts like physical violence.

If we all do our part, we can keep ethically produced goods moving while eliminating the demand for forced labor supply.

Some suggested resources to help with supply chain mapping and compliance from the Department of Homeland Security (DHS) are as follows:

The U.S. Department of Labor’s Comply Chain

The U.S. Department of State’s Responsible Sourcing Tool

National Action Plan on Responsible Business Conduct

CBP’s forced labor website resources

CBP’s Withhold Release Orders and Findings

The appearance of forced labor for raw materials extends beyond Xingang and its cotton and photovoltaic cell industries. CBP has WRO actions in place for products from around the world. The requirement of importers to comply or risk denial of entry means that is extremely important that, working with our clients, Future Forwarding keeps the goods in your supply chain moving from raw material to final delivery to the customer, whether business or individual.

A Recipe for Compliance

For the average consumer, there’s the cookbook and the shopping list that comes with following those instructions. Particularly now with the Fourth of July holiday this weekend, we’re probably all digging out those hand-written, handed-down books laden with summertime barbecue and boat favorites.

With grocery shelves having some gaping holes or old reliable ingredients no longer available, the need for clever last-minute substitutions and improvisation is quickly becoming the norm rather than the exception. If you’re good, you can ingredient swap without people even noticing the difference.

For buyers of finished goods, the quality and efficacy of the end product they receive has traditionally been sufficient. Needing to know not just the country of origin but the manufacturer, the source of the earliest precursor components and even the name and location of a farm are now all part of an importer’s responsibility. If Customs or a participating government agency like FDA or the EPA wants to know, not having an answer is not an option.

Years ago, CBP was focused on the country of origin of merchandise for both evasion of quotas (limitations on the quantity and type of a product which could be imported) and because USDA laws may permit the import of a product from one country but not another because of the risk to American agriculture. There are no shortage of invasive species which have now become ubiquitous such as the Longhorn Beetle or Asian Carp which threaten to destroy ecosystems.

Moving past quotas, CBP has been focused on the issue of forced and child labor, with an entire page devoted to products, manufacturers and countries from which items are prohibited entry ranging from latex gloves to peeled garlic and electric fans. These goods are tracked on a page with Withhold Release Orders maintained by the agency.

This month, the Uyghur Forced Labor Protection Act (UFLPA) came into law, and unlike any other mechanism preceding this statute, the presumption of innocence came first. Under UFLPA, the term being used is “rebuttable presumption”. As we wrote about in our last entry, CBP is looking not just to where a good was finished, but where any underlying component was sourced for a direct line to the affected region. The agency is using both public data sources and their own intelligence and targeting to identify shipments which may contain violative material from the Xinjiang Uyghur Autonomous Region, or XUAR.

What does this mean for US importers? Three well-known exports from Xinjiang are cotton, tomatoes and polysilicate (a precursor to solar cells).

For a textile or footwear importer, does any part of the garment or shoe contain cotton that was grown in Xinjiang?
For a food importer, does any part of the ingredient list contain tomatoes and can they go back to the manufacturer to provide verifiable records showing the source of the fruit?
For an importer of solar-powered lawn and garden lights, do the solar cells contain raw materials or components that could cause the shipment to be detained?

The level of detail that importers are required to maintain to remain in compliance has increased as governments have wanted to know more. A condition of importing, these agencies contend, is complying with a bevy of laws increasingly designed to follow a product from its earliest identifiable components, both to enforce trade laws and to protect consumers from fraudulent or harmful food, drugs or ineffective or dangerous medical devices.

Future Forwarding has been in the business of helping importers keep compliance for decades and our senior customs and compliance leaders have watched the evolution of these agencies and the granular level of detail they now require. Knowing what’s in a product isn’t just an importer’s legal responsibility, but can also open doors to classification changes that reduce or eliminate duties or provide information to support drawback claims at the time of export.

Let Future Forwarding help ensure your supply chain meets the requisite levels of transparency and compliance to prevent delays and provide savings opportunities. Contact us today.

Tag: Compliance

Deciphering the Ultimate Consignee

Export Controls: Global Security and Russia

Understanding MoCRA: A Guide to the Modernized Cosmetics Regulation Act of 2022

The Importance of Supply Chain Mapping

A Recipe for Compliance

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