On August 16, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) issued several new Frequently Asked Questions (FAQ) addressing potential red flags for diversion concerns.
Regarding semiconductor foundries, one FAQ asks if there any special red flags that should be considered with regard to parties (e.g., integrated circuit designers) on the Entity List. The response indicates that the “receipt of new design files from a new customer present a red flag if similar designs have been received from a company on the Entity List in the past. Foundries should consider screening any software design files (e.g., GDSII software files) they receive against their library of previously received design files to determine if any of these software files approximate or match the designs they have on file from a party on the Entity List.” BIS also notes that parties should consider scenarios presented under BIS’s Know Your Customer guidance.
A series of FAQs ask about commodities potentially diverted to restricted Russian or Belarussian companies. In response, BIS states that the following items and Export Control Classification Numbers (ECCNs) are of special concern because of their potential military applications and potential diversion to Russia and Belarus:
- Aircraft Parts and Equipment – ECCN 9A991
- Antennas – ECCN 7A994
- Breathing Systems – ECCN 8A992
- Cameras – ECCN 6A993
- GPS Systems – ECCN 7A994
- Inertial Measurement Units – ECCN 7A994
- Integrated Circuits – ECCN 3A001, 3A991, 5A991
- Oil Field Equipment – ECCN EAR99
- Sonar Systems – ECCN 6A991
- Spectrophotometers – ECCN 3A999
- Test Equipment – ECCN 3B992
- Thrusters (Marine) – ECCN 8A992
- Underwater Communications – ECCN 5A991
- Vacuum Pumps – ECCN 2B999
- Wafer Fabrication Equipment – ECCN 3B001, 3B991
- Wafer Substrates – ECCN 3C001 through 3C00
These Russia-related FAQs offer examples of potential red flags of attempts to evade Russia/Belarus sanctions by “illicit actors” who will engage “complicit shippers (or customs brokers)” to obscure a shipment to evade U.S. export controls. BIS examples of such red flags include, but are not limited to, transactions involving entities with little to no web presence; transactions associated with atypical shipping routes for a product and destination; export transactions involving non- U.S. parties that have shared owners or addresses with Russian state-owned entities or designated companies; transactions involving freight-forwarding firms that are also listed as the product’s final end customer, especially items going to traditional Russian transshipment hubs; and, transactions involving consolidated shipments of luxury goods that previously would have been destined for Russia or Belarus, but are now destined for a transshipment country or a country without restrictions on exports/re-exports to Russia or Belarus.
BIS has identified several countries as possible transshipment points in efforts to evade these sanctions. They include, but are not limited to Armenia, Brazil, China, Georgia, India, Israel, Kazakhstan, Kyrgyzstan, Mexico, Nicaragua, Serbia, Singapore, South Africa, Taiwan, Tajikistan, Turkey, United Arab Emirates (UAE), and Uzbekistan.