What do the new sanctions withhold?
The EU has added 27 new entities to the list of the ones directly supporting the Russian military and industrial complex during its war and aggression against Ukraine. The 27 entities are now subject to stricter export restrictions on dual-use goods and technologies, as well as goods and technology that could contribute to the technological improvement of Russia's defence and security sector. Some of these entities are located in third countries (India, Sri Lanka, China, Serbia, Kazakhstan, Thailand and Türkiye) and have been involved in evading trade restrictions, while others are Russian entities involved in the development, production and supply of electronic components for the Russian military and industrial compound.
In addition, the decision expands the list of restricted items that could contribute to the technological improvement of the Russian defence and security sector by adding components for the development and production of unmanned aerial vehicles (UAV).
Iron and steel
The UK is added to the list of partner countries that apply a series of restrictive measures on imports of iron and steel from Russia and a series of import control measures largely equivalent to those of the EU.
What is a sanction package?
A sanction package may include prohibitions on the import and/or export of goods, services and financial resources. A sanction package may also restrict trade with specific individuals, groups or entities. Even the trade of a non-sanctioned product with someone on this list, violates sanctions law. Such would also be the case if the trading partners - or their shareholders - are subject to sanctions. It is prohibited to supply any goods or services whatsoever to those parties.
Does the Sanction Package also apply if I never trade with Russians?
The possibility exists. The most prominent example is the obligation - in the 11th package of sanctions - for importers to provide proof when importing specific products made of iron and steel. Imports of products from Russia were already restricted at that time, but this new package added an additional obligation. In fact, since the 11th sanctions package, importers must prove - for a range of products - that the goods to be imported do not contain Russian basic raw materials. The obligation applies regardless from which third country the goods are imported. In other words, it also affects entrepreneurs who do not trade with Russia.
What if I am not dealing in dangerous goods?
This does not tell the whole story. In fact, it is even possible that your commodity code and trading partner are not mentioned in the Russia sanctions legislation, but the trade is still prohibited. This is the case when the product is mentioned in the Dual-use regulation. This is because some 'safe' goods can, in the wrong hands, be used for military purposes. The export of such items is only allowed with an export-authorisation. However, issuance of such authorisation is excluded for exports to Russia. Furthermore, the indirect trade with Russia is also sanctioned. So even if your trading partner is located in a country other than Russia, this does not mean that you are excused. If the products do eventually end up in Russia, then you may indirectly have contributed to that trade. It is therefore up to you, as a trader, to be well aware of who you are trading with and whether this party is actually the end user of the goods. Customs expects market participants to apply due diligence in this context. Know your customer, because it is better to be safe than sorry.
What if I pass all the checks?
The question then is whether the transaction is also allowed. Indeed, we are witnessing more and more banks independently refraining from facilitating transactions to and from Russia. As an illustration, Rabobank's website states:
'Rabobank also actively wants to avoid making a direct or indirect contribution to ongoing Russian aggression through payment transactions. Therefore, in essence, you cannot become a customer with us if you have a relationship with Russia.
Other banks have similar convictions. This shows the complexity even more. The fact the export is allowed does not mean that banks will facilitate payment.
To summarize, any new sanction package can have a major impact on your organisation, regardless of whether you are trading with Russian parties. The fact that some of your products are not currently sanctioned could easily change in the future.
If you fail to comply with the (sanction) obligations, you will make an incorrect customs declaration. This is obviously a punishable offence under customs legislation. However, because it is sanction legislation, it also qualifies as an economic offence. Economic offences also often receive media attention. In addition, these offences can have serious consequences for – amongst others – applying for or keeping your AEO authorisation.
Do you have questions about the impact on your business or want to know if you are in control or not? Feel free to contact one of our advisors!