On May 22, 2015, the US Government relaxed certain export and reexport controls imposed under US sanctions targeting the Crimea region of Ukraine (“Crimea”). Specifically, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued a new General License authorizing the export or reexport from the United States or by US Persons to persons in Crimea of certain services and software incident to the exchange of personal communications over the Internet. In coordination with OFAC, the US Commerce Department’s Bureau of Industry and Security (“BIS”) issued a final rule amending the Export Administration Regulations, 15 C.F.R. Parts 730-774 (“EAR”), to authorize without a specific license the export/reexport to, or transfer within, Crimea of certain software necessary to enable the exchange of personal communications over the Internet. These changes relax restrictions on certain exports and reexports to Crimea imposed pursuant to Executive Order 13685 and §746.6 of the EAR, as discussed in previous blog posts, including our posts here, here, and here. Action from both OFAC and BIS was necessary because the two agencies have overlapping licensing jurisdiction for exports and reexports to Crimea. This is in addition to OFAC’s licensing jurisdiction over the activities of US Persons involving Crimea. BIS also amended the EAR to clarify how to apply certain country-based provisions of the EAR to Crimea, which is not itself a country.
OFAC General License No. 9
General License No. 9 is similar in some respects to the “personal communications” general licenses found in the Cuba, Iran, Sudan, and Syria sanctions programs. Specifically, General License No. 9 authorizes the export or reexport, directly or indirectly, from the United States or by US Persons, wherever located, to persons in Crimea of the following services and software, provided that such services and software are widely available to the public at no cost to the user (i.e., not fee-based):
- Services incident to the exchange of personal communications over the Internet, such as instant messaging, chat, e-mail, social networking, sharing of photos and movies, web browsing, and blogging;
- Software necessary to enable the services described above, provided that such software is designated EAR99 under the EAR or classified by the US Department of Commerce (“Commerce”) as mass market software under ECCN 5D992 of the EAR; and
- Software not subject to the EAR because it is of foreign origin and located outside the United States that is necessary to enable the services described above, provided that such software would be designated EAR99 if it were located in the United States or would meet the criteria for classification under ECCN 5D992 of the EAR if it were subject to the EAR.
Importantly, General License No. 9 does not authorize the following:
- Transactions involving Specially Designated Nationals designated under the Ukraine-related sanctions program (although OFAC clarified in an FAQ that this does not exclude parties identified on OFAC’s Sectoral Sanctions Identifications List or otherwise subject to OFAC’s sectoral sanctions);
- The export or reexport of any goods or technology on the EAR Commerce Control List, except for software necessary to enable the services described above that is classified by Commerce as mass market software under ECCN 5D992;
- The export or reexport of commercial-grade Internet connectivity services or telecommunications transmission facilities (e.g., dedicated satellite links or dedicated lines that include quality of service guarantees);
- The export or reexport of web-hosting services that are for commercial endeavors; or
- The export or reexport of domain name registration services.
OFAC also announced that it may issue specific licenses on a case-by-case basis for the export or reexport of (i) services or software incident to the exchange of personal communications over the Internet that are not specified above, or (ii) hardware incident to the exchange of personal communications over the Internet.
Amendments to the EAR
BIS amended the EAR as follows: 1. Export/Reexport/Transfer of Software Related to Internet Personal Communications In coordination with OFAC’s publication of General License No. 9, BIS amended the EAR to authorize the export or reexport to Crimea, or the transfer within Crimea, of software necessary to enable the exchange of personal communications over the Internet, such as instant messaging, chat, e-mail, social networking, sharing of photos and movies, web browsing, and blogging, provided that such software is:
- Classified as EAR99 or classified as mass market software under ECCN 5D992.c; and
- Widely available to the public at no cost to the user.
2. Guidance Regarding Deemed Exports/Reexports to Foreign Nationals In or From Crimea Pursuant to the “deemed export” and “deemed reexport” requirements in the EAR, “releases” of technology or software source code subject to the EAR to a foreign national are “deemed” to be exports or reexports to the home country or countries of the foreign national. Because Crimea is not itself a country, BIS had received requests from the public for guidance on how to apply these requirements in the context of foreign nationals in or from Crimea. The EAR now provide that, for the purposes of determining whether a license is required for a deemed export or deemed reexport to a foreign national located in or from Crimea, the nationality of the foreign national – as determined by accepted methods such as looking at the individual’s passport or other nationality documents recognized by the US Government – is used. For example, if an individual from Crimea is in the United States and has a Ukrainian passport, the licensing requirements applicable to Ukraine would apply to the release of technology or software source code subject to the EAR to that individual. Similarly, for a release of technology or software source code to a Russian national located in Crimea, the licensing requirements applicable to Russia would apply. If the individual were a national of a third country (i.e., neither Ukraine nor Russia), the licensing requirements applicable to that third country would apply. (For individuals who have dual-citizenship or nationality (e.g., an individual who is a citizen of both Ukraine and Russia), BIS generally recognizes the individual’s most recent country of citizenship or permanent residency as his or her home country for licensing requirements.) 3. Guidance Regarding Application of EAR Country Groups to Crimea BIS amended Supplement No. 1 to Part 740 of the EAR to clarify how the EAR Country Groups – which determine licensing requirements and the use of license exceptions – apply to Crimea. Specifically, BIS added a footnote to clarify that, for purposes of any EAR provisions that reference the Country Groups, Crimea uses the same designations as Ukraine. The footnote also clarifies that the only license exceptions that may be used for Crimea are those specified in EAR §746.6(c).
As noted above, coordinated action by OFAC and BIS was necessary because these agencies share jurisdiction for certain exports and reexports involving Crimea. To the extent both OFAC and BIS jurisdiction apply, companies should be diligent in evaluating compliance responsibilities under both OFAC and BIS regulations related to Crimea.