Export controls case study using the example of an export to Belarus

The first step in the process is a check of the business partner. The export control check under EU law uses sanctions list screening to check for any existing bans on the provision of economic and/or financial resources to the business partner. The relevant list under EU law is the Consolidated Financial Sanctions Parties List (CFSP list). The CFSP list is an EU database that includes all persons, entities, and organizations that are subject to comprehensive EU bans of this nature.

With regard to the country embargo against Belarus, the CFSP list incorporates all entries from Annex I of the embargo regulation. Companies that use AEB’s Compliance Screening solution for their sanctions list screening always check their business partners against the current CFSP list.

It should be noted here that, in addition to comprehensive bans on the provision of economic and/or financial resources, EU sanctions laws also contain other sanctions against individuals, entities, and organizations not included in the CFSP list. The conglomerates mentioned by name in the embargo against Russia, for example, are excluded from trade in dual-use goods. These companies are not subject to any such bans, which is why they are not on the CFSP list.

The second step in the export control process is a country check. Here we look at the embargo regulations applicable in business transactions with embargoed countries such as Belarus, Russia, or Syria. The EU embargo regulations must be checked first, as they are more targeted and take precedence over the more general regulations of the Dual-Use Regulation and national laws.

Companies wishing to do business with Belarus should therefore prioritize checking whether the planned transaction falls within the scope of the embargo regulation against Belarus. If so, the restrictions defined in the embargo regulation in the form of bans or license requirements must be applied with precedence to the planned transaction. If the planned transaction does not fall within the scope of the embargo regulation, the next step is to check the general export control regulations.

The third step in the process is a check of export control lists. Export controls restrict the freedom of foreign trade in transactions with listed goods. Listed goods always require a license when exported. Companies are able to comply with this licensing requirement only if they first classify their material master according to the export control lists.

Civilian goods that, based on their technical parameters, are listed in the dual-use list in Annex I of the EU Dual-Use Regulation and do not fall under the more specific embargo regulation against Belarus always require a license under Art. 3 of the EU Dual-Use Regulation when exported to Belarus.

The fourth step in the export control process is an end-use check for all non-listed items. The step, known as a catch-all check, subjects non-listed items to a license requirement when there is knowledge of a critical end-use. End-uses subject to EU-wide licensing requirements are those described in Art. 4 and 5 of the EU Dual-Use Regulation. National catch-all regulations may also apply, depending on the country.

For exports to Belarus, all non-listed goods must undergo an end-use check. Since Belarus is an arms embargo country within the meaning of Art. 4 I b of the EU Dual-Use Regulation, a license is specifically required whenever there is knowledge of a military end-use in Belarus.

The first step is for A-SE to run a software check to determine whether the business partner MAZ is subject to EU bans on the provision of economic and/or financial resources. A listing of MAZ on the EU’s CFSP list is checked. The screening software checks for a similarity between the business partner’s name and the names of the listed entities. The sanctions list screening reports a match in this case.

The similarity or match of the business name reported by the software must be verified manually to determine whether the business partner and the list match are the same person. This is found to be the case. 

The EU has imposed a comprehensive ban on the provision of economic and/or financial resources to the business partner “Minskii Automobilnyi Zavod” (MAZ). In practice, this means that A-SE must break off its business relations with MAZ. No order confirmation will be issued, nor will any new agreements be entered into with MAZ. 

Due to the comprehensive bans in place against MAZ, the sanctions list screening (step 1) completes A-SE’s export control check. The result of the sanctions list screening is logged in AEB’s Compliance Screening software and can later be called up and verified in foreign trade audits.

The first step is for B-GmbH to check whether the Belarusian business partner is subject to EU bans on the provision of economic and/or financial resources. Belanixy OOO is the Belarusian business partner of B-GmbH. Checking Belanixy OOO against the CFSP list does not produce a match. The EU has not issued any such bans against Belanixy OOO. B-GmbH does not have any other Belarusian business partners that would need to undergo sanctions list screening. 

In practice, many companies check the foreign banks involved in the transaction, even though no business relations are maintained with them. In the present case, B-GmbH is aware that Belarusbank is providing a bank guarantee, so it decides to also run a sanctions list screening of Belarusbank against the CFSP list. The screening of Belarusbank does not produce a match on the CFSP list. B-GmbH is quite surprised about this, because Belarusbank is mentioned in Annex IX of the EU embargo regulation against Belarus.

Many companies expect that all individuals, entities, and organizations found in any of the annexes to the EU sanctions regulations will be consolidated into the CFSP list and produce a match during sanctions list screening. It should be noted here once again that the CFSP list only includes entities subject to EU bans on the provision of economic and/or financial resources. Individuals, entities, and organizations subject to other sanctions are not included in the CFSP list.

Belarusian state banks listed in Annex IX are denied access to the European capital market but are not subject to any of the aforementioned bans. B-GmbH is not active on European capital markets, nor is it even a business partner of Belarusbank, so it is not subject to the sanctions against Belarusbank. The assumption of the bank guarantee by Belarusbank does not affect the planned business relationship between B-GmbH and Belanixy OOO.

The screening of the business partner Belanixy OOO using the first question does not result in any restrictions for the planned transaction. B-GmbH can now proceed to step 2.

The second step is for B-GmbH to check by country. AEB’s Export Controls solution alerts B-GmbH to the partial embargo in place against Belarus and prompts it to review the EU embargo regulation against Belarus. B-GmbH must check whether the transaction in question actually falls under the restrictions against Belarus.

B-GmbH would like to export frequency changers listed in Annex I of the EU Dual-Use Regulation to Belarus. The export of dual-use items to Belarus is possible in principle, but the embargo regulation against Belarus prohibits trade in dual-use items under the conditions described in Art. 1e and 1f.

Art. 1e prohibits the trade in dual-use items listed in Annex I of the EU Dual-Use Regulation for military purposes or military end-users. Art. 1f of the embargo regulation against Belarus prohibits the provision of dual-use items to entities listed in Annex V of the regulation. 

Belanixy OOO is not a military end-user, nor are the frequency changers listed under 3A225 used for military purposes. The planned transaction of B-GmbH does not fall under the prohibition in Art. 1e of the embargo regulation against Belarus. 

Annex V of the embargo regulation against Belarus, which is intended for the listing of Belarusian conglomerates, is empty as of the beginning of January 2022. Annex V does not yet contain any names at the time of the sale of the listed frequency changers to Belanixy OOO. The planned transaction between B-GmbH and Belanixy OOO does not fall under the prohibition in Art.1f of the embargo regulation against Belarus.

Since the frequency changers are neither sanctioned surveillance goods nor products from the sanctioned petroleum, potash, or tobacco industries, the planned transaction of B-GmbH with Belarus does not fall under the EU Embargo Regulation No. 765/2006 against Belarus.

The embargo check carried out in the second step shows neither bans nor license requirements for the planned transaction. B-GmbH can now proceed to the third step. Step 3 involves checking the general export control regulations that must always be observed in business transactions with embargoed countries if no restrictions arise from the more specific embargo regulations.

The third step is a goods check. A classification of goods according to the export control lists is required. B-GmbH has classified its material master. Based on their technical parameters, the frequency changers requested by Belarus fall under the dual-use item number 3A225. B-GmbH has documented its decision-making process and saved the results of the export control list check to the material master.

The export of dual-use items listed in Annex I of the EU Dual-Use Regulation always requires a license under Art. 3 of the EU Dual-Use Regulation. Since Belarus is outside the EU, B-GmbH requires an export license to export the listed frequency changers. 

Generally, it’s necessary to apply for an individual export license. One exception is when a general license can be used for the specific export in question. The German company B-GmbH can use either the EU General Export Authorizations, which have priority, or Germany’s national general license (AGG). At the time of export, B-GmbH can export to Belarus using the national AGG17 license. 

B-GmbH is responsible for its use of German general licenses, meaning it must check whether the requirements described in AGG17 are present. The use of national general licenses is subject to registration and reporting requirements. In addition, the correct coded document must be provided to the customs authorities in the export declaration.

The export control screening of B-GmbH has been completed in compliance with the license requirement under Art. 3 of the EU Dual-Use Regulation. European export control law does not provide for any further checks. It should be noted here once again that the end-use test in step 4 is required only for non-listed goods.

Since B-GmbH runs the export control check using AEB’s Trade Compliance Management software, the screenings are logged together with reasons for approval and document attachments. The logs provide a complete audit trail for internal audits and foreign trade audits.

Case study 2 shows that in business transactions with embargoed countries, the general export control regulations remain applicable alongside the embargo regulations for the respective country. The export control process in this case study of a transaction with Belarus is transferable to business transactions with other embargoed countries. 

This same process can also be used to check a transaction with Russia, for example. It’s worth noting here that sanctions already familiar from the Russia embargo have been incorporated into the embargo regulations against Belarus.

These are restrictions against individuals and entities and entail bans on the provision of economic and/or financial resources.

These include the following areas: 

• Capital market restrictions
• Munitions
• Goods for internal repression
• Surveillance goods
• Dual-use items
• Goods for the petroleum, potash, and tobacco industries