The crisis in Ukraine and its impact on San Diego businesses

What San Diego companies need to know about the crisis in Ukraine

The situation in Ukraine has devolved rapidly over the past week and a half, in a conflict that has shaken the foundations of the post-Cold War world order. What happens in Ukraine has major implications for Russia’s relationship with Western nations and the global economy—and has already led to significant changes in the regulation of trade. It is important for San Diego companies—particularly in energy, defense, and dual use technologies—to be aware of these changes and prepare accordingly.

Our team spoke with Bob Bowen, a San Diego trade attorney who, throughout his career, has worked at major defense, aerospace, and tech companies, and helped them navigate the complexities of global trade and compliance. He points out the following aspects of new U.S. export control laws in response to the evolving situation in Ukraine:

  • The U.S. Export Administration Regulations (EAR) now apply to a broader range of items destined for Russia or Belarus, including items manufactured outside of the U.S. with components subject to the EAR
  • The EAR now require U.S. Department of Commerce export licenses for items destined for Russia or Belarus that previously did not require such export licenses
    • This includes items subject to the EAR that are intended for Government of Russia end-users or users at state-owned enterprises in Russia
    • There is a policy to deny applications for such export licenses
  • Nearly all items subject to the EAR are prohibited from going to military end-users, or for military end-uses, in Russia or Belarus without U.S. Department of Commerce export licenses (which are subject to a policy of denial)
  • Items subject to the EAR are prohibited from going to the Donetsk and Luhansk regions of Ukraine without U.S. Department of Commerce export licenses (which are subject to a policy of denial)
  • The Entity List of individuals, companies, and organizations in Russia and Belarus who are now prohibited from participating in transactions subject to the EAR has recently grown and is likely to continue growing

San Diego-headquartered law firm Procopio lists additional guidance to help ensure U.S. companies comply with federal law:

  • Ensure that you determine the Export Control Classification Number (ECCN) for your technology from the Commerce Control List (CCL)
    • This is going to help you understand whether an export license is required for the product
    • It is highly unlikely that you will be able to secure license exceptions for Russia, Belarus, and the Donetsk and Luhansk regions of Ukraine at this time
  • Restricted entities include individuals, so your company needs to ensure that hiring processes properly screen and keep up with the latest version of the Entity List on the Bureau of Industry and Security (BIS) website
  • Foreign Direct Product (FDP) Rules extend the reach of US export regulations to include foreign-produced items comprising US-origin content
    • San Diego companies should be screening customers and evaluating for prohibited end-uses. Companies may request a Letter of Assurance from a foreign customer if needed

As always, it is critical that companies properly classify export items AND screen all parties to a transaction.

As the war in Ukraine unfolds, we are cognizant of and compassionate toward those personally affected and their loved ones. More than a million Ukrainians have already fled into neighboring countries, with hundreds of thousands more expected in the coming days. As the world grapples with this humanitarian crisis, there are organizations you can support to help make a difference:

Locally, the San Diego branch of the International Rescue Committee provides opportunities for refugees, asylees, victims of human trafficking, survivors of torture, and other immigrants to thrive in the United States via immigration assistance and family reunification, financial literacy, and free English classes.

Charity Navigator is a resource to help you identify and evaluate 501(c)(3) foundations around the world to ensure that your charitable contributions are responsibly deployed.

Lucas Coleman
Lucas Coleman

Director, World Trade Center San Diego