Why the No Re-export to Russia Clause Matters

Background

Article 12g of EU regulations mandates that exporters include a “no re-export to Russia” clause in contracts for certain sensitive goods. This measure is designed to prevent the circumvention of EU export bans and enhance due diligence. It also imposes penalties on non-EU operators who redirect sanctioned goods to Russia. The clause covers specific goods, including aviation-related items, jet fuel, firearms, and high-priority items. Exporters must ensure that their contracts contain adequate remedies and should avoid engaging with operators unwilling to comply. The EU Commission also advises strong due diligence measures to prevent sanctions circumvention.

Recent Updates

On June 24th, Council Regulation (EU) 2024/1745 amended Regulation (EU) No 833/2014, updating the FAQ on the “No Re-export to Russia” clause.

The main change is the exclusion of public contracts with authorities in third countries or international organizations; however, exporters must inform the authorities within two weeks.

Two new articles, 12ga and 12gb, have been added:

• Article 12ga: Effective December 26, 2024, contracts involving intellectual property or trade secrets for high-priority items must prohibit their use for Russia. Exceptions exist for contracts signed before June 25, 2024, which will remain valid until June 26, 2025, or their expiry date.
• Article 12gb: Effective December 26, 2024, entities exporting high-priority items must assess and manage export risks to Russia, documenting risk assessments and implementing appropriate policies.

Is There a Required Clause?

There isn’t a mandatory clause; you are free to choose the appropriate wording for the “no re-export to Russia” clause. However, the European Union provides a template clause in the updated FAQ.

Additional Measures

A new package aligning closely with the Russian sanctions has recently been implemented for Belarus. This Belarus package now also includes a “no Belarus” clause for certain items.

Implications for Exporters

Many exporters may not realize that this specific sanction update fully applies to their business. It mandates including a relevant clause in your contracts and implementing adequate remedies for items referred to when selling to most countries outside the EU.

Even if you have never done business with Russia or Belarus, this regulation is still applicable.

Implementation Steps

1. Review Sanctions Packages: Identify which countries are excluded from the sanctions (some EU-friendly nations are).
2. Examine Annexes: Review the articles mentioned in the annexes and consider whether the new addition, Article 12ga (intellectual property rights or trade secrets), might be applicable. If so, you must review contracts and adapt a mandatory clause and adequate remedies.
3. Compliance for Subsidiaries: If you have foreign subsidiaries, ensure they comply with the EU sanctions.

Conclusion

The EU sanctions are unprecedented and comprehensive. Their impact on exporters is significant, especially considering that critical sanctions regimes from the U.S. and U.K. may also apply.

Exporters who do business outside Russia and Belarus must be fully aware of their responsibilities. The full package of sanctions is complex and ever-changing. If your company needs assistance to review, adapt, and build a robust compliance program, do not hesitate to contact Trade Controls Compliance. We are here to help you navigate these complex regulations and mitigate risks.

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