New guidance has been published by the Department for Business and Trade and the Office of Trade Sanctions Implementation to help UK businesses avoid exporting goods to Russia in contravention of Russian sanctions.
Purpose of the guidance
The guidance seeks to address the fact that some businesses may unknowingly be acting as intermediaries for goods to be exported (directly or indirectly) from the UK to Russia.
To strengthen the enforcement of sanctions on Russia, two key pieces of guidance were published at the start of the year:
- Circumvention guidance intended to help UK exporters understand Russian circumvention tactics and to help them avoid being targets.
- No-Russia clause guidance specifically for those who export Common High Priority items (i.e. goods Russia regularly imports to support development of their weapons and military).
How it can help UK business
The guidance provides advice and suggestions to UK businesses to increase awareness, identify red flags and avoid the potential harm caused by participating in sanctioned trade with Russia. It also highlights the importance of having strong due diligence in place and only dealing with those who you are confident satisfy compliance requirements.
The circumvention guidance recommends the following best practices:
- Strategic risk assessment: to assess the risk of a UK business being targeted, following which the business should implement systems and controls to reduce this risk. Factors to consider include the types of products the business sells, the jurisdictions its customers operate in and the end use to which its products might be put.
- Enhanced due diligence: to screen potential and existing customers especially where the transaction would be considered high risk.
- Screening tools: such as the Open Sanctions and War Sanctions databases which are available to UK business to assist them with assessing risk and implementing safeguards.
- Ongoing monitoring: to enable business to adapt to the frequently changing tactics employed to evade sanctions. Businesses should continuously assess risks and pay attention to trade flows especially for high-risk products. It is also important to keep up to date with regulations such as the Russia (Sanctions) (EU Exit) Regulations and the UK sanctions list.
In 2024 the EU mandated no-Russia clauses to prohibit re-exportation to, or for use in, Russia. This applies to certain restricted goods, not only ones with an obvious military application but also dual-use goods. Some UK businesses have already had to comply with these rules.
The recent UK guidance also suggests that businesses involved in the sale of “Common High Priority Items” should include a no-Russia clause in relevant contracts to prohibit the buyer exporting goods to Russia. While the clause is not mandatory, including it should help to reduce the risk of being involved in a transaction that circumvents Russian sanctions. It is already considered good practice for exporters of items used for military purposes. A model clause included in the guidance although again it is optional, and any form of suitable wording can be used.
If you would like to discuss the issues raised by the guidance or would like help adopting a no-Russia clause, please contact our team at [email protected].
