Foreign-Direct Product Rules as part of US measures against Russia
US export controls

Foreign-Direct Product Rules as part of US measures against Russia

The US has adopted far-reaching measures against Russia and Belarus. These include two new Foreign-Direct Product (FDP) rules. Let’s take a closer look.

FDP rules: the basics of the Foreign-Direct Product Rule

Products manufactured outside the US making direct use of US software or technology may be subject to US re-export control laws under the EAR as “Foreign-Direct Products” (see § 734.9 EAR). The most common and clear-cut case is probably production under US license.

If the plant or major component is the direct product of US technology or software, products manufactured by means of that plant outside the US may also be subject to the EAR under the conditions specified in § 734.9. This is where things get thornier ...

Looking at the legal underpinnings, we see that the Foreign-Direct Product Rules are presented in § 734.9 EAR in various manifestations. The primary manifestation of this FDP rule is the National Security FDP rule described in § 734.9(b) EAR. Exceptions apply to 9x515 and 600-series ECCNs.

The requirements described in § 734.9(e) apply to the US Entity List (EL) entries designated in Footnote 1. Companies doing business with Huawei will be familiar with this FDP rule. What’s new are the two Foreign-Direct Product Rules concerning trade with Russia and Belarus – specifically § 734.9(f) and, for military end-users on the EL designated in Footnote 3, § 734.9(g).

The new Foreign-Direct Product Rules (FDP rules)

Two new FDP rules have made their way into § 734.9. The newly defined “Russia/Belarus FDP rule” in § 734.9(f) deals with products manufactured outside the US that are either

  • the direct product of US-origin technology or software specified in product groups D or E in any ECCN in categories 3–9, or were produced in a plant with major components; or
  • the direct product of US-origin technology or software specified in product groups D or E in any ECCN in categories 3–9.

When such products are destined to or connected with Russia or Belarus, they are subject to the Foreign-Direct Product Rule and thus subject to the EAR.

And the new Russia/Belarus-Military End User FDP rule set forth in § 734.9(g) casts an even broader net: If your product manufactured outside the US is either the direct product of US-origin technology or software specified in product groups D or E of any ECCN, or was produced in a plant or with major components that are the direct product of US-origin technology or software specified in product groups D or E of any ECCN, then it is subject to the EAR if you have knowledge that your product is destined to or connected with a military end-user in Russia or Belarus listed on the EL and designated in Footnote 3.

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