On December 26, 2023, the Ministry of Trade, Industry and Energy (MOTIE) issued an administrative announcement of amendments (the “Amendments”) to the 33rd Public Notice on Trade of Strategic Items (the “Notice”) proposing to (i) facilitate and strengthen the international community’s efforts on export controls to Russia and Belarus, as well as to (ii) improve the system for the management of strategic items (MOTIE Announcement No. 2023-904). The Amendments came into force on February 21, 2024 (MOTIE Notice No. 2024-31).
The Amendments added a number of items to the list of goods subject to a “situational license,” including heavy construction equipment, secondary batteries and machine tools, given their potential for military use. Furthermore, changes to improve the management of strategic items were introduced, including increased authority for oversight over items granted comprehensive licenses.
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1.
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Expanded List of Items Controlled for Export to Russia and Belarus
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(1)
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Additional Items Subject to a Situational License and Changes to Control Criteria
Following the international communities’ efforts to strengthen the control of exports to Russia and Belarus, the list of items subject to a situational license has been expanded (i.e., from 798 to 1,159 items). The added items included heavy construction equipment, secondary batteries, machine tools and aircraft parts that have a likelihood of being used as weapons. In addition, the control criteria applied to certain existing items has also been revised.
Regarding the criteria revision, the current control criteria for general industrial products, which had previously classified products based on their names and technical specifications, has now been revised to explicitly correspond to specific HS (six-digit) codes. The control criteria for passenger vehicles have been revised from vehicles worth over USD 50,000 to vehicles with engines having a displacement of over 2,000 cc.
As a result of the Amendments, expert determinations issued prior to the enforcement of the Amendments will be deemed to have expired. Thus, companies will need to assess whether their exports are subject to situational licenses in accordance with the amended list and control criteria (i.e., items, technical specifications, HS codes, etc.) and obtain new expert determinations or self-determinations, if necessary. In addition, as the Amendments revise the control criteria for many tariff categories to an HS code-based standard, it will be important for companies to identify the correct HS codes and reflect the changes in their customs management systems.
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(2)
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New Guidelines for International Cooperation on Export Control Licenses to Russia and Belarus
The MOTIE has codified the licensing guidelines for exports to Russia and Belarus by explicitly adding the “License Guidelines for International Cooperation on Export Control to Russia and Belarus” (the “License Guidelines”), as Appendix 24. The specific contents of the License Guidelines are as follows.
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①
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Licenses for Strategic Goods Destined for Russia or Belarus: Denial (Limited Exemptions)
The License Guidelines mandate that the head of the licensing agency must deny applications for the export of strategic items to Russia or Belarus.
Furthermore, notwithstanding Article 26, paragraphs 1 and 2 of the Notice, which provides individual export licenses exemptions for strategic items, the newly codified License Guidelines now restrict exemptions to more limited circumstances. Still recognized exemptions include: (i) the export of machinery for the emergency repair of ships or aircraft for their safe operation, (ii) the export of goods for use by the Korean military or diplomatic envoys overseas, or (iii) the return of imported strategic goods to their manufacturer or original exporter.
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②
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Situational License: Denial in Principle, Review on a Case-by-Case Basis (Limited Exemptions)
The License Guidelines mandate that applications for export licenses relating to items subject to a situational license will be denied in principle but may be exceptionally granted on a case-by-case basis. For example, (i) if the end user is a company wholly or jointly owned or controlled by a company established in the Republic of Korea or in a region listed in Annex 6 of the Notice, or (ii) if a sales contract for items subject to a situational license specified in Annex 2 of the Notice has been entered into before the following dates:
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The contract for items 1 to 57 is completed by February 27, 2022;
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The contract for items 58 to 231 is completed by April 27, 2023; or
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The contract for items 232 to 1,159 is completed by February 23, 2024.
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2.
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Other Revisions to the Notice Expanded List of Items Controlled for Export to Russia and Belarus
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(1)
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Further License Types Added
In addition to the existing categories of export licenses (e.g., individual export license, comprehensive export license, and nuclear plant technology export license) available under the current regulations, the Amendments add a warship design technology export license.
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(2)
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Strengthened Oversight Over Comprehensive License Items
Under the current Notice, a comprehensive license is revoked only for violation of the Notice or the Voluntary Export Administration Regulations. The Amendments add a new basis for revocation in the event an exporter holding a comprehensive license becomes aware of use of the items for military purposes contrary to the original declared intended use by an importing country’s government, military agencies, or defense contractors. However, an exception may be granted where (i) a report is made to the Ministry of National Defense (“the MND”) prior to export, and (ii) the MND and MOTIE agree to maintain the comprehensive license.
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(3)
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New Individual Export License Exemptions Added
The Amendments establish a new individual export license exemption for exports in support of emergency humanitarian relief, providing the basis for timely assistance in the event of crises, such as war and natural disasters, and also an exemption in the case of the transport of nuclear items for exhibitions at fairs and other events.
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With the Amendments, the number of items controlled for export to Russia has expanded significantly, while the review criteria for licenses have been strengthened as a policy of “denial in principle.” As a consequence, when exporting to Russia or Belarus, companies are advised to confirm that their items are not subject to control under the expanded list, as well as verify that the HS codes of their items are accurate, as the HS code is now a key factor in determining the applicability of the regulations. In addition, given the strengthened license review criteria, companies are advised to examine whether there are exceptions or exemptions applicable in advance of filing for export licenses.
