The US is mulling a Foreign Direct Product Rule (FDPR) to sanction Russia. This certainly would be a big move. The but, given that Russia launched an unprovoked attack on Ukraine, it wouldn’t entirely be unwarranted. If implemented, it could isolate Russia from global markets. The move could block Russia from importing technology critical to its oil and gas sectors; maritime, defence, and civil aviation industries; and even the import of cars, smartphones, and other consumer electronics. Apart from this move, which could affect global markets, experts expect sanctions to be imposed on Russian military and government officials, banks and financial institutions, and extractive industries. The FDPR was last imposed on Chinese telecommunications giant Huawei.
The organisation was already on the FDPR radar as several of its affiliates were already on EAR’s (Export Administration Regulations) Entity list, which precluded the listed parties from receiving any item subject to the EAR (including, as noted, certain foreign-produced items incorporating US-origin content) without a regulatory license.
The Huawei FDPR was meant to impede Huawei's ability to buy chips, which are crucial components in telecom systems and devices when it was initially issued. Because many chips are made in the United States, the Huawei FDPR restrictions affect basic off-the-shelf chips found in daily items like smartphones and tablets. As a result, the Huawei FDPR limitations may apply to semiconductor manufacturers who supply Huawei outside of the United States. According to certain reports, Huawei will lose 30 per cent of its revenue in 2021 as a result of this restriction. An incursion to Ukraine could mean Russia becoming the next Huawei.
This would mean that companies throughout the world will need to evaluate their export and supply chain activities for potential US touchpoints, ensuring that their products, technologies, and software are appropriately export-classified, and identify whether their actions directly or indirectly involve targeted parties i.e if they find their foundations in Russia. Export classification is both technically and legally important. In some cases, hiring qualified outside specialists will prove to be a good idea. Engagement with industry counterparts or seeking agency guidance could also help to inform best practices.
