U.S. sanctions against the FSB created a risk to the electronics supplies to Russia


US sanctions against the Federal security service of Russia (FSB) introduced by former President Barack Obama at the end of 2016, can result in unforeseen consequences for American companies and Russian consumers. Imports of any devices with encryption — and it and mobile phones, and tablets, and even ordinary wireless mouse, are subject to mandatory consultation with the FSB (so-called notification), but American suppliers are now prohibited from any commercial interaction with the Russian secret service.

About the risk of administrative contacts with FSB of its customers were warned, for example, lawyers Baker and McKenzie wrote a blog for Thomson Reuters expert services Thomson Reuters Tax & Accounting Mary breed. “Because of the FSB performs certain administrative functions such as review and approval of commercial encryption products for import and distribution in Russia, the effect for certain us companies and individuals doing business in Russia can be substantial,” write the lawyers, Baker McKenzie, adding that technology companies is now the United States may need to seek permission from OFAC (sanctions of the U.S. Treasury) in order to submit the relevant documents to the FSB.

The value for the entire industry

OFAC sanctions prohibiting American companies to cooperate with the FSB, potentially affect a very large number of American businesses are “practically the entire industry”, says a source in the field of international legal consulting. According to him, this information is actively discussed by market participants, “the whole industry knows about it”. The representative of a major foreign manufacturer of the phone, who requested anonymity, said that the managers of their headquarters now analyze the situation. He explained that without the receipt of the notification of the FSB is a new model smartphone or other device containing the encryption module, can be supplied to the Russian market. “To get a notification, we send to the FSB request, which contains information about the weight, the size of the device, the encryption algorithm modules Wi-Fi, Bluetooth, and GSM (a wireless data transfer technology. — ) about what operating system it works”, lists the source . Notification does not require the payment of state duty, and the answer usually comes in two weeks, he said.

It is important to distinguish between licensing and notification, says the Executive Director of the “YUKO” (deals with assistance in obtaining licenses, certificates, including notifications FSB) Stanislav Kuznetsov. Both procedures oversees the Center for licensing, certification and protection of state secrets of FSB, but in the first case we are talking about the resolution on the delivery of Russian devices that have cryptographic functions primary (e.g., most network products of the U.S. Cisco), and the second on the supply of devices where cryptography is a side character (the same mobile phones, laptops and other consumer gadgets). But American manufacturers now do not submit the notification of the FSB is, as a rule, do Russian legal entities or their representatives by proxy. So contact manufacturers in the USA since the FSB is only indirect, says Kuznetsov.

From phones to scanners

Receiving notifications for import to Russia (Customs Union) of the American technology products — a common practice. In the registry of notification of the Eurasian economic Commission (EEC) was the appropriate permits for products like iPhone, iPad, iPod and MacBook from Apple, the Android operating system from Google, laptops and firewalls Dell, HP servers, Cisco and Intel, anti-virus software from Symantec, GoPro video cameras, operating system: Linux 7 from Oracle America, computer tomographs of General Electric, medical equipment Medtronic, etc., can be seen from the registry. These permissions are obtained at different times and are valid until 2020-2030. From December 29, 2016, when sanctions were imposed against FSB, in the registry, there have been 13 new notifications, but no — in the interests of American manufacturers, estimated . The representative of the EEC was not able to clarify whether you heard any American company of notification from the beginning of 2017.

Representatives from Google, HP, Symantec, Oracle, and Medtronic refused to comment on the potential risks to themselves in relation to the inclusion of the FSB in the sanctions list. Representatives for Apple, Intel, General Electric and GoPro have not answered the questions . A Dell representative said that “all the process of the notification happen in the normal mode, and about any potential difficulties, he did not know”.

In addition to notifications, the FSB also issues certificates for protection of information. Among American manufacturers in a special list FSB as of December 1, 2016 (before us sanctions) referred to Microsoft (operating systems Windows 7 and Windows 8, various modifications, software for servers). As explained by one of participants of the market, such a certificate is required, for example, to supply software to government bodies. A Microsoft representative declined to comment.

Punish your business

The ban on cooperation with the FSB could be a problem for American business, said the head of the Washington law firm Ferrari & Associates, specializing in sanctions, Erich Ferrari. “In my opinion, OFAC may soon issue a General license for interaction with the FSB or clarification on the restrictions imposed, if service was not provided, says Ferrari. Clif burns of Bryan Cave believes that such consequences for American suppliers — the unintended effect of sanctions (their direct goal was to block transactions in the interest of the FSB). “Probably, OFAC, bringing in the sanctions list of the FSB, did not try deliberately to this effect as interference for U.S. companies when exporting to Russia of cryptographic products, so there’s a chance that subsequently will be issued a General license permitting U.S. companies interaction with the FSB in the range of obtaining permits,” says burns.

The representative of OFAC did not respond to a request . The Agency now comes the change of command in connection with the arrival in the White house the new President of Donald trump.

At the end of 2016, OFAC issued a General license allowing American companies to do business with “Glavgosexpertiza of Russia” (on carrying out expert examination of project documentation of objects of construction, reconstruction, objects of defence and safety of highways of Federal value) in the entire territory of Russia except the Crimea. “Glavgosexpertiza of Russia” was included in the sanctions list of the OFAC in September due to the participation in the project of the Kerch bridge. As said the head of the American chamber of Commerce (AmCham) in Russia, Alexis Rodzianko, the chamber lobbied for the exception for “state expertise”.

Now the situation is complicated by the fact that at the beginning of January 2017, to its sanctions list, the Entity List Federal security service added and the Bureau of industry and security (BIS), a special unit of the U.S. Department of Commerce. Sanctions BIS ban all exports of American goods, software and services for the FSB (even if the supplier is not an American company). But since when submitting notifications of the company disclosed to the FSB, some technical information about encryption products, it may be deemed to be a prohibited technology transfer, and require separate permissions BIS, says burns of Bryan Cave.

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