UK & EU Sanctions on Russian Steel

UK & Europe Fear Thousands of Job Losses

According to Crowell, "The new measures tighten existing primary Russian iron and steel import restrictions (which were introduced in 2022) and aim to target circumvention by limiting the ability for Russian-origin iron and steel to be concealed through third country processing into downstream steel products."

Current Loopholes

Due to the war with Ukraine, the European Union has implemented sanctions across many Russian imports. Sanctions were imposed on Russian iron and steel in March 2022.

During this time, many loopholes have been used by companies to continue buying from Russian suppliers. These loopholes have continued to enrich Russian oligarchs and some of President Putin’s allies. The UK & the European Union has now turned a spotlight on the sale of iron and steel.

On Saturday (September 30, 2023) the UK and the EU tightened their restrictions on Russian iron and steel, as well as the potential for sourcing from a third country. Although the UK is no longer part of the European Union, the two entities will work in tandem on the sanctions package against Russia.

Sanctions

According to JDSUPRA, “The UK’s Guidance on third country processed iron and steel measures (UK Guidance) explains that the new UK sanctions prohibit an import of such Listed Iron and Steel Products into the UK if it meets all of the following criteria, being that the product:

1.  is listed in Schedule 3B of the Russia (Sanctions) (EU Exit) Regulations 2019;

2. has been “altered, transformed in any way; or subjected to any type of operation or process” in a third country (i.e., a country that is not the United Kingdom, the Isle of Man or Russia); and

3.  incorporates one or more Schedule 3B iron and steel products of Russian origin.”

With thousands of steel products used in manufacturing, construction, and the automotive industry, it has been difficult to enforce sanctions. In addition, it is known throughout industry that there is a class of steel products known as “semis,”that have not been included in the sanctions list. Semis are products sold to the EU that require another level of processing or re-rolling before being considered a finished product.

The EU is similarly introducing a prohibition on the direct or indirect import or purchase, from September 30, 2023, of iron and steel products listed in Annex XVII to Regulation (EC) 833/2014 (Regulation 833) when processed in a third country incorporating iron and steel products originating in Russia as listed in Annex XVII.  Annex XVII similarly contains products with HTS / CN codes falling within Chapters 72 and 73.

We expect a deeper level of sanctions enforcement from the UK and EU, as there is no sign of the war ending and tensions continue to rise globally.

Compliance, Customers, and Suppliers

Many of our clients are being asked for supplier declarations and policy documentation to support their compliance program for the sanctions on Russian iron and steel.

In order to best respond, it is important to start collecting data from suppliers, as well as implement the sanctions policy into all supplier management policies such as a supplier code of conduct, a supplier agreement, and purchase orders.

Companies can create a company level policy to be shared with customers and with suppliers expressing that all suppliers must work in compliance with the sanctions and communicate in writing if any use of Russian iron or steel is used in the supply chain or processing of products sold in Europe. During this concerning time, manufacturers will need to find and qualify alternate sources for any steel and iron materials, parts, or products that are currently sourced from Russia.

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Let us help with your compliance programs for Russian steel and iron. Contact us today!

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Links

Guidance on third country processed iron

Politico - The Soft Spot in EU's Steel Sanctions

JDSUPRA - Further sanctions on UK & EU Sanctions on Russian Iron and Steel

UK Schedule B The Russia (Sanctions) (EU Exit) Regulations 2019