Consolidated FAQs on the implementation of Council Regulation No 833/2014 and Council Regulation No 269/2014

The EC has published an updated consolidated version of its FAQs on the implementation of Council Regulation No 833/2014 and Council Regulation No 269/2014 in light of the ongoing conflict in Ukraine. The consolidated version includes FAQs concerning EU sanctions adopted following Russia’s military aggression against Ukraine.
Below we present the affected updated (new) questions which might have relevance to the financial market in full, together with a brief summary of the corresponding answers:

Section D „TRADE AND CUSTOMS“, topic 5 „IMPORT, PURCHASE AND TRANSFER OF LISTED GOODS“
Article 3g(1)(d) iron and steel products processed in third countries incorporating iron and steel inputs from Russia
Amended Question 5 (p.172) When does the prohibition under Article 3g(1)(d) start applying?
Answer: The prohibition on importing or purchasing iron and steel products processed in third countries but using iron or steel from Russia has staggered implementation dates based on specific inputs. Starting from 30 September 2023, the prohibition applies to products in Annex XVII, excluding those falling under CN codes 7207 11, 7207 12 10, or 7224 90. As of 1 April 2024, it extends to products containing CN code 7207 11, and from 1 October 2028, it includes products with CN codes 7207 12 10 or 7224 90.For products using CN codes 7207 11 before 1 April 2024 and CN codes 7207 12 10 or 7224 90 before 1 October 2028, the Russian Federation may be indicated in the Mill Test Certificate (MTC) as the country corresponding to the heat number but not for other processing operations. Post the specified dates, the MTC should not mention Russia for the country of ladle melting or other processing operations, ensuring compliance with the import, transfer, or purchase of the product.

New Question 12 (p.177) What does the newly introduced status of “partner countries for the importation of iron and steel” in Art. 3g(1)(d) mean for the import and purchase of iron and steel products processed in third countries?
Answer: Importers of iron and steel products processed in a third country, utilizing iron and steel inputs from Russia as specified in Annex XVII, are exempt from providing evidence of the origin of these inputs when imported or purchased from partner countries. The concept of a „partner country for importation of iron and steel,“ defined in Art. 1(zc), entails applying restrictive measures on imports of iron and steel inputs from Russia, aligning with Union import control measures. Presently, the Regulation designates Norway and Switzerland as partner countries (refer to Annex XXXVI). Consequently, EU operators procuring these products from Norway or Switzerland are relieved from the obligation to furnish evidence regarding the country of origin for the iron and steel inputs used in the third-country processing of the imported products in the Union.

Section D „TRADE AND CUSTOMS“, topic 6 „TRANSIT OF LISTED GOODS VIA RUSSIA“
Amended Question 2 (p.180) Are the restrictions in Articles 3, 3b, 3f, 3h and 3k of Council Regulation No. 833/2014 applicable to goods and technologies listed in Annexes II, XI, XVI, XVIII and XXIII transiting through Russian territory from the Union to a third country?
Answer: Goods and technologies subject to prohibitions in Council Regulation No. 833/2014 (Articles 3, 3b, 3f, 3h, and 3k) listed in Annexes II, XI, XVI, XVIII, and XXIII can transit through Russia to a third country unless otherwise prohibited. Article 12 of the regulation forbids knowingly participating in activities circumventing these prohibitions. Operators facilitating infringements face freezing of funds and economic resources under Article 3(1)(h) of Council Regulation No. 269/2014.High diversion risk during transit necessitates diligent due diligence by economic operators. They must demonstrate to national competent authorities that goods and technologies are solely transiting and not for use in Russia or supplied to entities there. Conditions to prove include transit as part of a complete journey, no sale or change of ownership post-export, clear identification of goods, and the final user in the third country. Member States may impose reporting obligations on exporters to verify compliance retrospectively. While transit via Russia is allowed, EU customs authorities retain the right to control goods, ensuring no other applicable restrictive measures are violated.Council Regulation No. 427/2023 prohibits transiting dual-use goods and technology, along with firearms, through Russian territory. Regulation No. 1214/2023 extends the ban to goods and technology contributing to Russia’s military, defense, aviation, space sectors, jet fuel, and fuel additives. The 12th sanctions package, Regulation No. 2878/2023, further expands the transit prohibition to specific goods and technology listed in Annex XXIII, detailed in Annex XXXVII. Notably, most items in Annex XXIII are exempt from the transit ban under Art. 3k(1a).

Amended Question 3 (p.181) Is the transit of goods mentioned in Articles 2, 2a, 2aa, 3c and 3k of Council Regulation No. 833/2014 from the Union through Russian territory to a third country allowed?
Answer: Council Regulation No. 833/2014 imposes a transit ban via Russian territory on specific goods and technologies when exported from the Union. This prohibition includes:
Dual-use goods and technology (Article 2).
Goods and technology contributing to Russia’s military, technological enhancement, or defense sector listed in Annex VII (Article 2a).
Firearms, parts, essential components, and ammunition listed in Annex I to Regulation No. 258/2012 and firearms and other arms in Annex XXXV (Article 2aa).
Goods and technology suitable for aviation or the space industry in Annex XI, along with jet fuel and fuel additives in Annex XX (Article 3c).
Goods and technology enhancing Russian industrial capacities listed in Annex XXXVII (Article 3k(1a)).
However, direct exports to third countries or transit through third countries, excluding Russia, remain unrestricted. The transit ban serves to mitigate the risk of circumvention, particularly concerning sensitive items, preventing diversion when goods destined for third countries transit through Russia. This measure aims to ensure the integrity of export restrictions on specified goods and technologies, safeguarding against potential misuse or diversion during transit.

Section D „TRADE AND CUSTOMS“, new topic 11. „DIVESTMENT FROM RUSSIA“
New Question 1 (p.190) Why were the derogations in Article 12b(1) and (2) of Council Regulation 833/2014 introduced?
Answer: In the context of EU operators divesting from the Russian market, they remain bound by the prohibitions outlined in Council Regulation 833/2014. However, temporary derogations under Article 12b have been introduced to facilitate a swift exit from the Russian market. These derogations specifically pertain to prohibitions in Articles 2, 2a, 3, 3b, 3c, 3f, 3h, and 3k. For prohibitions covered by Article 12b(1), operators can seek authorization to sell, supply, or transfer goods and technologies listed in specified annexes. To qualify, the sale must be strictly necessary for divestment from Russia, the goods must be owned by an EU national, EU operator, or a Russian entity controlled by an EU operator, there should be no reasonable belief that the goods may have a military end-use in Russia, and the goods must have been physically located in Russia before relevant prohibitions entered into force. Importantly, the sale, supply, or transfer must occur before 30 June 2024. In the case of prohibitions covered by Article 12b(2), operators can request authorization for the import or transfer of goods and technologies listed in designated annexes. Similar conditions apply, including strict necessity for divestment, ownership criteria, and the physical presence of goods in Russia before relevant prohibitions took effect. Again, the import or transfer must be completed by 30 June 2024.Both Article 12b(1) and Article 12b(2) aim to prevent circumvention of measures, ensuring that divestment does not retroactively validate purchases or exports that were prohibited under EU restrictive measures when they occurred. These provisions underscore the regulatory framework designed to balance the need for divestment with the imperative to maintain control over specific goods and technologies.

New Question 2 (p.191) Should the sale of shares of a Russian subsidiary that holds goods and technologies listed in Annexes II, VII, X, XI, XVI, XVIII, XX and XXIII to Council Regulation No. 833/2014 as well as in Annex I to Regulation (EU) 2021/821 to a Russian buyer be considered an indirect sale, supply or transfer of prohibited goods and technologies as listed in Articles 2, 2a, 3, 3b, 3c, 3f, 3h and 3k of Council Regulation No. 833/2014?
Answer: The sale of shares of a Russian subsidiary is deemed a prohibited indirect sale, supply, or transfer of goods listed in specified annexes of Council Regulation No. 833/2014 and Annex I to Regulation (EU) 2021/821. The prohibition applies even if less than 100% of the shares are sold. Control over the subsidiary implies control over its assets, constituting a transfer of the mentioned goods to a „natural or legal person, entity or body in Russia or for use in Russia.“ The physical location of the goods in Russia or their export restrictions by the Russian government is deemed irrelevant.In such transactions, EU operators can seek a derogation under Article 12b(1) of Council Regulation 833/2014. This provision acknowledges the need for a specific authorization process, allowing EU operators to navigate the regulatory landscape while divesting from the Russian market. The key emphasis is on the control and transfer of assets, irrespective of the percentage of shares sold, reinforcing the regulatory framework’s intent to monitor and control the movement of specified goods and technologies.

Section D „TRADE AND CUSTOMS“, new topic 12. „RESTRICTIONS ON DIAMONDS“
New Question 1 (p.192) What is the diamond import ban?
Answer: On December 6, 2023, the Group of Seven (G7) leaders, building on previous statements from February and May 2023, collectively decided to impose import restrictions on non-industrial diamonds originating from Russia. The first phase, effective by January 1, 2024, targets diamonds mined, processed, or produced in Russia. Subsequent phased restrictions, set for March 1, 2024, focus on the import of Russian diamonds processed in third countries.These actions align with the G7’s strategic goal to implement a globally coordinated diamond ban, with the EU’s sanctions on Russian diamonds, specified in the 12th sanctions package (Article 3p of Council Regulation No. 833/2014), being an integral part of this effort. The coordinated ban is designed to undermine Russia’s significant revenue source, estimated at EUR 4 billion annually, with approximately EUR 1.5 billion stemming from annual imports into the EU.The effectiveness of the diamond ban hinges on widespread implementation within the world’s major diamond retail markets. In pursuit of this objective, the Commission has actively collaborated with G7 countries, other key partners, and industry stakeholders. The focus of these collaborative efforts is on designing and ensuring the effective implementation of coordinated restrictive measures, leveraging tracing technologies to enhance the overall impact of the diamond ban. The strategic coordination underscores the concerted international effort to apply economic pressure on Russia by disrupting a crucial revenue stream associated with its diamond industry.

New Question 2 (p.192) What are the different stages of the diamond ban?
Answer: Article 3p of Council Regulation No. 833/2014 outlines a phased prohibition on the purchase, import, or transfer of Russian non-industrial diamonds in several stages:
##### Effective 1 January 2024:
Prohibition on diamonds (natural and synthetic) and products like jewelry, listed in Parts A, B, and C of Annex XXXVIIIA, if originating in or exported from Russia.
This ban extends to such goods of any origin if they transit through Russia.
##### Effective 1 March 2024:
Extension of the prohibition to Russian natural diamonds listed in Part A of Annex XXXVIIIA that have undergone processing in a third country, containing Russian diamonds of 1.0 carats or more per diamond.
##### Effective 1 September 2024:
Further extension of the prohibition to Russian natural and synthetic diamonds, along with jewelry incorporating Russian diamonds (all products in Parts A, B, and C of Annex XXXVIIIA), processed in a third country. This includes or incorporates diamonds from Russia, weighing 0.5 carats or 0.1 grams per diamond.
The regulation distinguishes between natural and synthetic diamonds, with synthetic diamonds measured in grams in the Combined Nomenclature (1 carat = 0.2 grams). These measures aim to restrict the flow of Russian non-industrial diamonds into the Union, applying stringent controls at different stages of production and processing to prevent circumvention and ensure compliance with the sanctions.

New Question 3 (p.192) Do the thresholds of 1.0 carats and 0.5 carats refer to the weight of the diamond before it is polished, or after?
Answer: The weight thresholds apply equally to rough and polished diamonds at the time of importation into the Union.

New Question 4 (p.193) Is diamond jewellery incorporating Russian diamonds banned?
Answer: As of 1 January 2024, Council Regulation No. 833/2014 prohibits the purchase, import, or transfer of jewelry incorporating Russian diamonds listed in Part C of Annex XXXVIIIA. This restriction applies if the jewelry originates in Russia or is exported from Russia. The prohibition is also extended to jewelry incorporating diamonds of any origin if they have transited through Russia. Furthermore, starting 1 September 2024, the prohibition encompasses jewelry processed in a third country, incorporating diamonds from Russia, or exported from Russia, with a weight equal to or above 0.5 carats or 0.1 grams per diamond.Additionally, there are specific bans on gold jewelry (Article 3o) and precious metal jewelry (Article 3i) from Russia, emphasizing comprehensive restrictions on various types of jewelry to curtail the flow of specific materials associated with Russia.

New Question 6 (p.193) Does the prohibition of Article 3p also apply to restricted goods that are already within the territory of the Union before entry into force of the relevant restrictive measures?
Answer: The restriction in Article 3p of Council Regulation No. 833/2014, prohibiting the import, transfer, or purchase of jewelry with Russian diamonds, does not apply to goods already released for free circulation in the Union when the measure takes effect. Goods in the Union not yet released for free circulation fall under the provisions of Article 12e of the regulation. This distinction ensures that the restriction is not retroactively applied to goods already on the market within the Union, providing clarity on the application of measures to different statuses of goods at the time of regulatory enactment.

New Question 7 (p.193) What sanctions other than Article 3p affect diamonds in Council Regulation No. 833/2014?
Answer: Synthetic diamonds from Russia were already included in import bans on 6 October 2022 (Article 3i). Additionally, there’s a ban on importing, transferring, and purchasing gold and precious metal jewelry from Russia since 22 July 2022 (Articles 3o and 3i). If diamonds are set in these products, they are covered. Luxury goods, including diamonds and jewelry, face export restrictions to Russia if their value exceeds 300 EUR (Article 3h and Sections 10 and 18 of Annex XVIII), encompassing synthetic/reconstructed diamonds, diamond dust, diamond jewelry, and other luxury items like watches, whether incorporating diamonds or not.

New Question 8 (p.194) What is the traceability-based verification and certification mechanism for rough diamonds?
Answer: As of 1 March 2024, the EU introduces the G7 Certification Scheme, a robust traceability-based verification and certification mechanism for rough diamonds. This system applies to diamonds above specific carat thresholds (1.0 carats or above from March 1, 2024, and 0.5 carats or above from September 1, 2024). The process involves onboarding diamond information onto a blockchain-based G7 ledger, either at the export point in the producer country or the G7 import node. Upon arrival, a verification, including a physical check, is conducted, and a G7 certificate is issued. The pilot phase begins on March 1, 2024, becoming fully operational by September 1, 2024. Economic operators can choose this traceability-based certification or alternative evidence until mandatory usage starts in September 2024. The G7 Certification Scheme utilizes existing tracing technologies, allowing diamond producers to input information for verification and certification at the G7 import node. The blockchain-based G7 ledger is standalone and interoperable with existing solutions supporting the certification scheme.

New Question 9 (p.194) What do I need to know before I plan to import diamonds into the Union?
Answer: From March 1, 2024, importers must provide evidence of the country of origin for diamonds or diamond-incorporating products used as inputs for third-country processing, if the diamonds are 1.0 carats or above. A ‚rough import node‘ in Antwerp, Belgium, handles verification and certification, becoming mandatory for diamonds of 0.5 carats or above from September 1, 2024. The Federal Public Service Economy at the Diamond Office in Antwerp is the designated authority. A G7 certificate is issued at the rough node. Verification for imported polished diamonds will rely on certificates from the rough diamond’s production/polishing process, with specific details to follow. This process enhances transparency in diamond traceability and regulation.

New Question 10 (p.195) What is the link with Kimberley Process (KP) certification?
Answer: The Kimberley Process (KP) plays a crucial role in ensuring conflict-free rough diamonds, and the sanctions on Russian diamonds extend to both rough and polished diamonds. The implementation of sanctions on diamonds will complement KP certification and verifications. In a phased approach, from January 1, 2024, KP certificates will be accepted as evidence of country of origin for rough diamond imports. Starting March 1, a Blockchain-based G7 ledger will be introduced alongside KP certificates, but the latter remains valid if no Russian diamonds are mixed with others. Mixed parcels will be accepted, provided additional evidence is given for diamonds over the weight threshold, confirming non-Russian origin. By September 1, 2024, the mandatory use of the G7 ledger for rough diamonds will be enforced under EU restrictive measures, while KP certification requirements persist. This phased control strategy ensures a smooth transition to stricter regulations, reinforcing the commitment to transparent and conflict-free diamond trade.

New Question 11 (p.195) Where can I find the list of goods covered by the diamond ban of Article 3p?
Answer: The goods subject to the diamond ban under Council Regulation No. 833/2014 are detailed in Annex XXXVIIIA, categorized into three parts. Part A encompasses unsorted and non-industrial diamonds with specific CN codes. Part B covers synthetic or reconstructed diamonds, distinguishing between unworked and other forms. Part C includes various articles of jewelry, goldsmiths‘ or silversmiths‘ wares, precious metal articles incorporating diamonds, as well as watches with diamond incorporation and specific cases. The ban covers a wide range of diamond-related products, emphasizing unambiguous restrictions on certain CN codes and types of diamonds, ensuring a comprehensive approach to the prohibition. This detailed listing assists importers and regulators in precisely identifying and complying with the banned items, fostering clarity in enforcement and trade control.