BIS Issues Denial Orders Against Russia-Related Procurement Networks

The Bureau of Industry and Security issued two temporary denial orders last week as part of the Biden administration's latest package of Russia-related sanctions and export controls (see 2406120036), targeting companies and people in the United Arab Emirates, Russia, Hong Kong, the British Virgin Islands, Turkey and Indonesia for sending export controlled items to Russia.

The denial orders, effective for 180 days from June 12, generally block the people and companies from participating in transactions subject to the Export Administration Regulations.

One TDO targets UAE-based Turboshaft FZE, Treetops Aviation, Black Metal FZE, Timur Badr, and Elaine Balingit for shipping U.S. aircraft parts classified under Export Control Classification Number 9A991.d, along with other items, to Russia.

BIS said its agents first met with Badr, owner of Turboshaft FZE and Treetops Aviation, at his UAE office in 2019, where Badr said he traded in U.S.-origin civilian aviation electronics and parts -- including parts from a Boeing 737 airplane -- and stored some of those parts in Moscow. The agents warned Badr that those shipments may have required a license and urged him to obtain end-user statements from his customers to verify that the parts wouldn’t be used in a way that violates U.S. export controls, but Badr said he would “lose customers” if he made them sign end-user statements.

BIS said Badr continued to trade those aircraft parts without export licenses, including after Russia invaded Ukraine in 2022. The agency said an invoice billed in 2023 to S7 Engineering, an arm of Siberian Airlines, shows the company purchased an aircraft part from Badr’s Turboshaft. “Communication” between the parties showed the item was shipped from the U.S. through the UAE and into Russia, BIS said in its TDO.

The agency included Balingit in the denial order because she is listed as Turboshaft’s logistics officer, and she was listed as the ultimate consignee contact for shipments of aircraft parts to Turboshaft and Treetops in 2023. The order also names Black Metal FZE, an alternate name for Turboshaft, and BIS said Badr “toggles between operating as Black Metal or Turboshaft to facilitate his procurement efforts.”

BIS said the people and companies are continuing to illegally export U.S. items, adding that Turboshaft was listed as the supplier on 136 imports of goods into Russia, worth about $1.6 million, between January and December 2023. The agency said both Turboshaft and Treetops have bought millions of dollars worth of additional U.S.-origin goods since the Biden administration increased export licensing requirements for Russia in 2022.

The order also said CBP seized a shipment of aircraft parts destined to Treetops in April. The agency said the shipment was filed in the Automated Export System with “false” electronic export information.

The other denial order targets Hong Kong-based Alexey Sumchenko, Russia-based Anna Shumakova, Indonesia-based Branimir Salevic and Danijela Salevic, Russia-based SkyTechnic, Hong Kong-based Skywind International Limited, Hong Kong- and BVI-based Hong Fan International, Hong Kong- and BVI-based Lufeng Limited, Turkey- and Hong Kong-based Unical dis Ticaret Ve Lojistik LSC, and Serbia- and Indonesia-based Izzi Cup DOO. BIS said the people and companies also shipped 9A991.d items to Russia, and SkyTechnic, a Russian aircraft parts supplier, used a network of shell companies to buy the parts from the U.S. and hide that they were destined to Russia.

BIS said Shumakova, through SkyTechnic, reached out to an American freight forwarder in March 2022 about ways to ship aircraft parts to Russia despite export restrictions. Shumakova then asked Indonesia-based Izzi Cup, owned by Branimir Salevic, whether it could help with the transaction, and Izzi Cup said it could help as long as the order listed Skywind, which had a non-Russian address, as the buyer.

The agency said SkyTechnic in June 2022 began using the business name Hong Fan, a company owned by Sumchenko, to “facilitate further exports of aircraft parts” from the U.S. BIS said Hong Fan in November 2022 coordinated with a freight forwarder to ship aircraft parts destined to Russia-based Pobeda Airlines, and the invoice was issued by SkyTechnic. SkyTechnic also used the alias Lufeng.

Unical, based in Turkey, also helped SkyTechnic ship aircraft parts, BIS said. The agency said a January 2023 invoice shows Unical sold aircraft parts to SkyTechnic and shipped the parts to Russia, and also negotiated purchases of aircraft parts from a U.S. repair facility, transhipped those items through Turkey and then delivered them to Russian airline Aeroflot on behalf of SkyTechnic.

BIS said the people and companies shipped hundreds of thousands of dollars worth of controlled items in 2022 and 2023 to Russian airlines and others. The agency also said “elements of this procurement network appear to be unresponsive to or unmoved by repeated outreach by the U.S. Department of Commerce,” adding that it determined that Izzi Cup was an “unreliable recipient of U.S.-origin items” after it tried to verify a shipment of U.S.-origin starter generators classified under ECCN 9A991 to the company last year.

BIS also said Lufeng is an “unreliable recipient” of U.S.-origin items based on a July 2023 end-use check. A U.S. export control officer contacted Lufeng twice to schedule an end-use check meeting and tried to arrange an in-person one, but Lufeng “failed to provide information.”