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10. Trade sanctions and Export controls

Stora Enso is committed to complying fully with all applicable sanctions and export control programs worldwide.

10.1 Fundamentals

Sanctions programs and export controls are political tools used to influence decision-making and punish unwanted and unlawful actions, and these programs are commonly used to impair and weaken governments that violate human rights and international law. More recent programs have been used to combat extensive corruption, drug trafficking and violations of human rights by individuals or entities. Historically, broad restrictions, also known as embargoes, prohibited nearly all trade with a sanctioned country. Today, targeted sanctions instead focus on, for example, a state’s key sectors, strategic products, or highly ranked politicians.

Compliance with recognized sanctions programs and export controls is a cornerstone of sound business practices and is required by a range of stakeholders, including financial institutions and business partners. Compliance is important not only for Stora Enso as a company but also for individual employees. In some jurisdictions, for instance, Sweden, breaches may lead to criminal liability and the imposition of fines on individual employees in their personal capacity.

Due to the different objectives pursued by those countries that impose sanctions programs and export controls, the content and scope of these vary considerably. Some restrict a greater range of activities than others. However, one or more of the following features are typically present in most programs:

  • Asset freezing and blocking sanctions: Prohibitions on providing funds, goods or services to (or for the benefit of) listed companies and individuals, travel bans and other types of asset freezing restrictions;
  • Import and export controls: Restrictions on exports to, or imports from, a particular jurisdiction of sanctioned products and/or services; and
  • Sectoral sanctions: Restrictions focused on specific industries, e.g. the financial sector, within a particular country or territory.

The rules and instructions outlined here are designed to ensure compliance with UN, EU, UK, and US sanctions and export controls only as these are the sanctions most commonly applicable to Stora Enso’s operations. It should be noted, however, that sanctions programs or export control rules in other jurisdictions (e.g. China and Brazil), and with different requirements, may also be applicable. The person who is responsible for a specific engagement or transaction with a business partner (either through direct handling or by management) must ensure that the business transaction in question is compliant with local sanctions or export control programs as applicable.

Any commercial activity or transaction between Stora Enso and an external party is subject to the rules in this Chapter. The most common examples are:

  • Direct and indirect sales with customers and distributors;
  • Agreement with an agency or similar intermediary for solicitation of sales or sourcing;
  • Direct and indirect sourcing with suppliers including, without limitation, raw materials, equipment, parts and services;
  • Transport, insurance, and similar interaction with intermediaries;
  • Financing, funding, and similar;
  • Mergers and acquisitions, purchase and selling of equity and similar;
  • Joint development, studies, and research.

10.2 Risk assessment

Supported by the Group Ethics and Compliance team, each Division shall perform and repeat/update risk assessment to obtain an up-to-date understanding of its specific risk exposure in terms of compliance with trade sanctions and export control rules. Each Division shall decide whether additional risk assessments are necessary for units within the Division. The Group Ethics and Compliance team coordinates such risk assessment by setting up standard questionnaires and evaluation criteria, and collecting and consolidating the results from each Division to form an overall risk landscape for Stora Enso as a whole. The Divisions can make necessary additions to such risk assessment based on their specific risk landscape and business profiles.

10.3 Countries and territories with elevated risks

There are stringent sanctions against certain critical countries and territories. Therefore, Stora Enso has taken a risk-based approach and divided countries with elevated risks into two groups; Tier 1 Countries and Tier 2 Countries (together “Risk Countries” or one “Risk Country”). Risk Countries are subject to specific policy restrictions outlined below.

A direct business involving a Risk Country is one where Stora Enso’s direct contracting party (i) is a citizen of, or physically located in a Risk Country (individual) or is registered, domiciled, or physically located/present in a Risk Country (company), or (ii) owned or controlled by such an individual or company.

Indirect business involving a Risk Country may include any of the following:

  • The end-user or end customer is an individual or company connected with a Risk Country, e.g. having domicile in a Risk Country or having production facilities in a Risk Country;
  • There will be goods and/or services delivered to or from a Risk Country, including known or suspected re-export by customers outside the Risk Country to a Risk Country, e.g. raw materials to our mills are sent from a Risk Country via a third country;
  • There are banks and similar financing institutions involved in a transaction which are registered, domiciled, or physically located/present in a Risk Country;
  • There will be payments made to, or received from, a Risk Country; or
  • There are persons or entities that are known to be materially involved in the transaction (e.g. all types of agents, shipping companies and similar) that are individuals or companies connected with a Risk Country.

Stora Enso employees shall act diligently towards the above-mentioned nexus points of direct and indirect business and actively inform themselves about the relevant circumstances. Employees shall take adequate actions required in this Policy when they become aware of any of these nexus points, e.g. when a business partner mentioned during a meeting that their bank account is located in a Tier 2 Country, or when any of the red flags listed in this 10.5.2 appears. Employees shall also actively find out whether any of these nexus points exist when there is such a risk, e.g. they shall ask about the location of the end-user or end customer when dealing with a new trading company, especially if the new trading company is located close to a Tier 1 or Tier 2 Country.

 

10.3.1 Tier 1 Countries

For the purpose of this Policy, and at the date this Chapter is last updated, Tier 1 Countries include the following countries and territories. The list of Tier 1 Countries will change from time to time so make sure you have access to the latest list, always available online.

(As of June 2024)
Cuba, Iran, North Korea, Syria, Russia, Non-government controlled areas in Ukraine (including without limitation to, the territories of Crimea, Donetsk, and Luhansk in Ukraine), Belarus, Libya, Myanmar (Burma), Sudan, Venezuela and Yemen.

Active action

All direct or indirect business that has a connection with Tier 1 Countries is prohibited unless written approval is obtained from the CEO or the CFO. Contact the legal team in your Division should you need more information and support.

10.3.2. Tier 2 Countries

At the date this Chapter is last updated, the EU, US, UK, and/or UN have adopted significantly more extensive sanctions against individuals, companies, industrial sectors and/or products in relation to the following Tier 2 Countries. The list of Tier 2 Countries will change from time to time so make sure you have access to the latest list, always available online.

(As of June, 2024)

Afghanistan, Bosnia and Herzegovina, Burundi, Central African Republic, The Democratic Republic of the Congo, Egypt, Guinea, Guinea-Bissau, Iraq, Lebanon, Montenegro, Palestine, Serbia, Somalia, South Sudan, Tunisia, Ukraine (other than the non-government-controlled areas in Ukraine), Zimbabwe.

Active Action

For all direct or indirect business that has a connection with a Tier 2 Country, written approval must be obtained from the legal team in your Division or Group Ethics and Compliance following the screening and approval steps in Section 10.6 herein.

10.4 Import/export control and dual-use goods

The EU and its member states, the US, and many other countries regulate and control the export or transfer of certain strategically sensitive products. Such strategic goods include products that are specially designed for military use and products that can be used for both civil and military purposes (dual-use products). Strategic goods do not only refer to physical goods, such as products and spare parts but include also software, technology and technical assistance/services. Also, certain emerging technologies may be subject to restrictions, i.e. technologies not yet listed as dual-use. 

Stora Enso’s products and services have a low risk of being categorized as dual-use goods in general. However, the constant change of regulations and rapid technology development mean that such risk will always be present. At this moment, such risks are relatively higher in the areas of biofuel and bioenergy, products and services that enable navigation, electronics including battery technology and telecommunications. It is also important to identify situations where our customers’ products and services might be considered dual-use, where we provide e.g. packages to items that can be used both for civilian and military purposes such as machine parts and electronics.

Generally, the permissibility of the export of strategic goods depends on i) what the product, service or technology is, ii) where it is going, iii) who the end-user is and iv) what the end-use may be. If an export is controlled, it may still be carried out if an authorisation or license is obtained from the relevant authority.

It is also important to note that certain national laws in this area can be applied exterriroially. For example, a US-origin product is subject to US export control laws wherever in the world it is traded. This means that a transfer of the product between two third countries may require a US export license. US law may also apply to foreign-made (as in non-US) products, simply because such products contain a certain amount of US-origin controlled components. Additionally, imports of certain products may be subject to restrictions due to sanctions.

REMEMBER!

  • The sanction and import/export control risks in relation to products, including and particularly dual-use goods, shall be evaluated as part of the risk assessment stipulated in Section 10.2.
  • If there is any suspicion or doubt as to whether a product, especially a new product type, could be subject to sanction and import/export control restrictions, including as a result of being considered as a dual-use good, contact the legal team in your Division for further guidance.

10.5 Additional restrictions and other red flags

10.5.1 Additional restrictions

Stora Enso believes that we shall lead in this area of trade sanction and export control by doing the right action of adopting extra restrictions in addition to what is required by the laws and regulations. At the date this Chapter is last updated, these additional restrictions include the following. This section will change from time to time so make sure you have access to the latest content, always available online.

a) Circumvention Risk Countries

At the date this Chapter was last updated, the following Circumvention Risk Countries are considered high risk from a sanctions perspective due to being hubs for circumvention. The list of Circumvention Risk Countries will change from time to time so make sure you have access to the latest list, always available online.

(As of June 2024)
American Samoa, Armenia, Bahamas, Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Bulgaria, Cambodia, Cayman Islands, Chad, China (including Hong Kong and Macau), Colombia, Cote D'Ivoire, Curacao, Cyprus, Eritrea, Ethiopia, Ghana, Grenada, Guam, Guyana, Haiti, Indonesia, Jordan, Kazakhstan, Laos, Marshall Islands, Mauritania, Mauritius, Mali, Malta, Mexico, Moldova, Mongolia, Namibia, Nicaragua, Niger. Nigeria, Pakistan, Palau, Panama, Philippines, Puerto Rico, Saint Lucia, Samoa, Saudi Arabia, Singapore, South Africa, Sri Lanka, Tajikistan, Trinidad and Tobago, Turkey, Turkmenistan, U.S. Virgin Islands, Uganda, United Arab Emirates, Vanuatu.

When doing business that involves Circumvention Risk Countries, it becomes even more important to stay vigilant towards the red flags listed in 10.5.2, especially the ones marked with circumvention risks.

REMEMBER!

  • The sanction and export control risks associated with a business that has a connection with a Circumvention Risk Country shall be evaluated as part of the risk assessment stipulated in Section 10.2.
  • While it is not mandatory to perform a sanction screening when dealing with business partners in Circumvention Risk Countries, if there is any suspicion or doubt as to whether such a business might circumvent sanctions or export controls, contact the legal team in your Division or Group Ethics and Compliance for further guidance.

b) In relation to merchants, trades and similar

The sales of our products to an individual or company who do not consume our products but trade them further (commonly referred to as merchants and traders), raises the uncertainty level as to the final destination and way-of-consumption of our products. Buying from merchants and traders also raises such uncertainty levels as to the country of origin and the chain of custody of these goods. Such uncertainty elevates sanction and export control risk, and therefore these businesses shall be more carefully examined.

REMEMBER!

  • The sanction and import/export control risks in relation to direct or indirect business with merchants, traders and similar business partners shall be evaluated as part of the risk assessment stipulated in Section 10.2.
  • If there is any suspicion or doubt as to whether a direct or indirect business with merchants, traders and similar business partners could lead to potential breaches of sanction and export/import control rules, contact the legal team in your Division for further guidance.

c) In relation to Russia and Ukraine

Direct and indirect business that has a connection to Russia and non-government-controlled areas in Ukraine (‘Restricted Areas’) are strictly forbidden. The definition of indirect business remains the same as stipulated in Section 10.3 herein.

Direct and indirect business with an individual or company outside of the Restricted Areas is also forbidden, should any of the following conditions be met:

  • That the individual or company is collectively and ultimately owned by Russian entities or persons of 50% or above;
  • That the individual or company is controlled by Russian entities or persons; or
  • That the individual or company is in other ways under significant influence of, or for the benefit of, Russian entities or persons.

Active Action

Any exception to the above-mentioned restrictions can only be approved in writing by the CEO or the CFO. Contact the legal team in your Division should you need more information and support.

10.5.2 Other red flags

There may of course be sanctions risks or sanctioned individuals and companies situated outside the listed Risk Countries and additional restriction scopes. It is therefore important that other "red flags" are also noted, regardless of the geographical location of the business partner.

Taking into consideration the fact that a sanction target may be unlikely to provide requested information in a complete and accurate form, all information received about a potential or current business partner (and, where applicable, an end-user) should be reviewed carefully and diligently.

The following is a non-exhaustive list of circumstances that you should carefully consider as they might indicate a potential sanctions compliance issue related to a proposed or current business partner or transaction. The below list of potential red flags is not comprehensive, and you should remain alert to any other circumstances that give rise to a suspicion that a proposed transaction is (or might be) in violation of sanctions:

  • The owner(s) of the business partner is likely to be in connection with a Tier 1 or Tier 2 country;
  • The business partner is reluctant to disclose the domicile or citizenship of its owner(s);
  • The business partner is reluctant to offer information about the end-user/end-use;
  • The business partner tries to avoid personal contacts such as meetings or phone calls;
  • The business partner is willing to pay cash for a very expensive item when the terms of sale would normally call for financing;
  • The amount of products involved is not consistent with the business operations of the business partner, e.g. a small manufacturer ordering quantities of products exceeding expected/reasonable needs;
  • The business partner orders products with dimensions known to only be used in a Risk Country (e.g. Russia);
  • The business partner has limited or no business background;
  • The business partner is unfamiliar with the product’s performance characteristics but still wants the product;
  • Delivery dates are vague, or deliveries planned for out-of-the-way destinations;
  • A freight forwarding firm is listed as the product’s final destination;
  • The shipping route is uncustomary for the product and destination;
  • The packaging is inconsistent with the stated method of shipment or destination;
  • The business partner is reluctant to provide details about their directors or ownership structure without a convincing justification;
  • When questioned, the business partner is evasive and/or unclear about whether the product is for domestic use or for export/re-export; or
  • The actions of the business partner are in violation of any Stora Enso guidelines, e.g. the rebate policy.
  • There is an unusual surge of business volumes in a country that is adjacent to another country which recently has had sanctions imposed over the products in question (circumvention risk);
  • There is no business logic in the transaction, e.g. a country with no local market or local converting capacity of a product is importing or exporting large volumes of this product;
  • The products in question are first delivered to tax-free zones or warehouses (circumvention risk);

REMEMBER!

  • If there is any suspicion or doubt that one or several of these red flags might lead to potential breaches of sanction and export/import control rules, contact the legal team in your Division for further guidance.

10.6 Screening and Approval

10.6.1. Manual screening and process

A manual screening process followed by reviews and decision-making steps shall be made if any direct or indirect business is connected with a Tier 2 Country according to 10.3.2 above or as instructed by the legal team. The appointed employees shall start to perform such a screening process by filling in the ‘Trade Sanction and Export Control Screening Form’, available HERE. Employees will be guided to receive support from the legal team during the process if needed and can also seek such support directly.

The Division heads are ultimately responsible for ensuring that individual employee(s) in the Division are instructed to make such a manual screening process in all applicable situations. Such appointments could be made by instructing every member of the business team(s) to be responsible for his or her transactions or by appointing one or several employees to perform such screening for the rest of the team(s). The Division heads are also ultimately responsible for the decisions made as an outcome of such a manual screening process. For Head Office transactions, such responsibilities lie with each function head. These responsibilities can be delegated and cascaded into the organisation.

The Group Ethics and Compliance team coordinates such screening and review processes by setting up standard questionnaires and review criteria and provides expert advice on an ad hoc basis.

In the following situations, contact the legal team in your Division to receive advice on whether the above-mentioned screening process shall be started:

  • If there is any suspicion or doubt as to whether a business that has a connection with a Circumvention Risk Country might circumvent sanctions or export controls, as stipulated in 10.5.1 (a);
  • If there is any suspicion or doubt as to whether a direct or indirect business with merchants, traders and similar business partners could lead to potential breaches of sanction and export/import control rules, as stipulated in 10.5.1 (b);
  • If there is any suspicion or doubt as to whether a product, especially a new product type, could be subject to sanction and import/export control restrictions, including as a result of being considered as a dual-use product, as stipulated in 10.4;
  • If there is any red flag as stipulated in 10.5.1 (c); or
  • Any other ad hoc situations as decided by the legal team in each Division, or by the Group Ethics and Compliance team.

 

10.6.2 System screening and review

The Group Ethics and Compliance team is responsible for setting up a system screening function that screens and monitors, for the purpose of complying with the rules in this section, new and existing business partners when they are and remain registered in the company’s enterprise resource planning systems such as the accounting systems, sales systems, sourcing systems etc. ("System Screening”). This function can also be set up in a business partner master data system that interacts with the aforementioned enterprise resource planning systems. The Divisions are responsible for ensuring that all the necessary information of their business partners is duly and accurately recorded in such systems where the System Screening takes place. The Division legal teams are responsible to review red flags identified from the System Screening and take adequate actions to comply with the rules in this section. The Group Ethics and Compliance team shall provide expert advice on an ad hoc basis.

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