June 5, 2023
June 5, 2023
The OFAC press release and the State Department press release contain full lists of the newly designated individuals, entities, vessels and aircraft.
In connection with the G7 meeting recently held in Japan, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) have issued new and broadened export controls and sanctions relating to Russia and Belarus. The expansive nature of these measures and the severity of the fines and penalties for lack of compliance make it imperative for companies to have robust compliance and screening procedures.
The two new BIS rules continue efforts to impose powerful and coordinated restrictions on Russia for its ongoing, full-scale invasion of Ukraine. The rules: (1) expand export controls to additional items in alignment with international partners and allies; and (2) add 71 entities to the Entity List, primarily for supporting Russia’s military and defense sectors. BIS also released a second joint alert with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), which urged continued vigilance by U.S. financial institutions against potential Russian export control evasion.
Meanwhile, OFAC, along with the U.S. Department of State, have taken numerous actions, including designating over 300 individuals, entities, vessels and aircraft in more than 20 countries as Specially Designated Nationals, and expanding the Russian sectoral sanctions to include the architecture, engineering, construction, manufacturing, and transportation sectors of the Russian Federation economy. The OFAC press release and the State Department press release contain full lists of the newly designated individuals, entities, vessels and aircraft.
The effective date for the new rules is May 19, 2023. A brief summary of the two rules follows.
The first rule builds on the existing Russian and Belarusian industry sector sanctions already put in place by the United States and its allies, targeting Russia’s industrial, commercial, chemical, biological and other sectors that can support Russia’s defense industrial base and/or be diverted to such uses through Belarus. The rule adds license requirements for additional items, as outlined in the Export Administration Regulations (EAR), to align U.S. controls further with those implemented by its partners and allies. The rule makes four major changes:
Under the stringent licensing review policy, applications for the export, reexport or transfer (in-country) of items that require a license for Russia or Belarus will be reviewed, with certain limited exceptions, under a general policy of denial. These reviews are conducted on a case-by-case basis. Therefore, companies wishing explore the possibility of obtaining a BIS export license are advised to contact experienced international trade compliance counsel.
The second rule adds 69 entities in Russia and one entity each in Armenia and Kyrgyzstan to the Entity List.
The supplemental alert builds on FinCEN and BIS’s first joint alert, issued in June 2022, and provides financial institutions additional information with respect to new BIS export control restrictions relating to Russia. The alert also reinforces ongoing U.S. government engagements and initiatives designed to further constrain and prevent Russia from accessing needed technology and goods to supply and replenish its military and defense industrial base. Specifically, the alert highlights Russia’s use of intermediaries in third countries to evade export controls and urges financial institutions to take appropriate due diligence measures, particularly with respect to high-priority items (identified below). The joint alert also identifies real world “red flags” of diversion risk.
High Priority Items
HS Code
HS Description
8542.31
Electronic integrated circuits: processors and controllers, such as microcontrollers
8542.32
Electronic integrated circuits: memories, such as SRAM
8542.33
Electronic integrated circuits: amplifiers, such as op amps
8542.39
Electronic integrated circuits: other, such as FPGAs
8517.62
Machines for the reception, conversion and transmission or regeneration of voice, images or other data, such as wireless transreceiver modules
8526.91
Radio navigational aid apparatus, such as GNSS modules
8532.21
Tantalum capacitors
8532.24
Multilayer ceramic capacitors
8548.00
Electrical parts of machinery or apparatus, not specified or included elsewhere, such as EMI filters
Also on May 19, 2023, OFAC took a number of specific actions:
In connection with the above actions, OFAC replaced Russia-related General License 13D with new Russia-related General License 13E, which authorizes certain administrative transactions otherwise prohibited by Directive 4 under Executive Order 14024. OFAC also issued Russia-related General License 66, authorizing the winding down of transactions involving public joint stock company Polyus; Russia-related General License 67, authorizing certain transactions related to debt or equity of, or derivative contracts involving, Polyus; Russia-related General License 68, authorizing the winding down of transactions involving certain universities and institutes; and Russia-related General License 69, authorizing certain debt securities servicing transactions involving International Investment Bank. A full list of the general licenses available in relation to the Russian Harmful Foreign Activities Sanctions is available on the OFAC website.
Attorneys in the firm’s International Group have considerable experience in assisting clients on a wide range of matters involving U.S. export controls and economic sanctions. Such assistance includes: performing export control classification reviews; advising on the viability of proposed transactions; applying for and obtaining licenses and other kinds of export authorizations from BIS and other U.S. government agencies (e.g., DDTC and OFAC); and developing, implementing and assessing trade compliance programs for companies.
If you have any questions or comments about this Alert, please contact Geoffrey M. Goodale, Hope P. Krebs, Thomas R. Schmuhl, Mauro M. Wolfe, Brian S. Goldstein, Raul Rangel Miguel, Lauren E. Wyszomierski, any of the attorneys in our International Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.
June 5, 2023
If you have any questions or comments about this Alert, please contact Geoffrey M. Goodale, Hope P. Krebs, Thomas R. Schmuhl, Mauro M. Wolfe, Brian S. Goldstein, Raul Rangel Miguel, Lauren E. Wyszomierski, any of the attorneys in our International Practice Group or the attorney in the firm with whom you are regularly in contact.