On Anniversary of Russia’s Invasion of Ukraine, US Announces Additional Sanctions and Export Controls, Imposes Higher Tariffs
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On the one-year anniversary of Russia's invasion of Ukraine, the US imposed additional sanctions and export controls measures on Russia. The restrictions include a new determination targeting the metals and mining sector of the Russian economy and the blocking of over a dozen Russian financial institutions, along with other individuals and entities "connected to Russia's sanctions evasion efforts" and operating in other sectors of the Russian economy. The US also expanded its export controls restrictions on Russia, Belarus and Iran. The new measures expand the scope of existing Russian and Belarusian industry sector sanctions and "luxury goods" sanctions, impose controls on items used for Unmanned Aerial Vehicles ("UAVs") destined for Iran, Belarus or Russia, and add new entities to the Entity List. Finally, the US raised tariffs on Russian products.
US Announces New Russia Sanctions Measures
Determination Regarding the Metals and Mining Sector
On February 24, 2023, the US Department of the Treasury's Office of Foreign Assets Control ("OFAC") announced new sanctions measures on Russia.1 The measures include a new determination targeting the metals and mining sector of the Russian economy, defined as "any act, process, or industry of extracting, at the surface or underground, ores, coal, precious stones, or any other minerals or geological materials in the Russian Federation, or any act of procuring, processing, manufacturing, or refining such geological materials, or transporting them to, from, or within the Russian Federation."2 The Determination enables OFAC to impose sanctions on any individual or entity determined to operate or to have operated in this sector.3 This does not mean that all individuals or entities operating in the sector are sanctioned, as OFAC makes sanctions designations on an individual basis.4
Additional Designations of Specially Designated Nationals ("SDNs")
Pursuant to the Determination above, OFAC designated four Russia-based entities as SDNs subject to blocking sanctions for operating in the metals and mining sector.
OFAC also designated 22 individuals and 79 other entities to the SDN List,5 including, among others:
- Thirteen Russian financial institutions, including Credit Bank of Moscow PJSC;6
- Eight wealth management firms in Russia, Austria and Cyprus, along with several individuals connected to those firms;
- Individuals (including Swiss, German and Italian nationals) and entities involved in evading Russia-related sanctions;
- Arms dealers supporting Russia and Belarus;
- Entities operating in the Russian aerospace sector;
- Entities involved in Russia's technology and electronics sectors, including those who produce or import specialized or high-tech equipment used by Russia's defense industry; and
- Other entities supporting Russia's war against Ukraine, including a Russian mercenary force and an entity that provides insurance services to companies in Russia's defense sector.
In coordination with OFAC, the US Department of State designated as SDNs over 100 individuals, entities and vessels. These designations include high-level officials in the Russian government, individuals and entities operating in parts of Ukraine occupied by Russia, individuals and entities operating in Russia's future energy production and export capacity sector, as well as its advanced technology, nuclear, defense, marine (including shipping) and financial services sectors.7 The State Department measures also include visa restrictions on over 1,000 Russian military members.8
All property and interests in property of persons on the SDN List that are located in the United States or within the possession or control of a US person, wherever located, are blocked, and US persons may not engage in any dealings, directly or indirectly, with them, absent an applicable license or exemption. Any entity in which one or more blocked persons owns in the aggregate, directly or indirectly, a 50 percent or greater interest is automatically blocked.
General Licenses and FAQs
Additionally, OFAC released two new general licenses ("GLs"):
- GL 60 authorizes certain wind-down transactions and rejection of transactions involving certain Russian financial institutions through 12:01 a.m. EDT May 25, 2023.9
- GL 61 authorizes certain transactions related to the divestment or transfer to non-US persons of debt or equity of certain Russian financial institutions through 12:01 a.m. EDT May 25, 2023.10 The GL also authorizes transactions related to the wind-down of derivative contracts entered into before February 24, 2023, that include the same named Russian financial institutions or are linked to the debt or equity of such institutions. This authorization also extends through 12:01 a.m. EDT May 25, 2023.
OFAC further updated two existing GLs:
- OFAC updated GL 8F to add Bank Zenit and Bank Saint Petersburg to the authorization of certain transactions related to energy involving certain Russian financial institutions through 12:01 a.m. EDT May 16, 2023.11
- OFAC extended the expiration date of GL 13D, authorizing certain administrative transactions with the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation prohibited by Directive 4 under Executive Order 14024 through 12:01 a.m. EDT June 6, 2023.12
OFAC has also issued new FAQs in connection with the new round of sanctions.13 In particular, OFAC has clarified in FAQ 1118 that GL 13D does not authorize the payment of an "exit tax" related to divestment from Russia if such payment involves the Central Bank, the National Wealth Fund or the Ministry of Finance of the Russian Federation. OFAC said US persons whose divestment from Russia requires payment of an "exit tax" may apply to OFAC for a specific license.14
US Imposes Additional Export Controls on Russia, Belarus and Iran
The US Department of Commerce Bureau of Industry and Security ("BIS") expanded export controls on Russia, Belarus and Iran by issuing four separate final rules under the Export Administration Regulations ("EAR"), effective February 24, 2023.15
Expansion of Existing Russian and Belarusian Export Controls
Expansion of Industry Sector Sanctions
BIS expanded the scope of existing Russian and Belarusian industry sector sanctions (oil and gas production; commercial and industrial items; chemical and biological precursors) by adding 322 new Harmonized Tariff Schedule ("HTS") six digit codes to the industry sector supplement No. 4 list of controlled items. Some of the items added include vehicles specially designed for traveling on snow; certain iron, aluminum and steel products; internal combustion piston diesel or semi-diesel engines for marine or agricultural use; and electrical and electronic waste and scraps of all kinds. BIS also added additional chemicals and made clarifications to industry sector supplement No. 6.
In addition, BIS aligned industry sector supplements Nos. 2 and 4 of Part 746 by clarifying that parts, components, accessories and attachments of items on the supplement No. 2 list are included within the scope of the controls. BIS also removed the Schedule B numbers and descriptions in the industry sector supplements Nos. 2 and 4 so that only the six-digit HTS codes are used in order to align with US allies and partners. The rule also clarifies that the first six digits of the HTS code determine whether a license is required, regardless of the remaining digits.
Expansion of Luxury Goods Controls
The rule also expands the Russia and Belarus "luxury goods" controls by adding 276 additional Schedule B codes for items that will require a license to align the luxury goods controls with US allies and partners.16 Some of the newly controlled items include certain aircraft engines for use in civil aircraft; certain gas turbines and parts; certain electronic calculators; and certain transmission shafts.
Modification of Licensing Policy
BIS will review license applications for the disposition of items by companies that are curtailing or closing all operations in Russia or Belarus on a case-by-case basis instead of under a policy of denial, provided the companies are not headquartered in countries subject to national security, arms embargo, unilateral embargo or terrorist-supporting country controls. BIS will consider whether the disposition of the items will benefit the Russian or Belarusian government or military.
Addition of Taiwan to List of Countries Excluded from Expanded FDP and De Minimis Rules
The new rules issued by BIS also added Taiwan to the list of countries that are exempt from the expanded de minimis and foreign direct product ("FDP") rules that apply to licenses for exports, re-exports and transfers (in-country) to Belarus, Iran and Russia, as those countries have adopted substantially similar export control rules against Russia to those found in the EAR.
New Rule Targeting Unmanned Aerial Vehicles ("UAVs")
Controls on UAV-related Items Destined to Iran, Russia or Belarus
BIS published a separate final rule imposing expanded export control measures on Iran, Russia and Belarus to address the use of UAVs by Russia in its unprovoked war against Ukraine.17 Specifically, these controls impose license requirements for the export or reexport to Iran of items subject to the EAR listed in a new supplement No. 7 to part 746 of the EAR. The items are designated by HTS codes and include both items with ECCNs and items that are EAR99. The rule includes items produced outside the United States ("foreign-produced items") with US-origin technology or software by adding a new Iran FDP rule and expanding the Russia/Belarus FDP rule and associated license requirement to include items listed in supplement No. 7.
Items that otherwise would have met the requirements for an OFAC general license if the transactions had been subject to OFAC license requirements are exempt from BIS license requirements, as this could control items used in applications such as medical devices that are otherwise authorized under the Iranian Transactions and Sanctions Regulations ("ITSR").
New Iran Foreign Direct Product Rule
A new Iran FDP rule renders foreign-produced items subject to the EAR if they are: (1) destined for Iran; (2) the direct product of US-origin software or technology classified in Categories 3 through 5 or 7 of the CCL, or are produced by a plant or major component of a plant which itself is the "direct product" of such software or technology; and (3) identified in the new supplement No. 7 to part 746 or described in any ECCN in Categories 3 through 5 or 7 of the CCL.
Exports or reexports from certain allied countries identified in supplement No. 3 to part 746 are exempted from the license requirements for items subject to the Iran FDP Rule.
Additional Entity List Designations18
BIS added 76 Russian entities to the Entity List for providing support to Russia's military and operations in Ukraine.19 Generally, a license is required for the export, reexport or transfer of all items subject to the EAR to such entities, with a policy of denial. Sixty-six of these entities are designated as Russian military end-users subject to the Russia/Belarus Military End User FDP Rule. Unless specified, license exceptions are not available.
For five of the 76 entities, portions of License Exception GOV are available for certain activities involving the International Space Station ("ISS"). Further, applications for EAR99 food and medicine and items for US government use on the ISS will be reviewed on a case-by-case basis.
In addition to the designations above, BIS separately added ten entities from Russia, China and other countries to the Entity List as Russian or Belarusian military end users subject to the Russia/Belarus Military End User FDP Rule.20 License applications for these entities will be reviewed under a policy of denial, other than food and medicine designated as EAR99, which will be reviewed on a case-by-case basis.
A savings clause applies to items affected by the expansion of the Russia and Belarus controls or the introduction of the UAV controls if they are en route pursuant to an actual order to their destination on/before February 24, 2023, provided the export, reexport or transfer (in-country) is completed no later than March 27, 2023. For items affected by the new Entity List designations, a savings clause applies to items en route pursuant to an actual order to their destination on/before February 24, 2023.
US Imposes Higher Tariffs on Additional Imports from Russia
Finally, acting under the authority of the Suspending Normal Trade Relations with Russia and Belarus Act, the United States raised tariffs on most metal and metal products from Russia—doubling them from 35 to 70 percent.21 The action also increased tariffs on aluminum pursuant to Section 232 of the Trade Expansion Act of 1962. Beginning on March 10, 2023, a 200 percent tariff will apply to aluminum articles and their derivatives that are the product of Russia, and beginning on April 10, 2023, the 200 percent tariff will also apply to aluminum articles and their derivatives where any amount of primary aluminum used in the manufacture of the aluminum articles is smelted or cast in Russia.22
1 See OFAC’s press release here.
2 OFAC FAQ No. 1115 here.
3 See full text of determination here.
4 See OFAC FAQ No. 1116 here.
5 See OFAC’s designations here.
6 Credit Bank of Moscow PJSC was previously subject to partial sanctions, but is now designated as an SDN and subject to full blocking sanctions.
7 See State Department designations here.
8 See State Department designations here.
9 See the full text of GL 60 here.
10 See the full text of GL 61 here.
11 See the full text of GL 8F here.
12 See the full text of GL 13D here.
13 See new OFAC FAQs here.
14 OFAC FAQ No. 1118 here.
15 See BIS’ press release here.
16 See the Federal Register notice here.
17 See the Federal Register notice here.
18 In addition to the Entity List designations discussed in this section, BIS added three more entities in Russia, Belarus and Taiwan to the Entity List on March 2, 2023, for significantly contributing to Russia’s military and/or defense industrial base. See the Federal Register notice here.
19 See the Federal Register notice here.
20 See the Federal Register notice here.
21 See USTR’s press release here.
22 See the White House Press Release here.
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