- OFAC imposes restrictions on the importation of gold from the Russian Federation
- OFAC and the U.S. Department of State impose new sanctions on Russian entities and individuals with a focus on the Russian defense and aerospace industries
- The U.S. Department of Commerce’s Bureau of Industry and Security imposes additional export controls on entities identified as attempting to evade U.S. export controls and sanctions on Russia and issues a joint alert with FinCEN warning U.S. persons to remain vigilant in the face of continued attempts at evasion
I. OFAC Prohibits Gold Importation from the Russian Federation
Implementing the declaration of G-7 leaders on June 26, 2022, the United States has joined the UK, Canada and Japan in prohibiting the importation of newly mined or refined gold of Russian Federation origin. The restriction was imposed after a determination issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) pursuant to Section 1(a)(i) of Executive Order 14068 and took effect immediately upon its announcement on June 28, 2022. The Treasury Department had previously warned that transactions in gold may be considered prohibited transactions in certain circumstances, including when persons are determined to operate or to have operated in the financial services sector of the Russian Federation economy. A limited exception to the import ban is provided for transactions involving gold of Russian origin that was located outside of the Russian Federation prior to June 28, 2022. OFAC also released a new FAQ in connection with the determination.
II. New SDN List Designations
On June 28, 2022, OFAC and the State Department also announced the addition of 70 entities and 29 individuals to the Specially Designated Nationals and Blocked Persons List (“SDN List”) including those operating in the Russian defense and materiel sectors, those seeking to evade export controls and sanctions on Russia, mercenary organizations, and certain Russian military units operating in Ukraine and accused of human rights abuses. A notable addition is State Corporation Rostec (“Rostec”), a defense conglomerate that had been previously added to the Sectoral Sanctions Identifications List (“SSI List”), which prohibited all transactions in new debt of Rostec with longer than 30 days maturity (including extensions of credit/payment terms on purchases of goods/services). As a defense conglomerate, the SDN designation also impacts Rostec’s many wholly and majority owned subsidiaries through application of the 50 Percent Rule, which generally treats all entities owned 50 percent or more by an SDN as if they were also on the SDN List. However, the simultaneous issuance of General License 39 provides a grace period, authorizing transactions ordinarily incident and necessary to the wind down of transactions involving Rostec through August 11, 2022.
Additional SDN List designations targeted Russia’s aerospace sector. In addition to Rostec, Tupolev P.J.S.C., Irkut Corporation J.S.C., P.J.S.C. United Aircraft Corporation, and other Russian aerospace companies were added to the SDN List. Other sectors targeted include Russian defense technology holdings companies and industrial exporters, including J.S.C. Shvabe, a producer of optical and laser systems, and KAMAZ Inc., Russia’s largest truck manufacturer, along with nine of its subsidiaries.
The U.S. State Department also designated the Uzbekistan-based Promcomplektlogistic P.C., pursuant to EO 14024, for supporting the efforts of sanctioned Russian defense companies attempting to evade U.S. sanctions. Promcomplektlogistic P.C. was simultaneously added to the Department of Commerce’s Entity List.
As a result of the SDN List designations, almost all transactions by U.S. persons with the SDNs are prohibited, and all U.S. assets of the SDNs are “blocked” and must be reported to OFAC. Designated natural persons are also subject to a travel ban. In addition, any person, including a non-U.S. person, may themselves be designated as an SDN for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, these SDNs.
III. New General Licenses Nos. 39-43
Alongside the new sanctions, OFAC has also issued five new general licenses. General License No. 39, as previously noted, authorizes the wind down of transactions with Rostec. General License No. 40 authorizes transactions with certain sanctioned entities ordinarily incident and necessary to the provision, exportation, or re-exportation of goods, technology, or services to ensure the safety of civil aviation, provided that the aircraft is registered in a jurisdiction solely outside of the Russian Federation. General License No. 41 authorizes transactions ordinarily incident and necessary to the manufacture, sale, and maintenance of agricultural equipment, components, and spare parts produced by recently-designated Nefaz Publicly Traded Company (“Nefaz”) or Public Joint Stock Company Tutaev Motor Plant (“Tutaev Motor Plant”), or any entity in which Nefaz or Tutaev Motor Plant owns, directly or indirectly, individually or in the aggregate, a 50 percent or greater interest. General License No. 42 provides a limited carve out to transactions involving the Russian FSB related to the licensing and distribution of certain information technology products. Finally, General License No. 43 provides a license to wind down investments in P.J.S.C. Severstal or Nord Gold PLC through August 31, 2022.
IV. Additional Export Controls
Also on June 28, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) added numerous companies to its Entity List, which imposes specific export license requirements on each listed entity. The additons included companies in China, Lithuania, Pakistan, Russia, Singapore, the United Arab Emirates, the UK, Uzbekistan, and Vietnam, alleged to have attempted to evade U.S. export controls on Russia and Belarus.
The same day, BIS also issued a joint alert with Treasury’s Financial Crimes Enforcement Network (“FinCEN”) reminding companies to remain vigilant in the face of continued attempts by Russia and Belarus to evade U.S. export controls. The alert also provides an overview of BIS’s current export restrictions related to Russia and Belarus, a list of certain commodities of concern for possible export control evasion, and examples of red flags to assist financial institutions in identifying suspicious transactions.
Foley Hoag will continue to provide updates as the situation with respect to Ukraine develops. Companies with questions about these actions or how to ensure compliance with U.S. sanctions and export control regulations should contact a member of Foley Hoag’s Trade Sanctions & Export Controls practice. For information on earlier Russia-related actions, see our prior Client Alerts issued on June 14, May 10, April 11, April 7, March 28, March 17, March 15, March 11, March 7, March 1, February 28, and February 17.