U.S. President Biden Issues Eighth Tranche of Economic Sanctions

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On June 28, 2022, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued a determination prohibiting gold of Russian origin from being imported to the United States.

The Department of Commerce’s Bureau of Industry and Security (“BIS”) and the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a joint alert to financial institutions to aid in detecting potential violations of export controls.

In addition, OFAC made 70 new designations, BIS added 36 entities to its Entity List, and the State Department made 74 new designations and imposed new visa restrictions.

For President Biden’s June 27 decision to raise the tariff rate on $2.3 billion worth of Russian imports to 35%, please see our Curtis Client Alert issued June 28, 2022.

Prohibition on Russian Gold Imports

OFAC issued a determination pursuant to Section 1(a)(i) of Executive Order (E.O.) 14068, which states that the “importation into the United States of gold of Russian Federation origin is prohibited.” This determination took effect on June 28, 2022.

This determination specifically “excludes gold of Russian Federation origin that was located outside of the Russian Federation prior to the effective date of this determination.” Certain gold-related transactions involving Russia were already sanctionable under E.O. 14024 before this determination.

The determination was part of a coordinated sanctions package released following the conclusion of the Group of Seven (G-7) summit in Germany. To date, three other G-7 members, Canada, Japan, and the UK, have announced similar bans on imports of Russian-origin gold.

New Designations and General Licenses

OFAC designated 70 entities, including State Corporation Rostec, which OFAC described as the “cornerstone of Russia’s defense, industrial, technology, and manufacturing sectors,” as well as 29 Russian individuals. For the complete list of designations, please see the Department of Treasury’s press release.

In tandem with OFAC’s designations, the Department of State imposed sanctions on 45 entities and 29 individuals under E.O. 14024, including 19 board members of Rostec and nine of their adult family members. Additionally, the Department of State imposed visa restrictions on 511 Russian military officers.

OFAC also issued General Licenses 39 – 43:

General License 39:

• Authorizes the wind-down of transactions involving State Corporation Rostec, or any entity blocked not earlier than June 28, 2022, in which State Corporation Rostec owns, directly or indirectly, a 50% or greater interest.
• The wind-down period ends at 12:01 a.m. EDT on August 11, 2022.
• This general license does not authorize:
  • Any transactions prohibited by Directive 2 under E.O. 14024
  • Any transactions prohibited by Directive 4 under E.O. 14024
  • Any transactions otherwise prohibited by the Russian Harmful Foreign Activities Sanctions Regulations (“RuHSR”)

General License 40:

• Authorizes certain transactions involving certain blocked entities that are ordinarily incident and necessary to ensure the safety of civil aviation, provided that:
  • The aircraft is registered in a jurisdiction solely outside of Russia
  • The goods, technology, or services that are provided, exported, or reexported are for use on aircraft operated solely for civil aviation purposes
• List of authorized entities under GL 40: (a) PJSC United Aircraft Corporation; (b) Irkut Corporation JSC; (c) Energotsentr Irkut; (d) Irkut-Avtotrans; (e) Irkut-Remstroi; (f) Irkut-Stanko Service; (g) Rapart Servisez; (h) Sportivno-Ozdorovitelnyi Tsentr Irkut-Zenit; (i) Tipografiya Irkut; (j) JSC Ilyushin Finance Company; (k) Open JSC Ilyushin Aviation Complex; (l) PJSC Taganrog Aviation Scientific-Technical Complex N.A. G.M. Beriev; (m) JSC Flight Research Institute N.A. M.M. Gromov; (n) Tupolev PJSC; (o) LLC Kapo-Avtotrans; (p) LLC Kapo-Zhilbitservis; (q) LLC Networking Company Irkut; or (r) any entity in which one or more of the above persons own, directly or indirectly, individually or in the aggregate, a 50% or greater interest.
• This general license does not authorize:
  • Any transactions prohibited by Directive 2 under E.O. 14024
  • Any transactions prohibited by Directive 4 under E.O. 14024
  • Any transactions otherwise prohibited by RuHSR
  • Non-compliance with the Export Administration Regulations (“EAR”)

General License 41:

• Authorizes certain transactions ordinarily incident and necessary to the manufacture, sale, and maintenance of agricultural equipment produced by Nefaz Publicly Traded Company (“Nefaz”) or PJSC 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% or greater interest.
• The wind-down period ends at 12:01 a.m. EDT on December 22, 2022.
• This general license does not authorize:
  • The opening or maintaining of a correspondent account or payable-through account for or on behalf of any entity subject to Directive 2 under E.O. 14024
  • Any debit to an account on the books of a U.S. financial institution of the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation
  • Any transaction prohibited by E.O. 14066, E.O. 14068, or E.O. 14071

General License 42:

• Authorizes certain transactions with Russia’s Federal Security Service (“FSB”) that are necessary and ordinarily to:
  • Requesting certain licenses and authorizations for the importation, distribution, or use of certain information technology products in Russia, provided that:
    • The exportation, reexportation, or provision of any goods or technology that are subject to the EAR is licensed or otherwise authorized by the Department of Commerce
    • The payment of any fees to the FSB for such licenses, permits, certifications, or notifications does not exceed $5,000 in any calendar year
  • Complying with law enforcement or administrative actions or investigations involving the FSB
  • Complying with rules and regulations administered by the FSB
• This general license does not authorize:
  • Any transactions prohibited by Directive 2 under E.O. 14024
  • Any transactions prohibited by Directive 4 under E.O. 14024
  • Any transactions otherwise prohibited by the RuHSR

General License 43:

• Authorizes all transactions that are ordinarily incident and necessary to the divestment or transfer of debt or equity of PJSC Severstal (“Severstal”) or Nord Gold PLC (“Nord Gold”), or any entity in which Severstal or Nord Gold owns, directly or indirectly, individually or in the aggregate, a 50% or greater interest, purchased prior to June 2, 2022.
• The wind-down period ends at 12:01 a.m. EDT on August 31, 2022.
• This general license does not authorize:
  • Any transactions prohibited by Directive 2 under E.O. 14024
  • Any transactions prohibited by Directive 4 under E.O. 14024
  • Any transactions otherwise prohibited by RuHSR

Additions to BIS’s Entity List and the Joint Alert on Export Control Evasion

BIS amended the EAR by adding 36 entities to the Entity List. The Entity List publishes the names of foreign persons that are subject to specific license requirements for the export, reexport, and/or transfer of specified items. These entities will be listed on the Entity List under the following destinations: China, Lithuania, Pakistan, Russia, Singapore, the United Arab Emirates, the United Kingdom, Uzbekistan, and Vietnam. Please see the BIS website for the most updated Entity List.

In addition, FinCEN and BIS issued a joint alert to provide financial institutions with an overview of BIS’s current export restrictions; a list of commodities of concern for possible export control evasion; and select transactional and behavioral red flags to assist financial institutions in identifying related suspicious transactions.

The joint alert reminds financial institutions of their obligations under the Bank Secrecy Act (“BSA”) to report suspicious activity to FinCEN. The alert provides Suspicious Activity Report (“SAR”) filing instructions for suspected export control evasion activity. The alert also provides additional reporting options directly to BIS enforcement authorities.

Curtis will continue to monitor developments in this rapidly changing area.

Attorney advertising. The material contained in this Client Alert is only a general review of the subjects covered and does not constitute legal advice. No legal or business decision should be based on its contents.