The continuing invasion and occupation of parts of Ukraine by Russia have resulted in the imposition of strong sanctions on Russia and its ally Belarus by US agencies. Key parts of the Russia sanctions include actions taken by the Commerce Department Bureau of Industry and Security (“BIS”) and Treasury’s Office of Foreign Assets Control (“OFAC”) as follows:
- An export license requirement by BIS, with a policy of presumed denial, for the shipment of all products to Russia that are classifiable under Categories 3 through 9 of the Commerce Control List ECCNs. This includes telecommunications, computers, sensors, lasers, and information security items. It also covers numerous items not previously subject to an export license requirement if destined for Russia;
- The addition of 130 Russian entities, many of them Russian military end users, to the Entity List maintained by BIS for whom licenses will be required prior to export and that will be subject to a policy of denial. Ten entities are added to the List that are outside Russia, including three in the UK;
- Implements a policy of denial on sensitive items that support Belarus’s defense, aerospace, and maritime industries;
- Imposes a policy of denial for export license applications involving items destined for the Russian oil sector and adds those used for refining oil to such restrictions;
- Adopts a near total ban on shipments to Russian or Belarus’ military end users. Imposes a policy of denial on sensitive items that support Belarus’s defense, aerospace, and maritime industries;
- The export to Russia of luxury items, such as high-end vehicles, apparel, alcohol and jewelry is banned;
- Applies the Foreign Direct Product Rule to any shipments to Russia or Belarus of items produced with certain US-origin technology;
- The US had already banned the importation of Russian oil, coal and gas which collectively account for some 60 percent of the value of US imports from Russia. The new steps prohibit the US importation of Russian diamonds, seafood and alcohol;
- Freezes the US assets of Russia’s Central Bank, essentially cutting off Russia from foreign reserves to support the ruble;
- The White House has stated plans to revoke Russia’s Most Favored Nation or “Column 1” tariff status. As a consequence, Russia will join Cuba and North Korea in the club of nations falling under Column 2 tariffs, which are generally multiples of their MFN counterparts. US import tariffs will soar on items such as unwrought aluminum, plywood and semi-finished steel. Tariffs on most precious metals such as palladium, rhodium, uranium and silver bullion are already duty-free for both MFN and Column 2 tariffs and as of now, such imports will not be impacted. Surprisingly, it will not impact supplies of vodka – Russia accounts for only about 1 percent of US vodka imports;
- There are indications that the other member countries of the G-7 Group will revoke Russia’s favored import tariff status as well;
- New US investment in the Russian energy sector is prohibited; the ban on such investment may be broadened to other Russian economic sectors in the near future.
Before you commit to any transactions with Russia, Belarus or the breakaway regions of eastern Ukraine, we recommend you check any applicable export licensing requirements, as well as the OFAC transactional prohibitions and restrictions entitled the Russian Harmful Foreign Activities Sanctions Regulations in 31 CFR Part 587.
Robin W. Grover