On May 19, 2023, in conjunction with allies at the 2023 G7 Summit, the Biden administration announced several new actions to counter continued Russian aggression in Ukraine that, among other measures, include a significant increase in restrictions on exports of previously permitted items to Russia and Belarus. The actions taken by the U.S. Departments of Commerce, Treasury, and State include expanded export controls, new secondary sanctions authorities, and the designation of dozens of new individuals and entities on various restricted party lists. The new rules announced by the Departments of Commerce, Treasury, and State affect companies in sectors ranging from electronics to medicine to manufacturing to architecture. Understanding these new controls is critical for U.S. companies still conducting activities in Russia or Belarus to ensure that they remain in compliance with applicable sanctions and export control laws.
BIS: The Commerce Department’s Bureau of Industry and Security (BIS) issued two new rules. The first, an effort to cut off Russia’s military resources, heightened export controls on a variety of “electronics, instruments, and advanced fibers for the reinforcement of composite materials, including carbon fibers,” many of which are classified for export under EAR99. This broad array of items, which now includes all entries contained in Chapters 84, 85, and 90 of the Harmonized Tariff Schedule—such as industrial machinery, electrical equipment, batteries, computers, networking equipment, photography equipment, measurement instruments, and most medical equipment—requires a license for export, reexport, or in-country transfer to Russia or Belarus. BIS’s second rule added dozens of new entities to the Entity List. In large part, these additions capture Russian entities determined to have supported Russian military and defense capabilities. BIS also broadened the Russian and Belarusian Industry Sector Sanctions, adding four new chemicals, and expanded the Russia/Belarus Foreign Direct Product Rule to include items destined for the temporarily occupied Crimea region of Ukraine.
OFAC: The Treasury’s Office of Foreign Assets Control (OFAC) also announced a series of new actions and determinations. Most significantly, OFAC expanded the current prohibition on the provision of certain services to persons located in Russia (pursuant to Executive Order 14071) to now include architecture and engineering services. OFAC’s actions also further expand sanctions upon “those attempting to circumvent or evade sanctions and other economic measures against Russia, the channels Russia uses to acquire critical technology, its future energy extraction capabilities, and Russia’s financial services sector,” including nearly two dozen individuals and over 100 entities across multiple countries and jurisdictions. OFAC also expanded the Treasury Secretary’s power to impose sanctions on U.S. persons who have operated in Russia’s architecture, engineering, construction, manufacturing, and transportation sectors (pursuant to Executive Order 14024).
State Department: At the same time, the State Department also leveraged its authority under Executive Order 14024 to sanction dozens of Russia-related individuals and entities targeting operators within Russia’s energy, military procurement and defense, metals and mining, advanced technology, government, and financial services sectors; individuals involved in the unlawful relocation of Ukrainian children; and entities deemed to have engaged in grain theft in Ukraine. As with parties designated by OFAC, no goods, funds, or services may be provided by, to, or for any of these sanctioned parties.
FinCEN: Separately, BIS and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a supplemental joint alert to their earlier 2022 alert, providing additional detail for financial institutions to ensure compliance with Russian export controls. The alert offers information on evasion typologies, denotes priorities for customer due diligence, and highlights behavioral red flags that can indicate suspicious transactions. In particular, the joint alert highlights a number of “high priority items” identified in Russian weapons and military systems in Ukraine, including “electronic integrated circuits,” networking equipment, “radio navigational aid apparatuses,” certain capacitors, and miscellaneous electrical parts of machinery and apparatuses.
If you have any questions about your company’s compliance obligations, or if you seek additional information on these new rules, please reach out to any member of Wilson Sonsini’s national security practice.
