Summary of Regulatory Updates, January – March 2022

The U.S. Department of the Treasury joined the Departments of State, Commerce, Homeland Security, Labor, and the Office of the U.S. Trade Representative and issued a business advisory to inform the public of the heightened risks associated with doing business in Burma, particularly business involving the military regime. 

The specific entities and sectors of greatest concern within Burma include:

• State-owned enterprises
• Gems and precious metals
• Real-estate and construction projects
• Arms, military equipment, and related activity

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued the Ethiopia Sanctions Regulations to implement Executive Order 14046 of September 17, 2021, “Imposing Sanctions on Certain Persons with Respect to the Humanitarian and Human Rights Crisis in Ethiopia.” OFAC intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) added regulations to implement a November 12, 2020 Executive order related to securities investments that finance Communist Chinese military companies, as amended by a June 3, 2021 Executive order related to the Chinese military-industrial complex and Chinese surveillance technology.

The President signed a new Executive Order – Blocking Property Of Certain Persons And Prohibiting Certain Transactions With Respect To Continued Russian Efforts To Undermine The Sovereignty And Territorial Integrity Of Ukraine.

Similar to the existing embargo targeting the Crimea region of Ukraine, which Russia attempted to annex in 2014, the regulations prohibit:

• new investment in DNR (Donetsk People’s Republic region of Ukraine), LNR (Luhansk People’s Republic region of Ukraine), or any other Covered Region by a U.S. person, wherever located;
• the importation into the United States, directly or indirectly, of any goods, services, or technology from any Covered Region;
• the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a U.S. person, wherever located, of any goods, services, or technology to any Covered Region; and
• any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited if performed by a U.S. person or within the U.S.

OFAC issued the following general licenses authorizing certain limited dealings with the Covered Regions, including:

• General License No. 17, authorizing transactions that are ordinarily incident and necessary to the wind down of transactions.
• General License No. 18, authorizing certain exports of food, medicine, medical devices, and certain COVID-19 treatments to the Covered Regions;
• General License No. 19, authorizing certain transactions ordinarily incident and necessary to the receipt or transmission of telecommunications;
• General License No. 20, authorizing activities by certain international organizations;
• General License No. 21, authorizing certain personal, non-commercial remittances, and the operation, maintenance, and closure of certain personal accounts; and
• General License No. 22, authorizing the export of certain services and software incident to theexchange of personal communications over the internet.

As a part of the EO and existing authorities, OFAC designated over 50 individuals, entities, and Russian vessels that operate or have operated in the financial services sector, technology sector, and defense and related materiel sector of the Russian economy and added them to the SDN List. FAQ 964 clarifies that a sector determination does not automatically impose sanctions on all persons who operate or have operated in the sector.

Included in these measures are two financial institutions seen as crucial to financing the Russian defense industry along with their subsidiaries: Promsvyazbank Public Joint Stock Company (PSB), a Russian state-owned financial institution that is Russia’s eighth largest financial institution, and State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB), Russia’s national economic development institution.

The measures also target elites close to Russian President Vladimir Putin viewed by the U.S. as President Putin’s inner circle, including Aleksandr Vasilievich Bortnikov, the Director of the Federal Security Service (FSB), and his son Denis Bortnikov, Petr Mikhailovich Fradkov, Chairman and CEO of PSB, and his son Vladimir Kiriyenko.

In response to the Russian Federation’s (Russia’s) further invasion of Ukraine, with this final rule, the Department of Commerce added new Russia license requirements and licensing policies to the Export Administration Regulations (EAR) to protect U.S. national security and foreign policy interests. These new Russia measures:

• impose new Commerce Control List (CCL)-based license requirements for Russia;
• add two new foreign “direct product” rules (FDP rules) specific to Russia and Russian ‘military end users;’ specify a license review policy of denial applicable to all of the license requirements being added in this rule, with certain limited exceptions;
• significantly restrict the use of EAR license exceptions;
• expand the existing Russia ‘military end use’ and ‘military end user’ control scope to all items “subject to the EAR” other than food and medicine designated EAR99, or ECCN 5A992.c and 5D992.c unless for Russian “government end users” and Russian state-owned enterprises (SoEs);
• transfer forty-five Russian entities from the Military End-User (MEU) List to the Entity List with an expanded license requirement of all items subject to the EAR (including foreign-produced items subject to the Russia-MEU FDP rules);
• and add two new Russia entities and revise two Russia entities to the Entity List. 

Lastly, this rule imposed comprehensive export, reexport and transfer (in-country) restrictions for the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republics (LNR) regions of Ukraine (“Covered Regions of Ukraine”) and makes conforming revisions to export, reexport transfer (in-country) restrictions for Crimea Region of Ukraine provisions.

OFAC issued Russia-related Directive 2  to impose correspondent and payable-through account sanctions on Russian financial institutions and listed Public Joint Stock Company Sberbank of Russia (Sberbank) and its subsidiaries under this directive.

Additionally OFAC issued Directive 3 which prohibits U.S. persons from dealing in new equity and new debt from targeted entities. The impacted entities are large, Russian state-owned entities critical to the Russian economy, including Gazprombank, Gazprom, Gazprom Neft, and Sberbank.

OFAC published new Frequently Asked Questions (regarding Russian Harmful Foreign Activities Sanctions) and updated several Frequently Asked Questions (including regarding sanctions applicable to Russian Harmful Foreign Activities, Belarus, Ukraine and Russia).

OFAC published a range of general licenses, intended to minimize unintended impacts on third parties.

Russia-related

• Russia-Related General License 5 authorizes transactions for the conduct of the official business of certain international organizations (as well as a notation indicating that transactions for the conduct of the official business of the United Nations and its specialized agencies, programs, funds, and related organizations are exempt);
• Russia-Related General License 6 authorizes all transactions ordinarily incident to the export or reexport of covered agricultural commodities, medicine, and medical devices (including software and replacement parts), as well as transactions relating to the prevention, diagnosis, or treatment of COVID-19;
• Russia-Related General License 7 authorizes transactions ordinarily incident to services rendered in connection with overflights of the Russian Federation or emergency landings;
• Russia-Related General License 8 authorizes energy-related transactions through June 24, 2022 with certain entities;
• Russia-Related General License 9 authorizes transactions necessary to divest, to a non-U.S. person, debt or equity;
• Russia-Related  General License 10 authorizes transactions necessary to wind down certain derivative contracts.
• Russia-Related General License 11 authorizes a broader wind-down of certain transactions;
• Russia-Related General License 12 authorizes U.S. persons to reject (as opposed to block) all transactions involving Otkritie, Sovcombank, VTB, or any entity that is 50% or more owned by one of these Russian financial institutions, through March 26, 2022;

Belarus

• Belarusian General License 6 authorizes all transactions that are for the official business of the United States government; and
• Belarusian General License 7 authorizes all transactions that are for the official business of certain international organizations, including the United Nations and its programmes, funds, specialized agencies, and related organizations.

OFAC issued Russia-related Directive 4 under Executive Order 14024, Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation and Russia-related General License 8A. 

See this Press Release for more information.

OFAC added Russian Harmful Foreign Activities Sanctions Regulations (31 CFR part 587) to implement Executive Order 14024 from April 15, 2021. OFAC intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions.

For additional information, see “Russian Harmful Foreign Activities Sanctions.”

This White House Fact Sheet on Russia and Belarus sanctions describes new sanction actions. More details will be published by agencies in coming days (see example below for Belarus).

Actions described in the Fact Sheet include:

• Sweeping restrictions on Belarus to choke off its import of technological goods in response to its support of Putin’s war of choice. The Department of Commerce will extend the stringent export control policies put in place for Russia to Belarus.
• Full blocking sanctions on Russian defense entities. The Department of State will impose sweeping sanctions that target Russia’s defense sector to further restrict Putin’s war machine. In total, 22 Russian defense-related entities will be designated, including firms that make combat aircraft, infantry fighting vehicles, electronic warfare systems, missiles, and unmanned aerial vehicles for Russia’s military.
• Export Controls Targeting Oil Refining, a Key Revenue Source that Supports Russian Military. Through export controls on oil and gas extraction equipment, the Commerce Department will impose restrictions on technology exports that would support Russia’s refining capacity over the long term.
• Targeting Entities Supporting the Russian and Belarusian Military. The Commerce Department, in coordination with its interagency partners, will add entities that have been involved in, contributed to, or otherwise supported the Russian and Belarusian security services, military and defense sectors, and/or military and defense research and development efforts to the Entity List. 
• Banning Russian aircraft from entering and using domestic U.S. airspace.

In response to Belarus’s substantial enabling of the Russian Federation’s (Russia)’s further invasion of Ukraine, this rule adds new license requirements and review policies for Belarus to the Export Administration Regulations (EAR) to render Belarus subject to the same sanctions that were imposed on Russia under the EAR effective February 24, 2022.

These new sanctions impose new Commerce Control List (CCL)-based license requirements for Belarus;

• revise the two foreign “direct product” rules (FDP rules) that are specific to Russia and Russian ‘military end users’ to make them also applicable to Belarus and Belarusian ‘military end users;’
• specify a license review policy of denial applicable to all of the license requirements on Belarus that are being added in this rule, with certain limited exceptions;
• significantly restrict the use of EAR license exceptions;
• expand the existing ‘military end use’ and ‘military end user’ control scope to include Belarus for all items “subject to the EAR” other than food and medicine designated EAR99;
• and add two new Belarusian entities to the Entity List as ‘military end users.’

This rule also imposes a license requirement for nuclear nonproliferation items for exports and reexports to Belarus and removes Belarus from Country Group A:4 under the EAR.

In addition, for Belarus and Russia, this rule amends the availability of License Exceptions AVS and ENC and includes clarifying guidance on the availability of CCD.

OFAC issued Russia-related General License 9A authorizing transactions related to dealings in certain debt or equity; General License 10A authorizing transactions related to derivative contracts; General License 13 authorizing certain administrative transactions prohibited by Directive 4 under Executive Order (E.O.) 14024, “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation” (e.g.) taxes, fees, or import duties, and purchase or receive permits, licenses, registrations, or certifications, to the extent such transactions are and; General License 14 authorizing certain clearing and settlement transactions prohibited by Directive 4 under Executive Order 14024.

OFAC published new Frequently Asked Questions.

1,009. Does Executive Order (E.O.) 14065 block the entire Donetsk and Luhansk oblasts?

No. E.O. 14065 targets the so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine or such other regions of Ukraine as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State (collectively, the “Covered Regions”). U.S. persons engaging in activity outside the Covered Regions are not subject to the prohibitions in E.O. 14065. Please see FAQ 1006 for what prohibitions apply to the Covered Regions.

OFAC updated several Frequently Asked Questions.

See Press Release for more information.

In response to the Russian Federation’s (Russia’s) further invasion of Ukraine, the Department of Commerce is expanded the existing sanctions against the Russian industry sector by adding a new prohibition under the Export Administration Regulations (EAR) that targets the oil refinery sector in Russia.

In response to the Russian Federation’s (Russia’s) further invasion of Ukraine on February 24, 2022, the Department of Commerce added 91 new entities to the Entity List under the destinations of Belize, Estonia, Kazakhstan, Latvia, Malta, Russia, Singapore, Slovakia, Spain, and United Kingdom with this final rule. These 91 entities have been determined by the U.S. Government to be acting contrary to the foreign policy or national security interests of the United States.

OFAC sanctioned Russian elites and their family members, identifying certain property of these persons as blocked, and sanctioning Russian intelligence-directed disinformation outlets.

See this press release for more information.

In response to the Russian Federation’s (Russia’s) further invasion of Ukraine, and to protect U.S. national security and foreign policy interests, the Department of Commerce has added new and highly restrictive license requirements and policies for certain transactions involving Russia and Belarus under the Export Administration Regulations (EAR). In order to recognize partner countries that have committed to implementing substantially similar new export controls on Russia and Belarus in their domestic laws, the Department of Commerce has published a list of countries excluded from portions of these new U.S. export controls. These exclusions apply specifically to certain requirements under the EAR related to foreign-produced items. In this rule, the Department of Commerce adds the Republic of Korea (South Korea) to the list of excluded countries.

New FAQs

1,011. My U.S. bank refused to process a requested payment related to energy despite the authorization in Russia-related General License (GL) 8A under Executive Order (E.O.) 14024. What can I do?

The Office of Foreign Assets Control (OFAC) encourages persons to connect with their financial institution regarding the status of any payment. In addition, persons with questions about engaging in or processing transactions related to GL 8A can contact OFAC’s Sanctions Compliance and Evaluation Division most efficiently via email at OFAC_Feedback@treasury.gov. Sanctions Compliance and Evaluation may also be reached via phone at (800) 540-6322 or (202) 622-2490.

The President has signed a new Executive Order banning the import of Russian oil, liquefied natural gas, and coal to the United States. The U.S. Treasury released Russia-related General License 16 and several Frequently Asked Questions to aid in the wind-down of deliveries of existing purchases that have already been contracted for.

Department of Commerce placed restrictions on the export, reexport, or transfer (in-country) to or within Russia or Belarus of ‘luxury goods’ under the Export Administration Regulations (EAR) and for exports, reexports and transfers (in-country) worldwide to certain Russian or Belarusian oligarchs and other malign actors supporting the Russian or Belarusian governments. 

OFAC issued sanctions targeting Russian elites, oligarchs, and Russia’s political and national security leaders. Actions include designating regime elites and business executives who are associates and facilitators of the Russian regime, including three immediate family members of President Putin’s spokesperson, Dmitriy Sergeevich Peskov; Russian tycoon and Kremlin insider Viktor Vekselberg; and the Management Board of the sanctioned VTB Bank. Additionally, OFAC designated 12 members of the Russian State Duma, including Vyacheslav Victorovich Volodin, who is also a permanent member of Russia’s Security Council.

OFAC issued Russia-related General License 17; General License 18 authorizing U.S. dollar-denominated banknote noncommercial, personal remittances prohibited by Executive Order of March 11, 2022 and; General License 19 authorizing transactions related to personal maintenance of U.S. individuals located in the Russian Federation Prohibited by Executive Order of March 11, 2022 and Ukraine-related General License 23.

OFAC published new Frequently Asked Questions.

Amended one Frequently Asked Question.

1,007. Are U.S. persons authorized to engage in certain activity with the so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine or such other regions of Ukraine as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State (collectively, the “Covered Regions”)?

U.S. persons are authorized through a variety of Ukraine-related general licenses (GLs) to support certain humanitarian efforts and other activity in the Covered Regions, including transactions related to the export of food or medicine, the response to the Coronavirus Disease 2019 (COVID-19) pandemic, the official business of an international organization, or the activities of nongovernmental organizations, as well as personal remittances, telecommunications, internet services, and mail.

• GL 18 authorizes certain transactions that are ordinarily incident and necessary to:  (1)  the exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices to the Covered Regions, or to persons in third countries purchasing specifically for resale to the Covered Regions; or (2) the prevention, diagnosis, or treatment of COVID-19 (including research or clinical studies relating to COVID-19).
• GL 19 authorizes certain transactions related to telecommunications that are ordinarily incident and necessary to the receipt or transmission of telecommunications in the Covered Regions, as well as certain transactions of common carriers involving the Covered Regions that are ordinarily incident and necessary to the receipt or transmission of mail and packages.
• GL 20 authorizes transactions for the conduct of the official business of certain international organizations and entities.
• GL 21 authorizes certain transactions that are ordinarily incident and necessary to the transfer of noncommercial, personal remittances to or from the Covered Regions or for or on behalf of an individual ordinarily resident in the Covered Regions.
• GL 22 authorizes certain transactions that are ordinarily incident and necessary to the exportation or reexportation, directly or indirectly, from the United States or by U.S. persons, wherever located, to persons in the Covered Regions, of services incident to the exchange of personal communications over the internet as well as the export of software to enable such services.
• GL 23 authorizes certain transactions that are ordinarily incident and necessary to the support of nongovernmental organizations’ activities in the Covered Regions, including activities related humanitarian projects to meet basic human needs, democracy building, education, non-commercial developments projects, and environmental and natural resource protection.

The Department of State is amending the International Traffic in Arms Regulations (ITAR) to better organize the purposes and definitions of the regulations. This rule consolidates and co-locates authorities, general guidance, and definitions.

Comment due date: The Department of State will accept comments on this interim final rule until May 9, 2022.

NOTE: Persons requesting further information via email should address to: DDTCCustomerService@state.gov. ATTN: Regulatory Change, Consolidation of Definitions and Restructuring of Part 120. The published email address for persons wishing to submit comments to the rule is: DDTCPublicComments@state.gov with the subject line, International Traffic in Arms Regulations:

Definitions

• Federal Register Document: Public Notice 11657
• 87 FR 16396, Mar. 23, 2022
• 87 FR 16396 – ITAR Reorg I – Summary of Changes
• 87 FR 16396 – ITAR Reorg I – Table of Moves, Edits, Removals, and Additions
• 87 FR 16396 – ITAR Reorg I – ITAR Redline

OFAC designated additional entities to the Specially Designated Nationals and Blocked Persons List (“SDN List”) pursuant to Executive Order (“EO”) 14024.

U.S. persons are generally prohibited from engaging in most transactions with SDNs, absent a specific or general license, and all U.S. assets of SDNs are “blocked” and must be reported to OFAC. Designated natural persons are also subject to a travel ban, and all entities owned 50% or more by an SDN are generally treated as if they were also on the SDN List (known as the “50 Percent Rule”) even if they are not expressly listed. In addition, any person, including a non-U.S. person, may be designated for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of these SDNs.

Sanctions on Duma Members

OFAC added 328 members of the Russian State Duma (the lower legislative house of the Russian parliament) to the SDN List, which follows the earlier designation of 12 Duma members on March 11, 2022.

Sanctions on Russian Financial Institutions

The focus on the Russian financial sector continues with new sanctions on board members and executives of sanctioned Russian banks. As part of the March 24 action, OFAC added 17 members of the board of PJSC Sovcombank (a bank that was added to the SDN List on February 24, 2022, along with 22 of its subsidiaries) to the SDN List. OFAC also designated Herman Gref, the head of Sberbank (Russia’s largest bank) and a close Putin associate. Sberbank itself is not yet an SDN, but is subject to sectoral sanctions, including a prohibition on U.S. financial institutions maintaining correspondent accounts or processing any transactions with it that went into effect on March 26. 

The financial services entity OOO Volga Group (“Volga”), which was already added to the SDN List on April 28, 2014 under EO 13661, was re-designated on March 24, 2022 under EO 14024. Gennady Nikolayevich Timchenko, the owner of OOO Volga Group, was also re-designated under EO 14024, along with OOO Transoil, a crude oil transport company owned by Mr. Timchenko. New SDN designations on persons associated with Volga include Mr. Timchenko’s wife, Elena Petrovna Timchenko, and daughter, Natalya Browning, along with Ksenia Gennadevna Frank, a board member of OOO Transoil and her spouse, Gleb Sergeevich Frank. As a result of the designation, Mr. Timchenko’s yacht, the Lena, is listed as blocked property. More information is available in the State Department’s Fact Sheet.

Sanctions on Defense Companies

Also on March 24, 2022, OFAC added several defense-related entities to the SDN List for their roles in facilitating Russia’s war effort.

OFAC issued Russia-related General License 6A transactions related to the exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components, or software updates, the coronavirus disease 2019 (COVID-19) Pandemic, or clinical trials; and Ukraine-/Russia-related General License 25 related to the establishment of journalistic offices. In addition, OFAC has updated two Frequently Asked Questions.

Aerospace, Electronics & Marine Sanctions

The Treasury Secretary issued a Determination which extends the application of Section l(a)(i) of Executive Order (E.O.) 14024 to the aerospace, electronics and marine sectors of the Russian economy. This authorises allows for sanctions to be imposed on any person or entity who operates, or has operated, in these sectors.

Designation of a “sanctions evasion network”

OFAC has designated 17 entities and 10 people said to constitute an international “sanctions evasion network”, pursuant to E.O. 14024. It is alleged that the network, led by OOO Serniya Engineering, conceals the Russian military and intelligence end-users of western technology.

• Listed people: Evgeniya Vladimirovna Bernova; Viacheslav Yuryevich Dubrovinskiy; Yevgeniy Aleksandrovich Grinin; Anton Alekseevich Krugovov; Irina Viktorovna Nikolaeva; Yevgeniya Aleksandrovna Podgornova; Nikita Aleksandrovich Sobolev; Tamara Aleksandrovna Topchi; Sergey Aleksandrovich Yershov; and Andrey Georgiyevich Zakharov.
• Listed entities: Alexsong Pte Ltd (Singapore); Djeco Group Holding Ltd (Malta); Djeco Group LP (UK); Invention Bridge SL (Spain); Majory LLP (UK); Malberg Ltd (Malta); Maltarent Ltd (Malta); OOO Foton Pro (Russia); OOO Nauchno-Tekhnicheskii Tsentr Metrotek (Russia); OOO Pamkin Khaus (Russia); OOO Robin Tried (Russia); OOO Serniya Engineering (Russia); OOO Sertal (Russia); Photon Pro LLP (Russia); SCI Griber (France); and Sernia-Film Co Ltd (Russia); Quantlog OY, an entity based in Finland that is alleged to be linked to sanctions evasion and Nikita Gennadievitch Kovalevskij (previous post), has been designated pursuant to E.O. 13694, as amended by E.O. 13757.

Designations of Russian Technology Companies

AO NII-Vektor, Joint Stock Company Mikron and Molecular Electronics Research Institute, all of which are entities operating in the Russian technology sector, have been listed pursuant to E.O. 14024. T-Platforms has also been listed.

Designations of TSNIIKHM Employees

OFAC has also designated 3 employees of the State Research Centre of the Russian Federation (FGUP) Central Scientific Research Institute of Chemistry and Mechanics (TsNIIKhM) pursuant to Section 224(a)(1)(B) of CAATSA: Evgeny Viktorovich Gladkikh; Sergei Alekseevich Bobkov; and Konstantin Vasilyevich Malevanyy. See previous post. Mr Gladkikh was indicted by the Justice Department last week in connection with cyber attacks on a non-US facility and attempted cyber-attacks on US infrastructure. DOJ Press Release.