The Treasury and Commerce Departments have announced new export controls and sanctions against Russia, following remarks by President Joe Biden. These new measures include export control license requirements for much of the Commerce Control List, and the expansion of sanctions, including to entities in Belarus.

The Bureau of Industry and Security (BIS) has also released a final rule on the export control changes, which are effective as of February 24, 2022.

The BIS rule lays out license requirements with a policy of denial on all Export Control Classification Number (ECCNs) in categories 3-9 of the Commerce Control list—58 of which were previously not controlled to Russia, including semiconductors, computers, telecommunications, information security equipment, lasers, and sensors, says a BIS fact sheet. BIS is also adding 49 Russian military end users to the Entity List.

In the rule, BIS is also creating new foreign direct product rules for all of Russia, including a more restrictive foreign direct product rule for military end users that will require a license if an entity with a footnote 3 designation. BIS has moved Russian parties from the Military End User List (“MEU List”) to the Entity List. This means that regular Entity List restrictions now apply, and—in most cases—a license will be required for export or reexport of any item subject to the EAR, including EAR99 items. The license review policy is “presumption of denial.” BIS also issued two new Foreign Direct Product Rules (FDPR) specific to Russia and Russian MEUs. BIS will also restrict the use of license exceptions for Russia.

The Office of Foreign Assets Control (OFAC) added 75 entities and 15 individuals from Russia and Belarus to the Specially Designated Nationals (SDN) List, including VTB Bank, Russia’s second largest, and three other major financial institutions. Given Belarus’s role in the conflict launched earlier this week, the Biden Administration has issued sanctions on two state-owned banks, Belarussian Bank of Development and Reconstruction Belinvestbank Joint Stock Company and Bank Debrabyt Joint-Stock Company. OFAC also announced a series of general licenses outlining exceptions to the expanded sanctions.

As of February 28, 2022

OFAC has blocked certain transactions with the Central Bank of Russia, the Russian National Wealth Fund, and the Russian Ministry of Finance. OFAC also froze the Russian Direct Investment Fund—which the agency called a “key” sovereign wealth fund—along with its CEO, Kirill Dmitriev. Also, blocked is RDIF’s management company and one of the managing company’s subsidiaries. By blocking these entities, OFAC said it is “terminating yet another route through which Russia has benefitted from access to the U.S. financial system.”

Concerns & Suggestions
The following are things to consider regarding transactions with Russia:

  • Commercial transportation to and from these areas will be problematic. UPS and FedEx are no longer servicing Russia.
  • We recommend an increased level of due diligence and reasonable care when dealing with any parties in either of these countries.
  • Check and re-check the denied parties list before proceeding on any trade.
  • Any financial transfer may be blocked by OFAC, The Department of Treasury, and Office of Asset Controls.
  • Make sure to conduct end use checks and carefully document and retain records to support your export authorization to for your export transaction.

If you have questions on how this may impact your business, or need assistance reviewing your transactions, reach out to Mohawk Global Trade Advisors.

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