Russia Sanctions

[ABS News Services/04.09.2024]

The Commerce Department’s Bureau of Industry and Security is taking action to further restrict the supply of both US-origin and “U.S. branded” (i.e., labeled) items to Russia and Belarus for the Kremlin’s war efforts.

BIS has imposed controls on a range of items subject to the Export Administration Regulations that did not previously require export licenses when destined for Russia. Also imposed are similarly stringent controls on items subject to the EAR that are destined for Belarus. Notably, both countries have been made subject to broad in-country transfer controls.

Key actions include:

· Further tightening controls on Russia by expanding the scope of the Russia/Belarus Military End User and Procurement Foreign Direct Product rule and imposing additional license requirements on operation software for computer numerically controlled machine tools;

· Cutting off exports to foreign companies on the BIS Entity List; applying the expanded Russia/Belarus MEU and Procurement FDP rule to dozens of entities outside Russia;

· Restricting trade to additional foreign addresses and issuing guidance to exporters on identifying suspicious transactions related to foreign corporate service providers and listed foreign addresses, strengthening recently implemented restrictions on shell company addresses; and

· Providing guidance and recommendations on contractual language referencing export regulations, specifically, restrictions that target unlawful reexports to Russia and Belarus.

Expanding Scope

Expanding the scope of the existing FDP rule allows BIS export controls to capture entities outside Russia (and Belarus) that help procure not only US-origin but also US-branded items that support Russia’s illegal, unjustified and unprovoked war in Ukraine.

This expansion is intended to target the transshipment of microelectronics and other items that bear the brand of a US-headquartered company, even if manufactured outside the United States.

Additionally, BIS is adding controls on certain software needed to operate CNC machine tools to prevent the provision of software updates to controlled tools in Russia and Belarus. This will have a delayed effective date of September 16, 2024.

BIS is also adding 123 entities under 131 entries to the Entity List – 63 entities in Russia or the Crimea Region of Ukraine, 42 in the People’s Republic of China (PRC, including Hong Kong), and 14 entities in Türkiye, Iran, and Cyprus – for shipping US-origin and US-branded items to Russia in contravention of US export controls or for engaging in other activities contrary to US national security and foreign policy interests.

In addition, BIS is further targeting diversion through shell companies by adding four high-diversion risk addresses in Hong Kong and Türkiye to the Entity List, thereby requiring a license for transactions involving parties using those addresses. BIS will continue to aggressively target entities around the world that ship US-origin and US-branded items to Russia.

BIS is also issuing guidance and recommendations to U.S. exporters on language in sales contracts or other export documents involving items subject to the EAR to prevent diversion to Russia or Belarus.

The actions were taken in concert with similar actions by the Departments of State and Treasury targeting Russian procurement networks in third countries around the world. Treasury and State targeted nearly 400 individuals and entities both in Russia and in Asia, Europe and the Middle East – whose products and services enable Russia to sustain its war effort and evade sanctions.

Treasury is targeting transnational networks involved in:

· procuring ammunition and military materiel for Russia,

· facilitating sanctions evasion for Russian oligarchs through offshore trust and corporate formation services,

· evading sanctions imposed on Russia’s cyber actors,

· laundering gold for a sanctioned Russian gold company, and

· supporting Russia’s military-industrial base by procuring sensitive and critical items such as advanced machine tools and electronic components.

The announced sanctions also further target Russia's metals and mining industry. and Russian financial technology companies that provide necessary software and IT solutions for Russia’s financial sector.

Noting Russian efforts to facilitate sanctions evasion by opening new overseas branches and subsidiaries of Russian financial institutions, Treasury advises foreign regulators and financial institutions to be cautious about any dealings with overseas branches or subsidiaries of Russian financial institutions, including efforts to open new branches or subsidiaries of Russian financial institutions that are not themselves sanctioned.