On December 5, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) imposed sanctions on numerous entities and individuals in order to place additional pressure on both Belarus and Russia. The OFAC sanctions focus on Belarus’ “authoritarian regime” and for its continued support of Russia’s war against Ukraine. The BIS additions to the Entity List focus on parties that have engaged in efforts to procure and transship U.S.-origin items to Russia or contribute to Russia’s military/defense industrial base. These new designations either completely block or severely restrict engaging in transactions with the identified parties.

OFAC Sanctions

OFAC has designated 11 entities and eight individuals in Belarus to “increase the pressure on Alyaksandr Lukashenka’s authoritarian regime for its brutal suppression of Belarus’s democratic civil society, corrupt financial enrichment of the Lukashenka family, and complicity in Russia’s unjustified war against Ukraine.” The designations target numerous members of Belarus President Lukashenka’s inner circle and their companies that act as revenue generators for the regime and who have assisted in the facilitation of Russia’s war against Ukraine. Entities placed on OFAC’s Specially Designated Nationals (SDN) List include, companies that offer defense technology to the Lukashenka regime as well as state-owned enterprises that have acted for or on behalf of, directly or indirectly, the Government of Belarus. OFAC also sanctioned two of Belarus’ richest oligarchs and their tobacco company for engaging in a cigarette smuggling scheme into Russia. 

Additional detail and identifying information on these individuals and entities is available here. A helpful Treasury Department press release is available here. OFAC has issued Belarus General License (GL) 10 authorizing transactions that are ordinarily incident and necessary to the wind down of any transaction involving Tabak Invest LLC, or any entity in which Tabak Invest owns, directly or indirectly, a 50% or greater interest, are authorized through 12:01 a.m. eastern standard time, February 2, 2024. Certain transactions remain unauthorized under this general license and therefore requires close analysis.

As a result of these actions, all property and interests in property of the persons and entities placed on OFAC’s SDN List that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50% or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.

BIS Export Controls

BIS has issued a Final Rule placing 42 entities on the Entity List after determining that they were “acting contrary to the national security or foreign policy interests of the United States.”  These entities are listed under the countries of Armenia (3), Belarus (1), Belgium (3), China, People’s Republic of (China) (1), Cyprus (4), Germany (1), Kazakhstan (1), Netherlands (1), Russia (28), and the United Arab Emirates (1). Two entities are added to the Entity List under two country destinations. 

The majority of these companies are being placed on the Entity List for posing a risk of diversion of items subject to the Export Administration Regulations (EAR) to Russia and for ongoing efforts to circumvent U.S. export controls on sensitive military electronics and avionics equipment. Other designated entities have performed contracts for Russian government entities, including Russia’s defense sector; these entities have also now been designated as Russian or Belarusian “military end users.” The remaining entities are designated based on information that they contribute to Russia’s military and/or defense industrial base in connection with the development of military-grade drones in Russia. For all of these entities, BIS has imposed a license requirement for all items subject to the EAR and will review license applications under a presumption of denial.

The effective date for this rule is December 7, 2023. Shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of these Entity List designations that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on December 7, 2023, pursuant to actual orders, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) before January 6, 2024. Any such items not actually exported, reexported or transferred (in-country) before midnight, on January 6, 2024, require a license from BIS.

On November 16, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License 8M, extending authorization until May 16, 2024 for certain activities previously authorized under General License 8L. General License 8M authorizes the continuation of transactions and activities “ordinarily incident and necessary to the limited maintenance of essential operations, contracts, or other agreements,” that:

  1. are for safety or the preservation of assets in Venezuela;
  2. involve Petróleos de Venezuela, S.A. (PdVSA) or any entity in which PdVSA owns, directly or indirectly, a 50% or greater interest; and
  3. were in effect prior to July 26, 2019, for the following entities and their subsidiaries:
    • Halliburton
    • Schlumberger Limited
    • Baker Hughes Holdings LLC
    • Weatherford International, Public Limited Company

The term “safety or the preservation of assets” covers transactions and activities necessary “to ensure the safety of personnel, or the integrity of operations and assets in Venezuela; participation in shareholder and board of directors meetings; making payments on third-party invoices for transactions and activities authorized” under this general license (or prior to April 21, 2020, if such activity was authorized at that time) as well as “payment of local taxes and purchase of utility services in Venezuela; and payment of salaries for employees and contractors in Venezuela.” The general license authorizes such activities involving PdVSA and the other listed entities through 12:01 a.m. EST, May 16, 2024.

As with past extensions, General License 8M does not authorize any activities related to Venezuelan-origin petroleum or petroleum products; the provision or receipt of insurance or reinsurance for such products; the design, construction or work on wells or other facilities or infrastructure in Venezuela; contracting any additional personnel or services (except as required for safety); or the payment of any dividends to PdVSA. Further, this General License does not authorize transactions related to the export or re-export of diluents to Venezuela; the issuance of any loans to, or accrual of additional debt by, or subsidization of PdVSA; or any transactions otherwise prohibited by OFAC’s Venezuela Sanctions Regulations (31 C.F.R. part 591) or with any blocked persons other than those identified in this General License.

General License 8M replaces and supersedes General License 8L. See also SmarTrade Update of May 24, 2023.

On November 14, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued an important guidance document to ensure the provision of humanitarian aid to the Palestinian people in Gaza, while also maintaining strict controls to prevent funds from reaching Hamas. OFAC clarified that “U.S. sanctions do not stand in the way of legitimate humanitarian assistance to the Palestinian people.” This delicate balance is critical to support those in need without compromising the fight against terrorism. The guidance highlights the following:

  • Transactions with Blocked Persons: U.S. persons are generally prohibited from dealing with entities sanctioned under the Global Terrorism Sanctions Regulations (GTSR) or the Foreign Terrorist Organization Sanctions Regulations (FTOSR), which include groups like Hamas and Palestinian Islamic Jihad (PIJ). However, neither Gaza nor the West Bank are subject to jurisdiction-based sanctions or an embargo by OFAC.
  • NGO Activities: The “NGO general licenses” permit transactions typically prohibited by the GTSR and FTOSR, when such transactions are ordinarily incident and necessary to certain non-commercial, humanitarian activities by non-governmental organizations (NGOs). U.S. financial institutions may process transactions for humanitarian assistance, provided they have no knowledge or reason to believe such transactions are not authorized under the “NGO general licenses.”
  • Agricultural and Medical Aid: The U.S. does not enforce jurisdiction-based sanctions on Gaza or the West Bank, thus the provision of food, other agricultural commodities, medicine, and medical devices to Gaza or the West Bank is generally not prohibited under certain provisions of GTSR and FTOSR.
  • U.S. Government Official Business: Pursuant to GTSR and FTOSR, the “USG general licenses” authorize all transactions related to the conduct of official U.S. government business by employees, grantees, or contractors.
  • International Organizations (IO): Pursuant to GTSR and FTOSR, the “IO general licenses” authorize all transactions that may otherwise be prohibited that are for the conduct of the official business of certain international organizations and for such conduct by employees, contractors, or grantees thereof. The guidance provides the list of IOs authorized by the IO general licenses.

This guidance affirms that OFAC sanctions are not intended to impede legitimate humanitarian activities and that there are specific authorizations in place to allow for such work to continue, within a framework designed to prevent the diversion of funds to sanctioned entities or individuals.

Entities engaging in humanitarian efforts in the region should conduct these activities in strict adherence to OFAC regulations, ensuring compliance to avoid potential exposure to sanctions.

On November 2, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC), the Department of State, and the Department of Commerce’s Bureau of Industry and Security (BIS) announced a combined effort to designate and sanction numerous additional Russian individuals and entities who have been determined to be assisting in the war against Ukraine and for efforts to evade U.S. sanctions and export controls on Russia. The Department of State and OFAC sanctions target Russia’s future energy production and revenue, metals and mining sector, defense procurement, and those involved in supporting the Russian government’s war effort. BIS’ actions focus on sanctioning entities supporting Russia’s military through the procurement, development, and proliferation of Russian unmanned aerial vehicles (UAVs).

OFAC and State Sanctions

OFAC stated that entities based in China, Türkiye (Turkey), and the United Arab Emirates (UAE) continue to send high-priority dual-use goods to Russia, including critical components that Russia relies on for its weapons systems (see Update of September 26, 2023 on “high-priority” items restricted for Russia). Despite continuing to work with these countries to address concerns, OFAC has sanctioned and placed on the Specially Designated Nationals (SDN) List multiple individuals and companies from these three countries that “have become hubs for exporting, reexporting, and transshipping to Russia foreign-made technology and equipment.” Most of these newly designated entities operate in the technology, electronics, and transportation sectors.

Sanctioned Turkish companies include those engaged in suppling high-quality foreign-made microelectronics, lithium-ion batteries, integrated circuits, machines for metalworking and machining tools, machines for reception, conversion and transmission of data, and trucking services. UAE companies include those providing logistics to ship machines for the reception, conversion, and transmission of data, aircraft and aviation parts, integrated circuits, machines for metalworking and machining tools. Several financial, engineering and investment firms in the UAE and their officers and/or owners have also been placed on the SDN List.

OFAC and the State Department have also targeted and designated a significant number of Russia-based industrial firms (as well as various related owners and officers) that produce, import, distribute, and repair industrial machinery, machine tools, spare parts, additive manufacturing (including 3D printing) equipment, ball bearings, and other industrial equipment and materials. 

Significantly, the agencies have placed on the SDN List Russia’s largest publicly-traded diversified holding company and a major entity involved in the development, operation, and ownership of Russia’s key Arctic LNG 2 liquified natural gas (LNG) project. In addition, OFAC continued its effort to identify and sanction entities operating in the financial services sector of the Russian by sanctioning seven Russia-based banks and one Russia-based financial infrastructure entity. Persons involved in several “sanctions evasion networks” and procurement networks were also sanctioned for their ongoing efforts to procure U.S.-origin goods and technology for Russia.

Additional detail and identifying information on these individuals and entities is available here. A helpful Treasury Department press release is available here. A helpful State Department press release is available here.

As a result of these actions, all property and interests in property of the persons and entities placed on OFAC’s SDN List that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50% or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.

New Russia General Licenses

With these latest additions to the SDN List, OFAC has issued related General Licenses to allow certain limited activities.

  • Russia General License (GL) 74 – Authorizes transactions ordinarily incident and necessary to the wind down of transactions involving East-West United Bank until January 31, 2024. It also allows U.S. person to reject, rather than block, and return funds involving this bank until January 31, 2024.
  • Russia GL 75 – Authorizes all transactions prohibited by Executive Order (EO) 14024 that are ordinarily incident and necessary to the divestment or transfer, or the facilitation of the divestment or transfer, of debt or equity of the certain blocked entities, placed on the SDN List on November 2, 2023, to a non-U.S. person through January 31, 2024.
  • Russia GL 76 – Authorizes all transactions prohibited by EO 14024 that are ordinarily incident and necessary to the wind down of any transaction involving several of the blocked entities, placed on the SDN List on November 2, 2023, through January 31, 2024. UPDATE: On November 8, OFAC issued a revised General License (GL) 76A, “Authorizing the Wind Down of Transactions Involving Certain Entities Blocked on November 2, 2023.” This action amends Russia-related GL 76 to clarify that the license applies to Public Joint Stock Company Saint Petersburg Exchange. The November 2, 2023 GL listed the entity’s name as Saint Petersburg Stock Exchange. This GL is otherwise unchanged.

Certain transactions remain unauthorized under these general licenses and therefore require close analysis.

Revised Russia General License 13G

OFAC also extended previous Russia-related General License (GL) 13F by issuing a revised GL 13G, “Authorizing Certain Administrative Transactions Prohibited by Directive 4 under Executive Order 14024,” which states that U.S. persons are authorized to pay taxes, fees, or import duties and purchase or receive permits, licenses, registrations, or certifications, to the extent such transactions are prohibited by Directive 4, provided such transactions are ordinarily incident and necessary to such persons’ day-to-day operations in the Russian Federation. Directive 4 prohibits any transaction involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation, including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of such entities. Previous GL 13F was set to expire on November 8, 2023; the new GL 13G is set to expire on January 31, 2024.

BIS Adds Companies to Entity List

On November 2, 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) also issued a Final Rule placing 13 entities to the Entity List for supporting Russia’s military through the procurement, development, and proliferation of Russian unmanned aerial vehicles (UAVs). Twelve entities being added are located in Russia and one is located in Uzbekistan. BIS determined that their activities are contrary to the national security and foreign policy interests of the United States, and also determined that all 13 entities qualify as “military end users” for export control purposes. The entities are now subject to a license requirement for all items subject to the Export Administration Regulations (EAR) and a license review policy of denial.

The effective date for the rule is November 2, 2023. Shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of these Entity List designations that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on November 2, 2023, pursuant to actual orders, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) before December 4, 2023. Any such items not actually exported, reexported or transferred (in-country) before midnight, on November 2, 2023, require a license from BIS.

A helpful BIS press release is available here.

Key Notes:

  • These two Interim Final Rules reinforce the October 7, 2022, controls appended to the EAR to restrict China’s ability to both purchase and manufacture certain high-end chips critical for military advantage.
  • The rules impose controls on additional types of semiconductor manufacturing equipment, adjust the parameters that determine whether an advanced computing chip is restricted, and impose additional measures to address risks of circumvention of the controls.
  • On November 6, 2023, the Assistant Secretary for Export Administration conducted a public briefing on these two Interim Final Rules.
  • Public comments on these interim rules are due no later than December 18, 2023.

On October 25, 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) published two significant Interim Final Rules updating the agency’s October 7, 2022, rulemaking that target support for China’s semiconductor manufacturing items, software, and technology and access to advanced computing. According to Commerce Secretary Gina Raimondo, these updated rules “will increase effectiveness of [U.S.] controls and further shut off pathways to evade our restrictions. These controls maintain our clear focus on military applications and confront the threats to our national security posed by the [Chinese] Government’s military-civil fusion strategy.”

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On October 31, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a new directive prohibiting U.S. persons from providing certain financial services to Myanma Oil and Gas Enterprise (MOGE) and designated certain entities and individuals for connections to the Burma’s military regime.

Under Directive 1, issued pursuant to Executive Order 14014, OFAC determined that MOGE is a “political subdivision, agency, or instrumentality of the Government of Burma” and prohibited U.S. persons from “the provision, exportation, or re-exportation, directly or indirectly, of financial services to or for the benefit of MOGE or its property or interests in property.” In two Frequently Asked Questions related to Directive 1, OFAC also clarified that: (1) these prohibitions apply to any entity, such as a subsidiary or joint venture, that is 50% or more owned, directly or indirectly, by MOGE; and (2) the term “financial services” includes loans, transfers, accounts, insurance, investments, securities, guarantees, foreign exchange, letters of credit, and commodity futures or options.

OFAC noted that MOGE, a state-owned enterprise that has large offshore oil and gas operations with foreign entities, is “the largest single source of foreign revenue for Burma’s military regime” and that OFAC’s actions seek to “restrict the regime’s access to U.S. dollars” and limit its ability to “carry out violent attacks against its own citizens.” OFAC’s actions against MOGE build upon a February 21, 2022 designation by the European Union and OFAC’s previous designation actions against MOGE leadership. Directive 1 prohibitions will take effect on December 15, 2023.

As part of its October 31, 2023 actions, OFAC also designated three entities and five individuals connected to Burma’s military regime. For additional details regarding the designated entities and individuals, please see the official press release.

On October 27, 2023, the U.S. Department of Commerce announced an immediate pause on the issuance of new export licenses for certain firearms, related components and ammunition for a period of approximately 90 days. This pause applies globally to all non-governmental end users with some exceptions, notably for Ukraine, Israel and countries in Country Group A:1 (Wassenaar Arrangement Participating States). During this pause, the department will conduct a review to reassess current firearm export control policies with a focus on U.S. national security and foreign policy interests. The aim is to mitigate the risk of these firearms being misused in ways that could destabilize regions, violate human rights or fuel criminal activities.

The pause specifically targets items controlled under four Export Control Classification Numbers (ECCNs): ECCN 0A501, ECCN 0A502, ECCN 0A504 and ECCN 0A505. These items, when intended for non-governmental end users, will be affected by the pause unless they are destined for Ukraine, Israel or a country in Country Group A:1. Items being exported to these exceptions will continue to be reviewed for license applications, along with exports to any governmental end users worldwide.

During this period, exporters can still submit their license applications, but those subject to the pause will be placed on “Hold Without Action” (HWA) and will not be processed until the pause ends. Licenses that have already been issued prior to the pause remain valid and unaffected. However, it should be noted that the Bureau of Industry and Security (BIS) retains the authority to modify, suspend or revoke these licenses if necessary. BIS will notify exporters when the pause is over. Importantly, the License Exception for Limited Value Shipments is still available for parts and components controlled by ECCNs subject to the pause.

This pause and review signifies a pivotal moment for the firearm export industry and may herald new regulatory landscapes in the near future. Companies and individuals involved in these exports should closely monitor any announcements from the department and BIS and may need to adjust their strategies accordingly.

On October 30, 2023, the U.S. Supreme Court declined to hear another Section 232 national security steel tariff appeal. On July 21, 2023, PrimeSource Building Products, Inc. filed Petition for a Writ of Certiorari with the U.S. Supreme Court, after the U.S. Court of Appeals for the Federal Circuit reversed the lower court decision of the U.S. Court of International Trade (CIT) and upheld the imposition of additional Section 232 national security tariffs on derivatives of certain imported steel articles implemented by former President Donald Trump under Section 232 of the Trade Expansion Act of 1962. With the Supreme Court denying the petition, this litigation has concluded and the Federal Circuit’s decision stands.

Our Updates of July 31, 2023, April 27, 2023 and February 8, 2023 provide details on PrimeSource’s Petition for a Rehearing En Banc at the Federal Circuit and the three-judge panel’s opinion that reversed the CIT decision. See also Updates of April 6, 2021 and January 28, 2021 for additional background on the case and the CIT’s dismissal of other claims.

Key Notes:

  • On September 29, 2023, the United States Department of Commerce launched a new funding opportunity for projects involving the construction, expansion, or modernization of semiconductor materials and semiconductor manufacturing equipment facilities under the CHIPS Act of 2022.
  • Projects within scope are expected to involve a complete capital investment range between $20 million and $300 million.
  • The funding application includes significant technical, financial, workforce and economic information, and effectively requires applicants to coordinate with other stakeholders and agencies.
  • Applicants are expected to demonstrate that they comply with eligibility requirements and various security expectations related to cybersecurity, intellectual property, supply chain resiliency, and regulatory requirements.
  • The Department of Commerce will begin taking initial applications on December 1, 2023, and the application window will close on February 1, 2024.

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On October 25, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued amended Russia-related General License No. 8H once again extending the authorization to conduct transactions involving Vnesheconombank, Bank Financial Corporation Otkritie, Sovcombank, Sberbank, VTB Bank, Alfa-Bank, Rosbank, Bank Zenit, Bank Saint-Petersburg, and the Central Bank of Russia that are related to energy until May 1, 2024.

The original General License No. 8, issued on February 24, 2022, had previously been amended to expand the list of Russian financial institutions and was scheduled to expire on November 1, 2023. The term “related to energy” means the extraction, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication, transport, or purchase of petroleum, including crude oil, lease condensates, unfinished oils, natural gas liquids, petroleum products, natural gas, or other products capable of producing energy, such as coal, wood, or agricultural products used to manufacture biofuels, or uranium in any form, as well as the development, production, generation, transmission, or exchange of power, through any means, including nuclear, thermal, and renewable energy sources.

General License No. 8H authorizes energy-related transactions through 12:01 a.m. EST, May 1, 2024. Certain dealings remain unauthorized under this general license and therefore require close analysis.

For prior updates on this topic, see Updates dated May 8, 2023, December 15, 2022,  June 14, 2022, April 7, 2022, and February 28, 2022.