On September 4, 2024, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a revised Russia General License (GL) 25E that continues to authorize all transactions ordinarily incident and necessary to the receipt or transmission of telecommunications involving the Russian Federation. This continues to allow for services incident to the exchange of communications over the internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, blogging, social media platforms, collaboration platforms, video conferencing, e-gaming, e-learning platforms, automated translation, web maps, user authentication services, web hosting, and domain name registration services. 

The GL also allows for the export or reexport of software, hardware, or technology incident to the exchange of communications over the internet so long as it is licensed or otherwise authorized by the Department of Commerce under the Export Administration Regulations. However, certain dealings – including transactions involving significant Russian telecommunications companies that have been designated by OFAC and placed on the Specially Designated Nationals and Blocked Persons List – continue to remain unauthorized under this GL and therefore require close analysis. OFAC has amended Russia-related Frequently Asked Question 1040 addressing this GL as well.

Additionally, OFAC has published an alert, “Russian Attempts to Evade Sanctions Using New Overseas Branches and Subsidiaries,” to warn foreign jurisdictions and financial institutions about Russia’s attempts to evade sanctions by opening new overseas branches and subsidiaries of Russian financial institutions. The alert notes that “efforts to open new branches or subsidiaries of Russia financial institutions should be viewed as a red flag for attempted Russian sanctions evasion.” As such, foreign regulators and financial institutions are cautioned that “deal[ing] with such branches or subsidiaries — including activities such as maintaining accounts, transferring funds, or providing other financial services such as payment processing, trade finance, and insurance — should be aware of the significant sanctions risks associated with facilitating Russia’s efforts to evade sanctions.”

On August 30, 2024, the Office of the United States Trade Representative (USTR) issued a press release stating that the agency “intends” to publicize tariff increases on certain products subject to the China section 301 investigation “in the coming days.” The press release addresses the second self-imposed deadline missed by the USTR; initially, the agency announced that the tariff increases would take effect August 1, 2024, but a July 30, 2024 press release announced that the modifications would not be publicized until later “in August 2024” and would still require “approximately two weeks” thereafter to take effect (see Update of July 31, 2024).

On March 1, 2024, the Department of Commerce’s Bureau of Industry and Security (BIS) issued an Advanced Notice of Proposed Rulemaking (ANPRM) to explore national security risks posed by connected vehicles (CVs) that incorporate Information and Communications Technology and Services (ICTS) from “foreign adversaries,” including China and the Hong Kong Special Administrative Region. The initiative was driven by concerns that such vehicles could be used to collect sensitive data on U.S. citizens and infrastructure or be remotely accessed or disabled, posing risks to national security and personal privacy. According to recent media reports, BIS is expected to propose rules soon that will bar vehicles with Chinese-developed software in vehicles with Level 3 automation or above.

In the ANPRM, BIS inquired into various topics, including:

  • The definition of CVs within the context of transactions involving ICTS incorporated into such vehicles. BIS proposed the following initial definition for such CVs: “an automotive vehicle that integrates onboard networked hardware with automotive software systems to communicate via dedicated short-range communication, cellular telecommunications connectivity, satellite communication, or other wireless spectrum connectivity with any other network or device.” This definition would likely include automotive vehicles, whether personal or commercial, capable of global navigation satellite system (GNSS) communication for geolocation; communication with intelligent transportation systems; remote access or control; wireless software or firmware updates; or on-device roadside assistance.
  • Information on the role that foreign adversaries play in the supply chain for CVs and the leverage these entities could exert as a result;
  • Details of the ICST supply chain in the United States, including categories of ICST software and hardware that are integral to CVs and market leaders within each distinct phase of the supply chain;
  • Full scope of data collection capabilities in CVs and the scale of data that CVs could collect on U.S. persons, entities, geography, and infrastructure;
  • Any cybersecurity concerns that may arise from linkages between sensors in CVs and the best practices/industry norms on cybersecurity standards relating to ICTS CVs;
  • The review criteria and standards that BIS should consider in granting temporary authorizations to otherwise prohibited transactions under a proposed rule; and
  • The economic impact of the proposed rule on U.S. businesses.

The deadline for public comments was April 30, 2024. In response, BIS received more than 50 comments from various automakers and trade groups urging BIS to tailor the restrictions narrowly and allow for a phase-in. One of the common themes raised by the commenters was that BIS should focus its restrictive efforts on the technology and services that may pose a national security risk on CVs, rather than the individual components, such as cameras, LIDARs, and radar sensors, that do not have any connectivity capabilities. If BIS proceeds with an overly broad restriction on any hardware and software component in CVs, the commenters warned, it could make it exceedingly difficult for automakers to comply with the rules and, in turn, hike the cost of cars. Additionally, a trade group argued for exclusionary tariffs on all Chinese vehicles, wherever they were made. The group asked BIS to establish safeguard measures against China’s automotive sectors to prevent Chinese companies from obtaining USMCA benefits and to place a greater emphasis in UFLPA enforcement on Chinese auto parts, batteries, and raw materials used in electric vehicles.

On August 26, 2024, the Department of Finance Canada announced the country would introduce a 100% tariff on Chinese-made electric vehicles (EVs) and a 25% tariff on certain Chinese steel and aluminum products. The press release, citing “unfair, non-market policies and practices” by China coupled with a “lack of rigorous labour and environmental standards,” thus aligns with President Joe Biden’s May 2024 announcement proclaiming the United States—through an investigation pursuant to Section 301 of the Trade Act of 1974—would raise its tariff rates on Chinese EVs to 100% and on certain Chinese steel and aluminum products to 25% (see Bulletin of May 15, 2024). The Canadian tariffs on EVs will be imposed in addition to the 6.1% Most Favored Nation rate currently applied to EVs produced in China and will take effect October 1, 2024. The list of Chinese steel and aluminum products to be subject to the 25% tariff will be finalized on the same day—October 1, 2024—but will not experience the rate increase until October 15, 2024.

The press release confirms the tariff increases stemmed from recent discussions with “Canada’s international partners,” including fellow G7 members. However, the Canadian—and, for that matter, U.S.—measures still differ from recent tariffs levied by the European Union, which announced a 37.6% countervailing duty rate against Chinese EVs on July 4, 2024.

The press release adds that Canada will reassess the effectiveness of the tariffs in a year’s time. Meanwhile, “in the coming days,” Canada will launch a 30-day consultation period to gauge whether the country should modify its tariff rates on Chinese “batteries and battery parts, semiconductors, solar products, and critical minerals” as well.

On August 23, 2024—one day before Ukrainian Independence Day—the Department of Commerce’s Bureau of Industry and Security (BIS), the Department of the Treasury, and the Department of State commemorated the milestone by expanding U.S. export controls and sanctions on Russia and Belarus. Notably, the agencies’ actions also come amidst Ukraine’s surprise incursion into Russia’s Kursk Oblast, which Ukraine began earlier this month.

BIS Renames and Amends the Russia/Belarus-Military End User Foreign Direct Product (FDP) Rule; Adds 123 Entities to the Entity List

  • In a final rule to take effect August 27, 2024, BIS announced the “Russia/Belarus-Military End User FDP” in § 734.9(g) of the Export Administration Regulations (EAR) would be renamed to the “Russia/Belarus-Military End User and Procurement FDP.” The change may seem minor, but doing so signifies that the FDP has broader application beyond “military end-users” as defined by § 744.21 of the EAR; the FDP will extend to “Russian or Belarusian Procurement Entities” too, a new category of entities to be defined in Note 3 to § 734.9(g): “an entity that poses a significant risk of involvement in the supply or diversion of items subject to the EAR to procurement networks for Russia’s or Belarus’s defense industry or intelligence services.”
  • The final rule also adds a new paragraph (a)(8) to § 746.8 of the EAR to impose new controls on “software” for the operation of computer numerical control (CNC) machine tools (i.e., operation “software”) otherwise classified EAR99. The EAR already restricts the export, reexport, or transfer to or within Russia and Belarus of “software” used to design industrial parts and components into machine-readable instructions, consequently this amendment broadens the restriction by targeting operation “software” that can carry out these instructions and is already embedded (or pre-installed) within CNC machine tools. The new paragraph (a)(8) to § 746.8 of the EAR, however, will not go into effect until September 16, 2024.
  • In a separate final rule also to take effect August 27, 2024, BIS added 123 entities under 131 entries to the Entity List. (Three entities are added to the Entity List under two destinations, while two other entities are listed under three destinations.) Although most of the entities are from Russia (63 in total), the new additions also hail from Canada (1), China (42), the Crimea Region of Ukraine (1), Cyprus (1), Iran (11), Kazakhstan (1), Kyrgyzstan (1), Turkey (8), Ukraine (1), and the United Arab Emirates (1). The entities also belong to different sectors, but BIS notes many deal with electronics, various technologies, and weapons systems. Having been added to the Entity List, additional license requirements will be imposed on exports, reexports, and transfers (in-country) to these 123 entities, and most license exceptions that could cover such transactions will be of limited availability.

Treasury Imposes Sanctions on a Myriad of Russia’s Transnational Supply Chain Networks

  • As proclaimed in a press release, Treasury imposed sanctions on 400 individuals and entities that comprise six of Russia’s military-industrial base transnational networks. Specifically, these sanctions target those involved in: (1) procuring ammunition and military materiel; (2) facilitating sanctions evasion on behalf of Russian oligarchs, such as through offshore trust and corporate formation services; (3) evading sanctions imposed on Russia’s cyber actors; (4) laundering gold for an already-sanctioned Russian gold company; (5) procuring sensitive and critical items such as advanced machine tools and electronic components; and (6) providing necessary software and IT solutions for Russia’s financial sector. According to OFAC, these sanctions taken together will also “further limit Russia’s future revenue from metals and mining.” As a reminder, OFAC forewarns, “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.”

State Sanctions Those Involved in Russia’s Wartime Economy

  • Announcing its partnership with Treasury to impose sanctions on 400 individuals and entities in a press release, State noted its designations target those “in both Russia and Belarus involved in [activities] to fuel Russia’s war effort.” In particular, State’s sanctions target those in the production of armed unmanned aerial vehicles, missiles, fighter aircraft, armored vehicles, defense electronics, and munitions. Additionally, State’s sanctions also target those involved in the attempted “Russification” and “re-education” of abducted Ukrainian children.

On August 15, 2024, the Department of State’s Directorate of Defense Trade Controls (DDTC) published a final rule adding two activities to the definition of “activities that are not exports, reexports, retransfers, or temporary imports” in § 120.54 of the International Traffic in Arms Regulations (ITAR). The final rule, which goes into effect September 16, 2024, is long-awaited, having first been proposed by DDTC on December 16, 2022.

The first activity—to be codified at paragraph (a)(6) of § 120.54—provides that the taking of U.S. defense articles outside a previously approved country by either “armed forces of a foreign government” or “United Nation military personnel” on a deployment or training exercise does not constitute an export, reexport, retransfer, or temporary import. Importantly, though, there can be “no change in end-use or end-user with respect to the [U.S.] defense article” during and after its transport.

The second activity—to be codified at paragraph (a)(7) of § 120.54—states that a foreign defense article that entered the United States but is subsequently exported pursuant to a DDTC license or other approval is also not subject to the ITAR’s reexport or retransfer requirements provided that the foreign defense article “was not modified, enhanced, upgraded, or otherwise altered or improved in a manner that changed the basic performance of the item” while in the United States, nor had “[a] U.S.-origin defense article…incorporated into [it].”

The expanded definitions are significant because the activities listed in § 120.54 of the ITAR do not require an authorization from DDTC.

On August 9, 2024, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned 19 individuals and 14 entities for their continued support of “Russia’s war in Ukraine through military resource production and transshipment of goods to Russia, sanctions evasion on behalf of Belarusian defense entities, and revenue generation for Belarusian oligarchs in Alyaksandr Lukashenka’s inner circle.” These sanctions and designations by OFAC follow similar restrictive measures implemented by Canada, the European Union,  and the United Kingdom

The entities and individuals designated by OFAC and placed on the Specially Designated Nationals (SDN) List are engaged in various Belarusian economic sectors, including: (i) technology and defense-industrial industries, (ii) cargo airline companies, (iii) logistics and transportation services, and (iv) several defense manufacturing plants.  OFAC has also designated an aircraft owned by the Government of Belarus that is used as part of Lukashenka’s fleet of presidential aircraft.  For additional identifying details on these individuals, entities and the aircraft see here.

For the involved airline companies, OFAC has issued Belarus General License No. 101 authorizing all transactions that are ordinarily incident and necessary to the provision, exportation, or reexportation of goods, technology, or services to ensure the safety of civil aviation involving these designated entities.  Certain transactions with these entities remain unauthorized under this general license and therefore requires close analysis.

As a result, all property and interests in property of the designated persons 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, individually or in the aggregate, 50% or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons. 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.

On August 12, 2024, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License (GL) 5P, “Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or After November 12, 2024,” which continues to delay U.S. persons’ ability to enforce bondholder rights to the CITGO shares serving as collateral for the Petróleos de Venezuela, S.A. (PdVSA) 2020 8.5% bond until on or after November 12, 2024.  The previous deadline had been August 13, 2024.  Effective August 12, 2024, this General License replaces GL 5O.

With this revised General License, U.S. persons remain prohibited from engaging in any transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5% Bond unless specifically authorized by OFAC. In FAQ 595, OFAC continues to note a favorable licensing policy toward those seeking to apply for a specific license in an effort to reach an agreement on proposals to “restructure or refinance payments due to the holders of the PdVSA 2020 8.5% bond.” 

On August 8, 2024, the Department of Homeland Security (DHS) announced via a Federal Register notice that effective immediately, five Chinese entities have been added to the UFLPA Entity List. These entities have been determined by DHS to be either: (i) working with the government of the Xinjiang Uyghur Autonomous Region (XUAR) to recruit, transport, transfer, harbor or receive forced labor or Uyghurs, Kazakhs, Kyrgyz, or members of other persecuted groups out of the XUAR, or (ii) sourcing material from the XUAR. They operate in the following industry sectors: magnesium fertilizer/alloy products; construction and engineering; and mining nonferrous materials. See DHS press release for more details on these companies.

As a result of their listing on the UFLPA Entity List, goods produced by these entities will be presumed to be made by forced labor and subject to detention under the Uyghur Forced Labor Prevention Act. DHS Secretary Alejandro N. Mayorkas stated that “[a]s DHS identifies more entities across different sectors that use or facilitate forced labor, we act to keep their tainted goods out of our nation’s supply chains.” With these additions, there are now 73 entities on the UFLPA Entity List.

For general background information on the Uyghur Forced Labor Prevention Act (UFLPA), see Thompson Hine’s International Trade Update of June 2022.

In an August 1, 2024 determination totaling 284 pages, the Department of Commerce (Commerce) announced it would continue to classify Vietnam as a non-market economy country in antidumping duty (AD) proceedings, despite praising Vietnam for “impressive reforms and economic growth” over the past 20 years. In a press release issued the day after its determination, Commerce noted that “extensive government involvement in Vietnam’s economy distorts Vietnamese prices and costs and ultimately render them unusable.” Based on this finding, Commerce “will continue to use market-based prices and costs from a country at a comparable level of economic development to Vietnam that produces comparable merchandise to calculate ADs.” This methodology generally results in higher ADs.