On June 12, 2024, the Office of Foreign Assets Control (OFAC) and the Bureau of Industry and Security (BIS) announced new sanctions and export control restrictions on Russia and Belarus. These measures have significant implications for companies that do business with or in these regions, as they may face new licensing requirements, limitations, or prohibitions on their transactions and operations.

OFAC Sanctions

OFAC announced new sanctions to increase pressure on Russia over its war against Ukraine. These measures include the following:

  • Broader Secondary Sanctions: Foreign financial institutions face greater risk of secondary sanctions, as OFAC has broadened the definition of Russia’s military-industrial base to include all persons blocked pursuant to Executive Order (E.O.) 14024. This means that foreign financial institutions risk being sanctioned for conducting or facilitating significant transactions, or providing any service, involving any person blocked pursuant to E.O. 14024. OFAC has also updated the Specially Designated Nationals and Blocked Persons List (SDN List) for five sanctioned Russian financial institutions to include the addresses and aliases of their foreign locations to help clarify the sanctions risk for foreign financial institutions.
  • Software and IT-Related Services: OFAC restricted access to certain software and IT-related services. To implement this, OFAC has issued a new determination under E.O. 14071, which prohibits providing to any person in Russia (1) IT consultancy and design services; and (2) IT support services and cloud-based services for enterprise management software and design and manufacturing software. The determination will take effect on September 12, 2024. This means that starting from that date, U.S. persons will be prohibited from providing these services to Russia. OFAC also issued FAQs Nos. 1184, 1185, 1186, 1187, and 1188 to clarify what activities are considered prohibited.
  • New Designations: OFAC designated as SDNs hundreds of individuals and entities both in Russia and outside its borders. These include:
    • Sanctions Evasion Networks: Russia-based and other foreign persons designated for their roles in complex schemes and supply chains aimed at evading sanctions and supporting Russia’s war efforts.
    • Russia’s War Economy: Russia-based persons within defense, manufacturing, technology, transportation, and financial services sectors for contributing to the country’s war economy.
    • Limiting LNG Revenue: Persons involved in key Russian liquefied natural gas (LNG) projects and related construction and manufacturing, in line with G7 commitments to restrict Russia’s future energy revenues.

BIS Export Control Restrictions

The BIS issued a final rule that imposes additional export control measures against Russia and Belarus under the Export Administration Regulations (EAR) that affect exports, reexports, and transfers (in-country) to or within Russia and Belarus (the document is unpublished in official form; it is scheduled to be published on June 18, 2024 but is effective as of June 12, 2024). The changes include:

  • Software Export Restrictions: BIS is imposing license requirements on the export, reexport, or in-country transfer of certain EAR99-designated “software” and software updates, including enterprise management and design software, to Russia and Belarus.
  • Narrowing License Exceptions: The scope of License Exception Consumer Communications Devices (CCD) has been narrowed, excluding items like lower-level graphics processing units from export to Russia or Belarus. BIS can revoke or suspend license exceptions for entities aiding in export control evasion.
  • Entity List: The BIS is implementing a new regulatory framework to list high-risk addresses on the Entity List, making it difficult for shell companies to engage in unlawful trade. Enhanced screening is now required. As of today, BIS added eight addresses in Hong Kong to the Entity List. In addition, many other entities were added to the Entity List.
  • Expanded List of Goods: BIS added over 500 additional Harmonized Tariff System (HTS) codes to lists of items requiring a license if destined to Russia and Belarus, covering 22 entire chapters of HTS codes. These include certain oil and gas equipment, aerospace and defense products, and chemicals.

In addition to that, BIS has issued two Temporary Denial Orders (TDOs) against Russian procurement networks for exporting aircraft parts to Russia through third countries in violation of U.S. export controls, affecting several companies and individuals involved in hundreds of shipments.

Implications for Companies

These new sanctions and export control restrictions on Russia and Belarus pose significant challenges and risks for companies. Companies should review their existing and potential transactions, contracts, and relationships with persons or entities that may be subject to the new measures, and ensure that they have the necessary licenses, authorizations, or exemptions to comply with the U.S. regulations. Companies should also monitor the developments and updates from OFAC and BIS, as well as consult with legal counsel, to stay alert of the changing regulatory landscape and avoid potential violations or penalties.

Posted in Belarus, BIS, EAR, Export Control, OFAC, Russia, Sanctions, Tariffs/Trade Policy, Ukraine
Photo of Francesca M.S. Guerrero Francesca M.S. Guerrero

Francesca counsels clients on compliance with export controls, sanctions, import regulations, human rights and forced labor, and the FCPA and antibribery laws. She works closely with companies to develop tailored compliance programs that fit their specific needs, and routinely advises clients on some…

Francesca counsels clients on compliance with export controls, sanctions, import regulations, human rights and forced labor, and the FCPA and antibribery laws. She works closely with companies to develop tailored compliance programs that fit their specific needs, and routinely advises clients on some of their most challenging international transactions, involving dealings in high-risk jurisdictions or with high-risk counterparties. Francesca also counsels companies through all phases of internal investigations of potential trade and antibribery violations and represents companies across industries before related government agencies.

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Photo of Samir D. Varma Samir D. Varma

Samir advises multinational corporations on export controls, economic sanctions and customs, and counsels individuals and corporations on the Foreign Corrupt Practices Act (FCPA) and other anti-corruption laws. He represents clients in enforcement actions before U.S. regulatory agencies and conducts corporate internal investigations.

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Photo of Aaron C. Mandelbaum Aaron C. Mandelbaum

Aaron focuses his practice on advising clients on compliance with international economic sanctions, export controls, and U.S. import laws and regulations. He is also involved in assisting clients with complex cross-border transactions, anti-dumping and countervailing duty litigation, utilization of international and preferential trade…

Aaron focuses his practice on advising clients on compliance with international economic sanctions, export controls, and U.S. import laws and regulations. He is also involved in assisting clients with complex cross-border transactions, anti-dumping and countervailing duty litigation, utilization of international and preferential trade agreements, and customs classifications. Most recently, Aaron has counseled clients navigating requirements under the Export Administration Regulations.

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Photo of Kristina Shcheglazova* Kristina Shcheglazova*

Kristina focuses her practice on advising clients on issues related to the importation and exportation of goods, including customs issues such as the classification of goods, country of origin, customs procedures and prior disclosures. She also assists clients with sanctions and export control…

Kristina focuses her practice on advising clients on issues related to the importation and exportation of goods, including customs issues such as the classification of goods, country of origin, customs procedures and prior disclosures. She also assists clients with sanctions and export control matters, including compliance with various sanctions and export control requirements, due diligence and sanctions screenings, and advises clients on the application of U.S. sanctions and export control licensing requirements. Her experience extends to addressing issues of forced labor in supply chains, assisting clients with government contracting matters and advising on anti-corruption policies.

*Licensed in MO only, not IL; limited to federal practice only.

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Photo of Scott E. Diamond** Scott E. Diamond**

Scott is a senior policy advisor with more than 25 years’ experience with the legislative and regulatory processes involved in international trade policy, remedies and enforcement. This includes working with clients on matters involving export controls, economic sanctions, human rights and forced labor…

Scott is a senior policy advisor with more than 25 years’ experience with the legislative and regulatory processes involved in international trade policy, remedies and enforcement. This includes working with clients on matters involving export controls, economic sanctions, human rights and forced labor compliance, corporate anti-boycott and antibribery compliance, national security investigations, and foreign direct investment in the United States.

**Not licensed to practice law.

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