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.