The Department of Commerce’s Bureau of Industry and Security (BIS) has created a web page offering “Resources on Export Controls Implemented in Response to Russia’s Invasion of Ukraine.” The web page provides convenient links to relevant BIS press releases, fact sheets, and Federal Register notices related to BIS actions involving export controls and compliance requirements regarding Russia. BIS has created this web page due to the fact that it is has imposed controls on a range of items subject to the Export Administration Regulations (EAR) that did not previously require export licenses when destined for Russia. It has also imposed similar export controls on items subject to the EAR that are destined for Belarus.

Importantly, the web page also provides BIS’ first set of Russia-related frequently asked questions (FAQs) to provide industry guidance on recent export controls on Russia. The FAQs cover the following topics:

On May 5, 2022, the U.S. International Trade Commission (ITC) announced the initiation of a general factfinding investigation that will examine the impact of tariffs on U.S. imports under section 232 of the Trade Expansion Act of 1962 and section 301 of the Trade Act of 1974 in effect as of March 15, 2022.  The ITC was directed to conduct this investigation, Economic Impact of Section 232 and 301 Tariffs on U.S. Industries, Inv. 332-591, as part of the Omnibus Appropriations Act, which was signed into law on March 15, 2022.  As a result, all currently active Section 232 national security tariffs (e.g., steel and aluminum tariffs) and the Section 301 tariffs against imports from China will be subject to review and the ITC will prepare a report on the impact of these tariffs on U.S. trade, production, and prices in the industries most affected by these tariffs.  If the tariffs change between now and the report’s submission, the analysis will only cover how the economy was affected by the tariffs that were in place as of March 2022. The ITC must submit this report to Congress by March 15, 2023.

In preparing the report, the ITC will seek public comments and hold a hearing.  Key dates for the investigation include:

  • July 6, 2022: Deadline for filing requests to appear at the public hearing.
  • July 8, 2022: Deadline for filing prehearing briefs and statements.
  • July 14, 2022: Deadline for filing electronic copies of oral hearing statements.
  • July 21, 2022: Public hearing. Information about the hearing, including how to participate or observe, will be posted on the ITC’s website no later than June 21, 2022, at https://usitc.gov/research_and_analysis/what_we_are_working_on.htm.
  • August 12, 2022: Deadline for filing posthearing briefs and statements.
  • August 24, 2022: Deadline for filing all other written submissions.

Currently, because the ITC’s Office of the Secretary is accepting only electronic filings, the filing of any documents in this investigation must be made through the ITC’s Electronic Document Information System (EDIS, https://edis.usitc.gov). No in-person paper-based filings or paper copies of any electronic filings will be accepted.  Procedures are available for filing confidential business information; however, while it will be considered, no confidential information will be included in the final report to Congress.

On May 2, 2022, new amendments to the Ukraine Related Sanctions Regulations, renaming them “Ukraine-/Russia-Related Sanctions Regulations” (URSR), were published by U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) in the Federal Register. The Ukraine-/Russia-Related Sanctions Regulations went into effect May 2.

OFAC’s new URSR replace the Ukraine Related Sanctions Regulations that were published in abbreviated form on May 8, 2014 with a more comprehensive set of regulations that includes additional interpretative and definitional guidance, general licenses, and other regulatory provisions that will provide further guidance. The revised regulations implement provisions of several statutes related to Ukraine as well as Executive Order 13685.

OFAC also added seven new general licenses which generally authorize certain transactions relating to investment and reinvestment of funds, official business of the U.S. government, and official business of certain international organizations. Specifically, new sections 589.509, 589.510 and 589.511 incorporate general licenses authorizing certain transactions relating to investment and reinvestment of funds, official business of the U.S. government, and official business of certain international organizations and entities. New sections 589.518, 589.519 and 589.520 authorize activities specific to the Crimea region of Ukraine: “Transactions necessary and ordinarily incident to publishing, emergency landings and air ambulance services, and the export of certain services in support of nongovernmental organizations’ activities.” New section 589.521 authorizes transactions related to closing a correspondent or payable-through account. OFAC noted in the final rule that the “addition of these general licenses to the Regulations do not represent a significant alteration of the United States’ foreign policy with regard to the Russian Federation.”

Additionally, OFAC also announced that it is revising several FAQs for the Ukraine-/Russia-Related Sanctions Regulations to reflect these changes.

On May 3, 2022, the Securities and Exchange Commission’s Division of Corporation Finance issued a sample comment letter outlining public company disclosure requirements relating to the business impact of Russia’s invasion of Ukraine and the international response.

To the extent material or otherwise required under the SEC’s disclosure framework, the SEC advises that companies should provide tailored disclosures relating to:

  1. their direct or indirect exposure to Russia, Belarus and/or Ukraine, whether through operations, employees, investments, sanctions or legal or regulatory uncertainty associated with operating in or exiting business in Russia or Belarus;
  2. direct or indirect reliance on goods or services sourced in Russia, Ukraine and, as applicable, in countries supportive of Russia;
  3. actual or potential supply chain disruptions and volatility related to commodity prices;
  4. cybersecurity risks related to these activities;
  5. business relationships, connections to, or assets in, Russia, Belarus and Ukraine; and
  6. the quantitative and qualitative impact on their financial statements from any related impairment of assets, changes in inventory valuation, deferred tax asset valuation allowance, dispositions, de-consolidations, and business exits, fluctuations in exchange rates, and changes in contracts with customers or the ability to collect consideration.

The SEC highlights other areas of interest, including the company’s evaluation of the effectiveness of disclosure controls, procedures and internal controls over financial reporting. The SEC also draws attention to the oversight role of the board of directors, and particularly concerning whether to continue or to cease activity in Russia and/or Belarus. When reviewing company filings, the SEC is likely to continue issuing comment letters, and may request additional details and further discussions related to these issues.

On May 3, 2022, the U.S. Trade Representative (USTR) issued a notice initiating a statutory four-year review of Section 301 tariffs on imports of certain Chinese products initially implemented by the Trump administration.

In its notice, the USTR is seeking comments from domestic industries benefiting from the two Section 301 tariff actions, which became effective July 6, 2018 and August 23, 2018, on their continuation. Otherwise, these actions are set to expire on their four-year anniversary dates. These two actions involve the assessment of Section 301 tariffs on products with an approximate annual trade value of $34 billion effective July 6, 2018 (List 1), and on products with an approximate annual trade value of $16 billion effective August 23, 2018 (List 2). The USTR subsequently issued notices modifying these actions to impose additional tariffs on various other imports of Chinese products identified in different tranches commonly known as Lists 3 and 4A on September 21, 2018 and August 20, 2019, respectively. To ensure comprehensive coverage of the review, the USTR will consider the List 3 and List 4A modifications as applicable to both the July 6, 2018 action and the August 23, 2018 action.

Domestic industry representatives may submit their requests for the July 6, 2018 and August 23, 2018 actions between May 7, 2022 and July 5, 2022 and between June 24, 2022 and August 22, 2022, respectively. Submission should be made at https://comments.ustr.gov/s/. If no request is received, the Section 301 trade actions will terminate on July 6, 2022 and August 23, 2022, respectively. If the USTR receives such a request, it will announce the continuation of these actions, and will undertake a review of the effectiveness of the actions in achieving Section 301 objectives, other actions that could be taken, and the effects of such actions on the U.S. economy, including consumers. The USTR will then open a separate portal for interested persons to submit their comments addressing these issues.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has added multiple new entities and persons to its Specially Designated Nationals (SDN) List after determining that they were involved in attempts to evade U.S. sanctions put in place as a result of Russia’s invasion of Ukraine.  OFAC has designated Russian commercial bank PJSC Transkapitalbank (TKB) stating that it has offered services to several banks in Asia, including within China, and the Middle East, and suggested options to evade international sanctions.  In particular, OFAC notes that TKB offers to process transactions via its Internet-based banking system as an alternative to relying upon SWIFT codes.    OFAC has also sanctioned and designated a network of more than 40 individuals and entities led by U.S.-designated Russian oligarch Konstantin Malofeyev.  On April 6, 2022, the U.S. Department of Justice charged Mr. Malofeyev with conspiracy to violate U.S. sanctions and violating U.S. sanctions Mr. Malofeyev.

OFAC also designated companies operating in Russia’s virtual currency mining industry, including BitriverAG and ten of its subsidiaries.  Treasury stated that in “operating vast server farms that sell virtual currency mining capacity internationally, these companies help Russia monetize its natural resources. Russia has a comparative advantage in crypto mining due to energy resources and a cold climate. However, mining companies rely on imported computer equipment and fiat payments, which makes them vulnerable to sanctions.”

Additional identifying information on these sanctioned entities and individuals is available here.  All property and interests in property of the individuals and entities above 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 otherwise blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt.

In addition to these actions, OFAC recently issued the following Russia-related General Licenses (GLs):

  • GL 26 – Authorizing the Wind Down of Transactions Involving Joint Stock Company SB Sberbank Kazakhstan or Sberbank Europe AG.  This GL authorizes transactions ordinarily incident and necessary to the wind down of transactions involving JSC SB Sberbank Kazakhstan or Sberbank Europe AG, or any entity in which these blocked Sberbank subsidiaries own, directly or indirectly, a 50 percent or greater interest, that are otherwise prohibited by Executive Order (E.O.) 14024 until July 12, 2022.
  • GL 27 – Certain Transactions in Support of Nongovernmental Organizations’ Activities.  This GL authorizes transactions related to certain activities of NGOs in Russia and Ukraine, including activities to support humanitarian projects to meet basic human needs, to support democracy building efforts and to support education.
  • GL 28 – Authorizing Certain Transactions Involving PJSC Transkapitalbank and Afghanistan.  This GL authorizes continued transactions  involving PJSC Transkapitalbank (TKB), or any entity in which TKB owns, directly or indirectly, a 50 percent or greater interest, that are ultimately destined for or originating from Afghanistan and otherwise prohibited by E.O. 14024, until October 20, 2022.
  • GL 29 – Authorizing the Wind Down of Transactions Involving Public Joint Stock Company Transkapitalbank.  This GL authorizes all transactions ordinarily incident and necessary to the wind down of transactions involving PJSC Transkapitalbank (TKB), or any entity in which TKB owns, directly, or indirectly, a 50 percent or greater interest, that are otherwise prohibited by E.O. 14024, until May 20, 2022.

As of February 22, 2022, President Biden and the Departments of State, Commerce and the Treasury have implemented an array of sanctions and export controls severely restricting international trade and financing involving Russia, Ukraine and Belarus in response to the Russian invasion of Ukraine. These have been primarily imposed and implemented pursuant to executive orders, the Ukraine-/Russia Related Sanctions Regulations and the Russian Harmful Foreign Activity Sanctions Regulations. Below are summaries of the sanctions most relevant to the automotive and other mobility industries.

As a result of these restrictions, businesses in the auto and mobility sectors are carefully reviewing any transactions related to Russia. The restrictions, as well as political considerations, have led many OEMs to suspend or limit current operations in Russia.

Blocking and other restrictions imposed against major financial institutions in Russian and Belarus. Sanctions have targeted major financial institutions in Russia and Belarus. For example, most significant Russian banks have been placed on the Specially Designated Nationals and Blocked Persons (SDN) list, including Foreign Economic Affairs Vnesheconombank, VTB Bank Public Joint Stock Company and most recently, Public Joint Stock Company Sberbank of Russia. As of the date of their designation to the SDN list by the Treasury Department’s Office of Foreign Assets Control (OFAC), all property and interests in property of the SDNs, including all entities and property owned 50% or greater, directly or indirectly, individually or in the aggregate, by the SDNs are blocked and cannot be dealt in by any U.S. person unless generally or specifically authorized by OFAC.

Other financial institutions have been placed on non-SDN lists by OFAC, which impose other restrictions pursuant to Directives 1-4 under EO 14024 or Directives 1-3 under EO 13662. The Directives impose restrictions on new debt, new equity and corresponding payable through accounts at banks designated pursuant to the Directive. For more information on what is restricted and what is authorized pursuant to blocking and non-blocking sanctions against these financial institutions, see our March 9 update.

These sanctions have a significant impact on financing and payment arrangements with not only the designated banks but also, in many instances, their global subsidiaries. As a result, transactions involving the auto industry in Russia require careful scrutiny of not only parties to a transaction (suppliers, customers, OEMs, carriers) but also the financial institutions that will be facilitating payment.

New export controls on trade with Russia and Belarus involving all items on the CCL and “luxury goods.” The Departments of Commerce, State and Treasury have also imposed hefty export controls on Russia and Belarus. For example, as of April 8, 2022, all exports, reexports and in-country transfers of goods, technology and software to Russia or Belarus “subject to Export Administration Regulations (EAR)” and listed on the Commerce Control List (CCL) are prohibited absent a license from Commerce’s Bureau of Industry and Security (BIS). In addition, BIS expanded the “foreign direct product rule” to provide that many items manufactured outside the United States through the use of U.S. origin technology are now subject to the EAR and require a BIS license for export to Russia. In the auto industry, many companies are realizing that fairly standard items such as semiconductor chips and ECMs for car components may be subject to the new export controls. For additional information, see our April 11 update.

President Biden also issued EO 14068 on March 11, 2022, which, among other things, prohibits the “exportation, reexportation, sale or supply, directly or indirectly, from the United States or by a U.S. person, of luxury goods.” On that same date, BIS issued a final rule restricting the export, reexport or in-country transfer of “luxury goods” to Russia or Belarus as well as those “that are destined for Russian and Belarusian oligarchs and malign actors, regardless of their geographical location.” The list of luxury goods includes many automobiles and motorcycles. For additional information, see our March 14 update. The European Union has issued similar, and perhaps broader, restrictions. Together these measures are greatly restricting supply chains serving automotive manufacturing facilities in Russia.

Embargo against the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) of Ukraine. While the United States had previously imposed a comprehensive embargo against the Crimea region of Ukraine in 2014, it expanded the embargo to also cover Ukraine’s so-called DNR and LNR regions. Nearly all direct or indirect transactions, dealings or trade in or with the DNR, LNR or persons in these regions is prohibited. For more information on what is restricted and what is authorized in the region, see our March 9 update.

Pending sanctions on export of certain “services” to Russia and Belarus. On April 6, 2022, President Biden issued EO 14071, which, among other things, prohibits the “exportation, reexportation, sale or supply, directly or indirectly, from the United States or by a U.S. person” of certain services to any person in Russia. The types or categories of services that will be banned are yet to be determined by the Secretary of the Treasury Department.

These sanctions and export controls have wide-reaching implications across industries and have severely disrupted mobility and automotive supply chains in the region. In addition to financial institutions, many other state-owned entities in Russia and Belarus have been designated to the SDN list, impacting not only financing but also logistics, shipping and production. Businesses in the automotive and mobility industries should continue to monitor these changes and ensure that their investment, trade and financing activities in the region comply with U.S. sanctions and export controls.

On and effective April 8, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Rule that expands upon prior export control restrictions placed on Russian and Belarus in response to Russia’s invasion of Ukraine. This rule expands restrictive license requirements to include Commerce Control List (CCL) categories 0-2, which include materials and equipment relevant to nuclear, chemical, and materials processing. It applies additional export restrictions established under previous Russia and Belarus rules to now include the three remaining categories of controlled technology on the Commerce Control List (CCL) which had previously not been applied to Russia and Ukraine. For past BIS actions see Updates of March 4, 2022 and February 25, 2022.

While BIS noted that the vast majority of items in CCL categories 0-2 already required a license for Russia and Belarus (or are subject to the licensing authorities of other agencies), this Final Rule imposes new license requirements for items including certain composite materials, medical products containing certain toxins or genetically modified organisms, hydraulic fluids, pumps, valves, and lower-level machine tools. The rule also applies the foreign “direct product” rule for Russia/Belarus to apply to all items in categories 0-9 of the CLL. In reviewing any license application, BIS has stated they it will typically apply a “policy of denial.”

This Final Rule also limits certain provisions of the license exception for aircraft (AVS) for aircraft registered in, owned or controlled by, or under charter or lease by Belarus or a national of Belarus.

BIS has stated that for these expanded CCL controls, shipments of items removed from eligibility for a License Exception or export or reexport without a license (NLR) as a result of these new export restrictions that were en route aboard a carrier to a port of export or reexport, on May 9, 2022, pursuant to actual orders for export or reexport to Burma, may proceed under their previous eligibility.

On April 8, 2022, President Joseph Biden signed into law H.R. 7108, the Suspending Normal Trade Relations with Russia and Belarus Act, and H.R. 6968, the Suspending Energy Imports from Russia Act. Both pieces of legislation passed the Senate and House of Representatives on April 7, 2022.

The Suspending Normal Trade Relations with Russia and Belarus Act (now Public Law No. 117-110) suspends the United States’ granting of permanent normal trade relations (PNTR) with Russia and Belarus. The removal of PNTR status includes the withdrawal of “most favored nation” tariffs and will result in higher tariffs on the import of goods imported from Russia and Belarus. The law also gives the president authorization to increase the duties applicable to products imported from these two countries.

The Ending Importation of Russian Oil Act (now Public Law No. 117-109) suspends imports of Russian petroleum products that are classified under Chapter 27 of the Harmonized Tariff Schedule of the United States (HTSUS) and as set forth in Executive Order 14066.

Provisions in both laws allow for the restoration of normal trade relations and resumption of imports of petroleum products upon certification to Congress that Russia and Belarus:

  • have reached an agreement relating to the respective withdrawal and cessation of military hostilities that is accepted by the free and independent government of Ukraine;
  • pose no immediate military threat of aggression to any North Atlantic Treaty Organization (NATO) member; and
  • recognize the right of the people of Ukraine to independently and freely choose their own government.

Upon signature by President Biden, the White House released a statement available here. These new laws codify previous executive actions taken by President Biden. See Updates of March 12, 2022 and March 9, 2022.

On April 6, 2022, President Joseph Biden issued Executive Order, “Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression” (the “April 6, 2022 EO”) , further expanding sanctions against Russia, including measures to ban new investments in Russia and authorizations to prohibit the provision of services in Russia.  On the same date, the Department of Treasury’s Office of Foreign Assets Control (OFAC) announced blocking sanctions against additional Russian banks (including Sberbank and Alfa-Bank), as well as blocking of several of Russia’s most critical state-owned enterprises (SOEs) and Russian government officials and their family members.

The April 6, 2022 EO prohibits the following activities:

  • new investment in the Russian Federation by a U.S. person, wherever located;
  • the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a U.S. person, wherever located, of any category of services as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, to any person located in the Russian Federation; and
  • any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person involving the foregoing prohibited activities where the transaction by that foreign person would be prohibited if performed by a U.S. person or within the United States.

The Secretary of the Treasury has not yet identified categories of services prohibited under this EO’s authority.

Blocking Sanctions

As noted, OFAC designated Russia’s largest financial institution Sberbank (and 24 of its subsidiaries) and Russia’s largest private bank, Alfa-Bank (and 6 of its subsidiaries) to the Specially Designated Nationals and Blocked Persons (“SDN”) List.  Several other Russian banks were also placed on the SDN List.  Notably, Sberbank and its subsidiaries were  previously only subject to Non-SDN Menu-Based Sanctions pursuant to EO 14024 Directive 2 but are now fully blocked.

In addition, OFAC has designated family members of President Vladimir Putin and Foreign Minster Sergey Lavrov, as well as former President and Prime Minister of Russia Dmitry Medvedev and other Russian Security Council members.  Several additional vessels have also been placed on the SDN List.  For full identifying details on these banks, entities and persons click here.

As a result of these actions, all property and interests in property of these individuals and entities 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 otherwise blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt.

General Licenses

OFAC has issued three new Russia-related General Licenses (GL) to authorize all transactions ordinarily incident and necessary to the wind down of certain activities involving Sberbank CIB USA, Inc. (GL 21, authorizing certain activities until June 7), PJSC Sberbank of Russia (GL 22, authorizing certain activities until April 13), and JSC Alfa-Bank (GL 23, authorizing certain activities until May 6).  The authorization for wind down activities includes any entities in which these three entities own, directly or indirectly, a 50% or greater interest.

OFAC also issued an updated GL 8B, updating the prior GL 8A to include some newly designated entities and authorize certain energy related transactions until June 24, 2022.  In addition, OFAC issues GLs 9B and 10B to add newly designated entities to authorizations permitting certain divestment related activity and wind-down of derivative contracts.

A White House Fact Sheet summarizing these additional sanctions is available here.