The Bass, Berry & Sims international trade team is actively monitoring the situation in Russia and Ukraine and providing real-time advice to clients on managing the situation. This post summarizes new U.S. sanctions and export restrictions as of Monday, May 9. This post supplements our previous summaries, which are available by following the links at the end of this blog post.

Commerce Department Adds to Restrictions, Imposes Licensing Requirements on More Russia Exports

On May 9, the U.S. Commerce Department, Bureau of Industry & Security (BIS) announced further restrictions on exports to Russia of items deemed to support Russian military capabilities. Under the rule, the Commerce Department has introduced licensing requirements on hundreds of items that, prior to the rule, would not have required a license for export to otherwise permitted Russian recipients. The items are classified by both Harmonized Tariff Schedule and U.S. Schedule B number. According to BIS, the action has been taken to more closely align the United States with European Union export restrictions related to Russia.

The May 9 action builds upon prior action taken by BIS, particularly the introduction of Russian export licensing requirements that became effective on March 3 with respect to the oil and gas industry, and the licensing requirements that became effective on March 11 with respect to exports of luxury goods. For more information about these prior actions, please refer to our March 3 post and our March 14 post.

OFAC Imposes Broad Restrictions on Russian Professional Services, Issues Related Frequently Asked Questions and General Licenses

On May 8, acting pursuant to Executive Order 14024, the Office of Foreign Assets Control (OFAC) issued a Determination by which it designated the accounting, trust and corporate formation services, and management consulting sectors of the Russian economy. OFAC provided additional detail on the scope of covered services in newly issued Frequently Asked Question (FAQ) 1034, which was also issued on May 8.

Under this Determination, any person designated by OFAC – acting in coordination with the U.S. Department of State – as being involved in one or more of these sectors will be considered a prohibited party. U.S. persons will be prohibited from engaging in virtually any transaction with any such party.

Also on May 8, acting pursuant to Executive Order (EO) 14071, OFAC issued a Determination that prohibitions under EO 14071 will apply to accounting, trust and corporate formation, and management consulting services. Thus, effective June 7, 2022, U.S. persons are prohibited from exporting, selling, or supplying, directly or indirectly, any such services to any person in Russia. OFAC did announce certain exceptions to this prohibition, including for providing services to an entity located in Russia that is owned or controlled by a U.S. person.

In addition, OFAC announced General License (GL) 34, which authorizes transactions ordinarily incident and necessary to winding down the export, sale, or supply of accounting, trust and corporate formation, or management consulting services to designated Russian parties. OFAC also published a new Frequently Asked Question – FAQ 1038 – that describes the scope of the services covered by the Determination. The GL, which was issued on May 8, expires on July 7, 2022.

OFAC Introduces New and Amended General Licenses

OFAC continues to issue General Licenses to authorize a limited number and scope of transactions with and involving Russia. On May 8, OFAC issued the following:

  • GL 25A, which authorizes certain transactions that (1) are ordinarily incident to the receipt and transmission of telecommunications involving Russia or (2) relate to the export to Russia of services, software, hardware, or technology related to the exchange of communications over the internet. The GL does not authorize transactions with specifically designated Russian entities. GL 25A supersedes GL 25, which was issued on April 7.
  • GL 33, which authorizes certain otherwise prohibited transactions related to winding down operations, contracts, or other agreements related to Joint Stock Company (JSC) Channel One Russia, JSC NTV Broadcasting Company, and Television Station Russia-1, along with entities in which any of these three named parties owns an interest of 50% or more. (These entities, each of which is state-owned, were designated as Specially Designated Nationals (SDNs) on May 8.) GL 33 expires on June 7, 2022.
  • GL 35, which authorizes transactions ordinarily incident and necessary to the export, sale, or supply of credit rating or auditing services with respect to certain designated Russian parties. OFAC issued new FAQ 1035 to describe the scope of services covered by the GL. GL 35 expires on August 20, 2022.

OFAC Designates Additional Banking Executives, and Bank and Defense Entities

OFAC designated an additional eight current and recent executive board members of Sberbank, which itself was designated on April 6. (The designation is described in more detail in our April 6 post.) OFAC also designated 27 board members of Gazprombank, which is subject to Directive 3 prohibitions (discussed in our February 24 blog post), and designated Joint Stock Company Moscow Industrial Bank and 10 of its subsidiaries:

  • Agropromyshlenny Kompleks Voronezhski OOO
  • Anninskii Elevator OOO
  • Auditkonsalt OOO
  • Belinveststroi OOO
  • Dve Stolitsy OOO
  • Kontrakt OOO
  • Ladoga OOO
  • Nekommercheskaya Organizatsiya Fond Khimicheskoe Razoruzhenie I Konversiya
  • Azovskaya Zernovaya Kompaniya OOO
  • Ekspluatiruyushchaya Kompaniya Tsentr OOO

In addition, OFAC designated Limited Liability Company Promtekhnologiya, a Russian defense company that reportedly is an important supplier to Russia’s military and intelligence services.

Finally, OFAC designated dozens of Russia-owned or –controlled vessels as SDNs. U.S. parties are prohibited from conducting virtually any transaction with or involving one of these vessels. As part of the U.S. government’s effort to target the Russian maritime industry, the State Department also designated the owners of the vessels:

  • Oboronlogistika OOO and its subsidiary SC South LLC
  • Joint Stock Company Northern Shipping Company
  • Transmorflot LLC
  • M Leasing LLC
  • Marine Trans Shipping LLC
  • Nord Project LLC
  • Obshchestvo S Ogranichennoi Otvetstvennostyu Fertoing

If you have any questions or need assistance related to this evolving situation or other international trade matters, please contact the authors. To read our previous coverage concerning the Russia-Ukraine situation, click the links below:

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Photo of Thad McBride Thad McBride

Thad McBride advises public and private companies on the legal considerations essential to successful business operations in a global marketplace. He focuses his practice on counseling clients on compliance with U.S. export regulations (ITAR and EAR), economic sanctions and embargoes, import controls (CBP)…

Thad McBride advises public and private companies on the legal considerations essential to successful business operations in a global marketplace. He focuses his practice on counseling clients on compliance with U.S. export regulations (ITAR and EAR), economic sanctions and embargoes, import controls (CBP), and the Foreign Corrupt Practices Act (FCPA). He also advises clients on anti-boycott controls, and assists companies with matters involving the Committee on Foreign Investment in the United States (CFIUS). Thad supports international companies across a range of industries, including aviation, automotive, defense, energy, financial services, manufacturing, medical devices, oilfield services, professional services, research and development, retail, and technology. Beyond advising on day-to-day compliance matters, Thad regularly assists clients in investigations and enforcement actions brought by government agencies, including the U.S. Department of Justice (DOJ), the U.S. Treasury Department Office of Foreign Assets Control (OFAC), the U.S. State Department Directorate of Defense Trade Controls (DDTC), Customs and Border Protection (CBP), the U.S. Commerce Department Bureau of Industry & Security (BIS), and the Securities & Exchange Commission.