On May 8, 2022, the White House announced a number of new measures in response to Russia’s ongoing war in Ukraine. The new measures include bans on new categories of services to Russia by US nationals; export controls on certain industrial products; and the addition of several shipping lines, bank executives and television companies to the US Treasury Department’s Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons (SDN) list.
Prohibition of exporting services
OFAC has issued a determination pursuant to Executive Order (EO) 14071 prohibiting the export, re-export, sale, or supply, directly or indirectly, from the United States, or by a United States person, anywhere finds, of the following categories of services to anyone located in the Russian Federation: accounting, trust and business creation, and management consulting. This is the first category of services to be defined under EO 14071, published in April.
OFAC has defined services as follows:
- “Accounting Services”: includes services related to the measurement, processing and evaluation of financial data on economic entities.
- “Trust and Company Formation Services”: includes services relating to assisting individuals in the formation or structuring of legal persons, such as trusts and corporations; act or cause others to act as directors, secretaries, administrative trustees, fiduciary trustees, registered agents or registered shareholders of legal entities; provide a registered office, a business address, a mailing address or an administrative address for legal persons; and the provision of administrative services for trusts. Please note that all of these activities are standard activities of Trust and Company Service Providers (TCSPs), although they may be provided by others.
- “Management Consulting Services”: includes services related to strategic business advice; organizational and system planning, assessment and selection; development or evaluation of marketing programs or implementation; mergers, acquisitions and organizational structure; staff augmentation and human resource policies and practices; and brand management.
General License 34 authorizes all transactions usually incidental and necessary to the cessation of such activities until 12:01 a.m. EDT on July 7, 2022. In addition, General License 35 authorizes the provision of certain transactions usually incidental and necessary for credit scoring or auditing services to anyone located in the Russian Federation until 12:01 a.m. EDT on August 20, 2022.
In addition, OFAC has determined that pursuant to Section 1(a)(i) of EO 14024, additional penalties may be imposed on any person or entity determined to operate or have operated in any of the above. This decision authorizes future OFAC sanctions designations, but does not in itself create a ban. This decision builds on previous rulings authorizing the issuance of sanctions designations against individuals who operate or have operated in the aerospace, marine, electronics, financial services, technology and defense and related equipment of the economy of the Russian Federation.
On May 9, 2022, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued a final rule imposing additional export controls, which became effective on May 11, 2022. The rule imposes licensing requirements for exports, re-exports or transfers to and within Russia of industrial and energy sector equipment, such as engines, oil and gas separation equipment and bulldozers.
Affected items are identified by Harmonized Tariff Schedule classifications and Schedule B descriptions, which are normally used in the context of customs compliance, and are used here to identify controls on items that are normally EAR99 and not described by Export Control Classification Numbers (ECCN). These EAR99 items were not covered by previous BIS actions that applied licensing requirements to ECCN categories.
License applications will be considered under a no-claims policy, except for items that may be required for health and safety reasons or humanitarian needs.
OFAC has added the following parties to the SDN list:
- Moscow Industrial Bank (MIB) Joint Stock Company and 10 of its subsidiaries;
- Eight senior executives from Sberbank;
- 27 senior managers of Gazprombank;
- Fertoinga company specializing in maritime engineering which produces, among other activities, remotely operated underwater equipment;
- Promtekhnologiya liability company, a rifle company;
- Three public television companiesMore precisely:
- Joint stock company Channel One Russia
- Russia-1 TV Station
- NTV Broadcasting Company Joint Stock Company
- Shipping companiesMore precisely:
- Oboronlogistika, the shipping company of the Russian Defense Ministry;
- SC South LLC;
- Northern Shipping Company;
- M Leasing LLC;
- Marine Trans Shipping LLC, and,
- Nord Project LLC Transportation Company.
OFAC has designated shipping companies (and a specific list of vessels they own) under the direction of the Department of State.
Pursuant to OFAC’s 50% rule, the sanctions also apply to entities owned, directly or indirectly, 50% or more by blocked parties. The full list is available here.
Along with the above designations, OFAC has also issued General License 33, which authorizes the phasing out of existing operations or contracts involving the above television stations (and those subject to the 50% rule of the OFAC) up to June 7, 2022.