Trade Law

The United Kingdom just issued a new statutory instrument, effective immediately, which extends the authority to designate persons and entities under the U.K. sanctions against Russia.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued new Russia/Ukraine-related sanctions on Thursday, September 1, 2016. This action marks OFAC’s first major expansion of the Specially Designated Nationals (SDN) List and Sectoral Sanctions Identifications (SSI) List for the Russia sanctions program since December 22, 2015. Additionally, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) made corresponding additions to its Entity List on September 7, 2016.

U.S. Department of Commerce Places Export Restrictions on 29 Parties; State Department Announces Sanctions on Russian Defense Companies; EU to Extend Russia-Related Sanctions.

A. BIS Adds 29 Entities to Entity List

On September 2, 2015, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule amending the Export Administration Regulations (EAR) by adding 
29 parties to its Entity List, a restricted-party list identifying foreign persons that engage in activities contrary to U.S. national security and/or foreign policy interests. This latest action was taken in accordance with Executive Orders 13660, 13661, 13662 and 13685 to “ensure the efficacy of existing sanctions on [Russia] for violating international law and fueling the conflict in Ukraine.”

For 14 of the 29 entities added to the Entity List, BIS imposes a general license requirement for all items subject to the EAR. Accordingly, all exports, re-exports and transfers (in-country) of all restricted items to these companies require a license from BIS, and BIS will also consider such license requests with a presumption of denial. This BIS action essentially conforms the Entity List with actions against the same entities previously taken by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), designating these entities as “Specially Designated Nationals” (SDNs) under Executive Orders 13660, 13661 and 13685.

On August 7, 2015, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published a final rule adding the Yuzhno-Kirinskoye Field, a Russian oil and gas field located in the Sea of Okhotsk, to its Entity List, a restricted party list maintained by BIS which identifies foreign persons that engage in activities contrary to U.S. national security and/or foreign policy interests. Consequently, exports, reexports and transfers (in-country) of all items subject to the Export Administration Regulations (EAR) to this Russian field require a license from BIS. Furthermore, BIS will consider such license requests with a presumption of denial.

On July 30, 2015, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a Crimea Sanctions Advisory highlighting certain practices that have been used to circumvent or evade U.S. sanctions involving Crimea and suggesting measures to mitigate Crimea sanctions risks.

Signaling increased tensions with Russia regarding its alleged intervention in eastern Ukraine, the European Union on June 19 and 22, 2015, took action extending sanctions targeting Russia and Crimea, including measures that prohibit EU persons from investing in or importing from Crimea and measures that restrict certain companies operating in Russia’s energy, defense and financial sectors from accessing European capital and equity markets.

This blog posting is the third of a series of five postings from the 2014 year-end energy briefing.

This article was first published in The Metropolitan Corporate Counsel, January 2015 issue.

Burdick: Leading our next discussion is Wynn Segall, a partner in the International Trade practice. Wynn will provide an update on the situation in Ukraine and Russia.

On August 13, 2014, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) published guidance (“Revised Guidance”) that revises its 2008 guidance regarding how to treat entities that are owned or controlled by blocked persons—i.e., persons whose property and interests in property are blocked. The 2008 guidance—which is widely known as the “50 Percent Rule”—held that if a blocked person owns 50 percent or more interest of an entity, either directly or indirectly, that entity would automatically be blocked by operation of law. The Revised Guidance reaffirms this 50 Percent Rule, but now requires aggregation when determining blocked persons’ ownership interests. In other words, under the Revised Guidance, an entity is automatically considered “blocked” if one or more blocked persons together own 50 percent or more (directly or indirectly) of the entity, even if the entity itself is not formally identified as a blocked party by OFAC.

OFAC stated that this Revised Guidance equally applies to entities identified on the Sectoral Sanctions Identification (SSI) List, which is part of the Ukraine-Russia sanctions program. Thus, any entity that is owned 50 percent or more (directly or indirectly) in the aggregate by one or more persons on the SSI List is also subject to SSI restrictions.