New EU sanctions
Sectoral sanctions (effective as of 26 February 2023)
Council Regulation (EU) 2023/427 of 25 February 2023 amending Regulation (EU) No 833/2014 concerning measures in view of Russia’s actions destabilising the situation in Ukraine provides for:
Export restrictions:
Transit restriction on dual-use items and firearms, their parts and ammunition
Transit of dual-use items and firearms, their parts and essential components and ammunition via the territory of Russia is prohibited, except for dual-use items if the transit is intended for certain purposes such as humanitarian, medical or pharmaceutical use.
Annex IV list of military entities
96 military entities, including seven Iranian entities, are added to the list of military entities, which cannot benefit from the exemptions and authorisations for dual-use or strategic (Annex VII) items to Russia. The list now contains 506 entities.
Annex VII (strategic goods)
The following categories of goods have been added to Annex VII and are subject to an export ban:
Rare-earth metals and compounds, either in organic or inorganic form, including mixtures whether or not intermixed or interalloyed;
Electronic integrated circuits falling under CN code 8537 10;
Other television cameras, digital cameras and video camera recorders falling under CN code 8525 89;
Other optical devices, appliances and instruments falling under CN code 9013 80;
Other thermometers and pyrometers, not combined with other instruments falling under CN code 9025 19;
Aerials and aerial reflectors of all kinds; parts suitable for use therewith falling under CN code 8529 10; and
Other fixed capacitors of tantalum falling under CN code 8532 21.
Plumbing valves and storage tanks with total internal (geometric) volume less than 1m³ (1,000 litres) designed for domestic water or gas systems are excluded from the scope of item X.B.X.015.
Annex XI (goods and technology suited for use in aviation or the space industry)
Additional goods and technology have been added to Annex XI (Part D), including turbojets, turbopropellers and their parts, which cannot be exported, supplied, sold or transferred to Russia. There is a winddown period until 27 March 2023 for contracts concluded before 26 February 2023.
Annex XXIII (goods that could contribute to the enhancement of Russian industrial capacities)
Additional goods have been added to Annex XXIII (Part C) and are subject to an export ban:
Certain flat-rolled iron and steel products
Vehicles such as heavy trucks, semi-trailers, fork-lifts, and snowmobiles;
Goods easily directed to military, such as electric generators, binoculars, radars, compass;
Construction goods, such as bridges, fork-lifts trucks, cranes;
Goods critical for the Russian industrial capacity, such as batteries, electronics, steam and vapour turbines, machine parts, pumps, machinery for working metals; and
Complete industrial plants, except plants for the production of food and drinks, pharmaceuticals, medicines and medical devices
There is a winddown period until 27 March 2023 for contracts concluded before 26 February 2023.
No authorizations for export of Annex XXIII items to Russia shall be granted if Member State authorities have reasonable grounds to believe the goods may have a military end-use.
Import restriction:
Annex XXI (goods that generate significant revenue for Russia)
Additional goods have been added to Annex XXI (Part C), including items falling under:
CN code 2712: petroleum jelly, paraffin wax, micro- crystalline petroleum wax, slack wax, ozokerite, lignite wax, peat wax, other mineral waxes, and similar products obtained by synthesis or by other processes, whether or not coloured;
CN code 2713: petroleum coke, petroleum bitumen and other residues of petroleum oil or of oil obtained from bituminous minerals;
CN code 2714: bitumen and asphalt, natural; bituminous or oil-shale and tar sands; asphaltites and asphaltic rocks;
CN code 2715: bituminous mastics, cut-backs and other bituminous mixtures based on natural asphalt, on natural bitumen, on petroleum bitumen, on mineral tar or on mineral tar pitch;
CN code 2803: carbon (carbon blacks and other forms of carbon not elsewhere specified or included); and
CN code 4002: synthetic rubber and factice derived from oils, in primary forms or in plates, sheets or strip; mixtures of natural rubber, balata, gutta-percha, guayule, chicle or similar types of natural rubber with synthetic rubber or factice, in primary forms or in plates, sheets or strip.
These items are subject to an import ban. There is a winddown period until 27 May 2023 for contracts concluded before 26 February 2023.
Until 30 June 2024, an import quota applies to carbon and synthetic rubber products, as follows:
Carbon (CN code 2803): 752,475 metric tonnes; and
Synthetic rubber (CN code 4002): 562,973 metric tonnes.
Expansion of the list of partner countries:
The list of partner countries is extended to cover Australia, Canada, New Zealand and Norway, in addition to the United States, Japan, United Kingdom, and South Korea. Partner countries can benefit from the following exemptions / authorisations:
Export of dual-use and strategic items to: (i) Russian subsidiaries of entities incorporated in a partner country; and (ii) diplomatic representations of partner countries in Russia;
Export of luxury items and Annex XXIII items necessary for the official purposes of diplomatic or consular missions of partner countries in Russia;
Provision of restricted professional services to: (i) Russian subsidiaries of entities incorporated in a partner country; and (ii) diplomatic and consular representations of partner countries in Russia.
Norway, as an EEA country, will now benefit from both the exemptions/authorizations for partner countries as well as those for EEA countries.
Broadcasting restriction:
The broadcasting ban has been extended to RT Arabic and Sputnik Arabic in Annex XV. The ban would apply for these entities as from 10 April 2023, subject to the adoption of an implementing act.
Additional reporting obligations for aircraft operators:
Aircraft operators of non-scheduled flights between Russia and the EU, operated directly or via a third country, should notify all relevant information concerning the flight to their competent authorities prior to their operation, and at least 48 hours in advance.
Reporting obligation related to Russian Central Bank assets:
As of 27 April 2023, EU persons (in particular the European Central Bank, national central banks, financial sector entities, (re)insurance undertakings, central securities depositories and central counterparties) must report assets and reserves of the Central Bank of Russia which they hold or control or are a counterparty to, simultaneously to the national authorities of the competent Member State and the European Commission.
Russian interference in critical infrastructures and entities:
As of 27 March 2023, Russian nationals are prohibited to hold any posts in the governing bodies of owners/operators of critical infrastructures and entities. Dual EU-, EEA- or Swiss-Russian nationals are exempted from the prohibition.
Restriction on the provision of gas storage capacity to Russian persons:
It is prohibited to provide storge capacity in an underground storage facility, except for the part of liquefied natural gas facilities used for storage in the EU to Russian persons and their affiliates.
There is a winddown period until 27 March 2023 for contracts concluded before 26 February 2023.
Member States may issue an authorisation if it is necessary for ensuring critical energy supply within the Member State concerned or within the EU.
Authorisations, exemptions and clarifications:
a) Transaction ban with SOEs listed in Annex XIX
Extension until 31 December 2023 of the exemption for transactions which are strictly necessary for the winddown of a joint venture with an Annex XIX entity concluded before 16 March 2022 (previously 30 June 2023).
Extension until 31 December 2023 of the authorisation for transactions which are strictly necessary for the divestment and withdrawal of Annex XIX entities or their EU subsidiaries from an EU entity (previously 30 June 2023).
New exemption for the provision of pilot services to vessels in innocent passage as defined by international law and necessary for reasons of maritime safety.
Exemption for technical assistance to vessels in innocent passage
Technical assistance restrictions do not apply to the provision of pilot services to vessels in innocent passage as defined by international law and necessary for reasons of maritime safety.
Divestment authorisation related to professional services restriction
Until 31 December 2023, Member States can authorise the continuation of restricted professional services if these are strictly necessary for the divestment from Russia, or the winddown of business activities in Russia.
No authorisation shall be granted if they have reasonable grounds to believe that the services might be provided, directly or indirectly, to the Russian government or a military end-user or have a military end-use in Russia.
Import of goods presented to EU customs before the imposition of restrictions
Goods physically in the EU may be released by national competent authorities, provided they have been presented to customs before the entry into force or applicability date of the respective import prohibition, whichever is the latest.
Asset freeze measures (effective as of 25 February 2023)
Council Regulation (EU) 2023/426 of 25 February 2023 and Council Implementing Regulation (EU) 2023/429 of 25 February 2023 amending Council implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine provide for:
New listings of banks
Three banks are now listed: Tinkoff Bank, Alfa Bank and Rosbank. In certain circumstances Member States may authorise the release of funds and making funds available to them.
Expansion of the list of sanctioned persons
120 names have been added to the list of sanctioned persons and entities.
New exemption relating to NSD
This exemption applies only to funds blocked within NSD where (i) the funds were necessary for the disposal or transfer of securities by an entity established in the EU, currently or previously controlled by VTB Bank, (ii) prior to 24 July 2023, in order to (iii) secure the performance of operations, contracts or other agreements concluded with, or otherwise involving, NSD prior to 3 June 2022.Therefore, this provision only applies to entities established in the EU that are or have been controlled by VTB Bank.
Divestment of interests by listed persons in EU entities
The period to request an authorisation to release frozen funds or making available of certain funds to a listed person is extended until 31 May 2023.
New reporting obligations regarding frozen assets
EU persons are obliged to (i) supply immediately any information which would facilitate compliance with the asset freeze measures, as well as (ii) cooperate with the competent authority in any verification of such information.
Central securities depositories should provide information on extraordinary and unforeseen loss and damage concerning the relevant funds and economic resources.
Member States and relevant persons should cooperate with the European Commission in any verification of information.
New UK sanctions (effective as of 24 February 2023)
Asset freeze measures
The new designations include 80 individuals and 12 entities.
Designations include four Russian banks, Bank Saint Petersburg PJSC, Bank Uralsib PJSC, MTS Bank PJSC and Bank Zenit PJSC.
The full list of designations can be found here.
Upcoming restrictions
The Foreign Secretary also announced new trade measures, including export bans on hundreds of goods, which will include aircraft parts, radio equipment, and electronic components, including those used in the production of UAVs. According to a press release issued by the UK Government, this restriction is aimed at banning exports on every item Russia has been found using on the battlefield to date. The UK will also ban the import of 140 goods including iron and steel products processed in third countries. These measures have not yet come into force.
The UK has also announced that it will be extending existing measures against Crimea, and non-government controlled territory in Donetsk and Luhansk oblasts, to target Russian controlled areas of Kherson and Zaporizhzhia oblasts, restricting their access to UK trade and finance. These measures have not yet come into force.
New US sanctions (effective as of 24 February 2023)
New designations
A significant number of individuals and entities have been added to both the Specially Designated Nationals and Blocked Persons List (“SDN List”) and Entity List. The updated SDN List contains numerous Russian banks, including Credit Bank of Moscow, Bank Zenit, MTS Bank etc.
A full list of designations is available here.
General licenses
OFAC has issued three general licenses (“GLs”) in relation to the designation of the Russian banks listed above, including:
GL 60 - authorizing the wind down and rejection of transactions involving certain financial institutions designated today through 12:01 a.m. eastern daylight time, May 25, 2023.
GL 61 - authorizing the wind down of certain securities and derivatives transactions involving certain of these financial institutions through 12:01 a.m. eastern daylight time, May 25, 2023.
GL 8F - adding certain of these financial institutions to the authorization to process certain energy-related transactions.
In addition, OFAC has issued GL 13D, an extension of GL 13C authorizing US Persons or their owned or controlled entities to pay taxes, fees, import duties, or purchase or receive permits, licenses, registrations, or certifications where such transactions would otherwise be prohibited for involving the Central Bank of Russia, National Wealth Fund of Russia, and Ministry of Finance of Russia, provided such transactions are ordinarily incident and necessary to the day-to-day operations in Russia of US Persons. GL 13D is valid until June 6, 2023.
Expansion of Existing Export Controls: The Commerce Department has further expanded the scope of items that require a license for export, reexport or transfer to Russia/Belarus. This was achieved primarily by expanding the list of items subject to existing controls under the industry sector sanctions, as well as industrial goods and luxury items. This results in export licensing requirements applying to a larger number of EAR99 items destined for Russia/Belarus, including common household items such as telephones, modems, microwaves and toasters. The Commerce Department also implemented certain revisions to the EAR to address the use of Iranian-made UAVs by Russia.
Determination targeting metals and mining sector in Russia
OFAC has issued a new determination under Executive Order 14024 (“Determination”) authorizing asset-freezing sanctions (i.e. designation to the SDN List) on any person determined by the Secretary of the Treasury in consultation with the Secretary of State to operate or have operated in the metals and mining sector of the Russian economy. The Determination does not automatically impose sanctions on all persons operating in the targeted sector, but provides the US government with the authority to impose sanctions on such persons (see OFAC’s new FAQ 1116). Using this new authority, OFAC designated four entities for operating or having operated in the metals and mining sector of Russia (i.e., Joint Stock Company Burevestnik Central Scientific Research Institute, OOO Metallurg-Tulamash, TPZ-Rondol OOO, Mtsenskprokat) and may designate additional such entities in the future.
OFAC anticipates publishing regulations defining the term “metals and mining sector of the Russian Federation economy” to include any act, process, or industry of extracting, at the surface or underground, ores, coal, precious stones, or any other minerals or geological materials in the Russian Federation, or any act of procuring, processing, manufacturing, or refining such geological materials, or transporting them to, from, or within the Russian Federation (see FAQ 1115).
OFAC does not intend for the Determination to target persons operating in the metals and mining sector where such activities are “solely for the safety and care of personnel, protection of human life, prevention of accidents or injuries, maintenance or repair necessary to avoid environmental or other significant damage, or activities related to environmental mitigation or remediation. Examples of such goods include personal protective equipment, safety devices, ventilation systems, and alarm systems; examples of such services include rescue and accident response services, cleaning, safety inspections, and services necessary for use of the goods described above.” OFAC has also clarified in this FAQ that non-US Persons generally would not risk exposure under the Determination for engaging in transactions with blocked persons where those transactions would not require a specific license if engaged in by a US Person (e.g., transactions that are authorized under general licenses) (see FAQ 1117).
Export control measures
The US Department of Commerce’s Bureau of Industry and Security (“BIS”) has imposed new export control measures, effective today, including the following:
Industry sector sanctions and luxury goods sanctions:
BIS is expanding the scope of the Russian industry sector and luxury good sanctions by adding additional items to the list of items controlled for export, reexport and transfer to Russia and Belarus. This action was taken to align with sanctions imposed by US partners and allies. BIS has also made revisions to the EAR to clarify the scope of the restrictions and understanding of items that are restricted. Key changes include:
Expansion to Supplement No. 2 (oil and gas production items) to Part 746 to expand the items captured to include any modified or designed components, parts, accessories, and attachments of listed items, regardless of HTS Code or HTS Description.
Expansion of Supplement No. 4 (commercial and industrial items) to Part 746 by adding 322 items to the list of industrial items requiring a license for export to Russia or Belarus. The items added include a variety of electronics, industrial machinery, and equipment.
Expansion of Supplement No. 6 (chemical and biological precursors) to Part 746 by adding certain items and certain components, parts, and accessories to previously listed items.
Expansion of Supplement No. 5 to Part 746 by adding 267 additional luxury good items that will require a license for Russia or Belarus or designated Russian and Belarusian persons. Newly added items include many common consumer commodities, including smartphones, telephone sets, modems, microwaves, and toasters.
Clarification that the exception from the license requirement for items controlled under ECCN 5A992 and 5D992 that applies to certain US and Country Group A:5 or A:6 entities in Russia or Belarus also applies for the luxury items license requirement.
Imposition of a case-by-case license review policy for applications of the disposition of items by companies curtailing or closing operations in Russia or Belarus. BIS seeks to encourage companies to exit Russia and Belarus with this new policy by facilitating the orderly exit from Russia and Belarus.
Export control restrictions to address Iranian UAVs:
BIS is imposing new export control measures on Iran to address the use of Iranian unmanned aerial vehicles (“UAVs”) by Russia in the war against Ukraine. A BIS license requirement is now required for specific EAR99 items that can be used in UAVs that are destined to Iran, regardless of whether a US Person is involved in the transaction. The specific items controlled are identified by HTS code in a newly added Supplement no. 7 to Part 746 of the EAR. The rule also adds a new foreign direct product (“FDP”) rule specific to Iran that applies to certain items controlled on the Commerce Control List (“CCL”) Categories 3-7 or Category 7 and EAR99 items identified in supplement No. 7, to ensure that these foreign produced items are subject to the EAR when destined for Iran. The rule also revises the existing Russia/Belarus FDP rule to cover EAR99 items that can be used in UAVs to ensure such items are not available for shipment to Iran for use in manufacture of UAVs used by Russia.
Tariffs on Russian products imported into the US
The White House has announced that it will sign proclamations to raise tariffs on certain Russian products imported to the United States. These measures are designed to target key Russian commodities that generate revenue for the Russian government. The action will result in increased tariffs on over 100 Russian metals, minerals, and chemical products worth approximately $2.7 billion. It is also anticipated to increase costs for aluminum smelted or cast in Russia to enter the US market.
Specifically, according to a Presidential Proclamation, beginning March 10, there will be a 200% tariff on Russian aluminum exports, including derivative products, and, beginning on April 10, aluminum articles from other countries that used any aluminum from Russia will also be tariffed at 200%, unless those third countries also impose 200% tariffs on imported Russian aluminum. The U.S. will also increase the tariffs on more than 570 groups of Russian products previously subject to a 35% tariff to 70% -- and will increase non-most-favored-nation tariffs to 35% on some minerals and chemicals from Russia
*This material has been prepared for informational and/or educational purposes only and does not constitute legal advice. For the purposes of applying the information contained herein, we advise you to contact LEVEL Legal Services to analyze your specific situation in order to avoid making incorrect decisions.
