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 prohibitions on new categories of services to Russia by U.S. persons; export controls on certain industrial goods; and the addition of several shipping companies, bank executives, and television companies to the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons (SDN) List.
Prohibition on Export of Services
OFAC issued a determination pursuant to Executive Order (E.O.) 14071 prohibiting the export, reexport, sale, or supply, directly or indirectly, from the U.S., or by a U.S. person, wherever located, of the following categories of services to any person located in the Russian Federation: accounting, trust and corporate formation, and management consulting. This is the first category of services to be defined under E.O. 14071, which was issued in April.
OFAC defined the services as follows:
- “Accounting services”: includes services related to the measurement, processing, and evaluation of financial data about economic entities.
- “Trust and corporate formation services”: includes services related to assisting persons in forming or structuring legal persons, such as trusts and corporations; acting or arranging for other persons to act as directors, secretaries, administrative trustees, trust fiduciaries, registered agents, or nominee shareholders of legal persons; providing a registered office, business address, correspondence address, or administrative address for legal persons; and providing administrative services for trusts. Please note that all of these activities are common activities of trust and corporate service providers (TCSPs), although they may be provided by other persons.
- “Management consulting services”: includes services related to strategic business advice; organizational and systems planning, evaluation, and selection; development or evaluation of marketing programs or implementation; mergers, acquisitions, and organizational structure; staff augmentation and human resources policies and practices; and brand management.
General License 34 authorizes all transactions ordinarily incident and necessary to the wind down of such activities through 12:01 a.m. EDT on July 7, 2022. In addition, General License 35 authorizes the provision of certain transactions ordinarily incident and necessary for credit rating or auditing services to any person located in the Russian Federation through 12:01 a.m. EDT on August 20, 2022.
Additionally, OFAC determined that, pursuant to section 1(a)(i) of E.O. 14024, additional sanctions may be imposed on any individual or entity determined to operate or have operated in any of the above sectors. This move authorizes future sanctions designations by OFAC, but does not itself create a prohibition. This decision builds on previous determinations authorizing the issuance of sanctions designations against persons that operate or have operated in the aerospace, marine, electronics, financial services, technology, and defense and related materiel sectors of the Russian Federation economy.
On May 9, 2022, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) published a final rule imposing additional export controls, which became effective on May 11, 2022. The rule imposes license requirements for exports, reexports, or transfers to and within Russia of industrial and energy sector equipment, such as engines, oil and gas separation equipment and bulldozers.
The affected items are identified by Harmonized Tariff Schedule classifications and Schedule B descriptions, which are normally used in the customs compliance context, and are used here to identify controls on items that normally are EAR99 and not described by Export Control Classification Numbers (ECCNs). These EAR99 items were not covered by prior BIS actions that applied licensing requirements to ECCN categories.
Applications for licenses will be reviewed under a policy of denial, except for items which may be necessary for health and safety reasons or humanitarian needs.
OFAC added the following parties to the SDN List:
- Joint Stock Company Moscow Industrial Bank (MIB) and 10 of its subsidiaries;
- Eight senior executives of Sberbank;
- 27 senior executives of Gazprombank;
- Fertoing, a specialized marine engineering company that produces remotely operated subsea equipment, among other activities;
- Liability Company Promtekhnologiya, a rifle company;
- Three state-owned television companies, specifically:
- Joint Stock Company Channel One Russia
- Television Station Russia-1
- Joint Stock Company NTV Broadcasting Company
- Shipping companies, specifically:
- Oboronlogistika, the Russian Ministry of Defense’s shipping company;
- SC South LLC;
- Northern Shipping Company;
- M Leasing LLC;
- Marine Trans Shipping LLC, and,
- Nord Project LLC Transport Company.
OFAC designated the shipping companies (and a specific list of vessels that they own) at the direction of the State Department.
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.
Simultaneously with the above designations, OFAC also issued General License 33, which authorizes the wind down of operations or existing contracts involving the above television stations (and those captured by OFAC’s 50% rule) until June 7, 2022.