Posted By Administration,
Thursday, August 14, 2014
Updated: Tuesday, August 12, 2014
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by Melissa A. Miller Proctor, Esq., Sandler, Travis and Rosenberg, P.A.
As reported in previous issues of this newsletter, more sanctions against Russia have been rolled out by the United States and the European Union in response to Russia's continued support of separatists in the Ukraine. The latest news reports indicate that Russia has amassed roughly 20,000 troops on the eastern border with the Ukraine and NATO Secretary-General Anders Rogh Rasmussen has stated that there is a high probability that Russia will soon invade the Ukraine under the pretext of delivering humanitarian aid. Companies operating in the Ukraine and Russia are urged to closely monitor this volatile situation as even more sanctions against Russia are likely to be put into place by the U.S. and EU as tensions continue to rise.
Sanctions were first imposed against certain entities and individuals in the Ukraine and Russia back in March 2014. Since that time, especially in late July and August, the U.S. and the EU ratcheted up their respective sanctions programs. For concerned companies that may be dealing with the Ukraine and Russia, it is important to keep in mind that the current U.S. sanctions against Russia only prohibit:
The EU sanctions against Russia currently restrict only the following:
Dealings with individuals and firms identified on OFAC's SDN Lists and BIS's Entity List
- Dealings in certain loans and equity with designated Russian firms
- Exports, reexports and transfers of items for certain oil exploration or production activities in Russia
For those companies who are keeping a close eye on the developments in the economic sanctions on Russia, the following provides an updated timeline of events:
- Trade in arms and related material with Russia
- Exports of dual-use items for military end-use or end-users in Russia
- Exports of equipment and technology for oil exploration or production activities in Russia
- Dealings in certain loans and equity with Russian financial and energy firms
Companies operating in or dealing with firms in Russia and the Ukraine are urged to continue monitoring the situation closely, and assess how additional sanctions in the future may affect their operations.
- March 5, 2014: EU Council Decision 2014/119/CFSP froze the assets of persons identified as being responsible for the misappropriation of Ukrainian state funds and the commission of human rights violations, prohibited transfers of funds or economic resources to those individuals and initiated travel bans on such persons to the EU.
- March 6, 2014: President Obama issued Executive Order 13660 calling for the freezing of assets of parties undermining democracy in the Ukraine, threatening the sovereignty of the Ukraine, and/or misappropriating Ukrainian assets. Entities found to be providing support to the foregoing, or that are owned or controlled by those entities were also blocked as well. U.S. persons are prohibited from dealing with blocked individuals and entities (e.g., imports, exports, reexports purchases, sales, transportation, brokering, financing, facilitating, guaranteeing, financing, investing, etc.), and blocked parties will also be denied entry into the United States. Blocked parties were added to the Specially Designated Nationals Lists (SDN Lists) administered by the Office of Foreign Assets Control (OFAC).
- March 17, 2014: President Obama issued a second Executive Order (E.O. 13661) which froze the assets of an additional seven (7) Russian officials, as well as firms owned or controlled by the foregoing. Again, those individuals were added to OFAC's SDN Lists.
- March 17, 2014: The EU issued Regulation No. 269/2014, sanctioning 21 persons involved in activities that undermine or threaten the territorial integrity, sovereignty and independence of the Ukraine.
- March 20, 2014: President Obama issued a third Executive Order (E.O. 13662) expanding sanctions targets to include individuals and entities that provide material support to Russian officials. Identified targets were added to OFAC's SDN Lists.
- March 21, 2014: The EU issued Regulation 284/2014, sanctioning additional Russian and Ukrainian government officials. The EU also announced that it would temporarily refrain from assessing customs duties on imports of Ukrainian goods into the EU, while continuing to move forward with formalizing the proposed Free Trade Area between the EU and the Ukraine.
- March 27, 2014: Both the U.S. Commerce Department's Bureau of Industry and Security (BIS) and U.S. State Department's Directorate of Defenses Trade Controls (DDTC) announced a suspension of the processing of license applications for the export and reexport of commercial/dual-use items subject to the Export Administration Regulations (EAR) and defense articles subject to the International Traffic in Arms Regulations (ITAR) to Russia.
- March 27, 2014: The Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 (P.L. 113-095) was enacted by the U.S. Congress. The law mirrors the three E.O.'s described above, but prohibits the Obama Administration from imposing restrictions on the importation of items into the United States from Russia.
- May 8, 2014: OFAC published its new Ukraine-Related Sanctions Regulations which implement the three E.O's identified above. As noted above, the names of individuals and entities identified in all of the E.O.'s are published on the SDN Lists.
- July 16, 2014: OFAC published Directives 1 and 2 pursuant to the mandates of E.O. 13662. These directives prohibit U.S. persons from providing financing or otherwise dealing in new debt of longer than 90 day's maturity or new equity involving certain Russian financial lenders and energy firms. OFAC also created a new Sectoral Sanctions Identification List (SSIL) which identified four financial and energy sector entities, as well as any firm that is 50% or more owned by those firms. Note that these firms are not included on OFAC's SDN Lists, and the Directives do not prohibit or restrict other transactions with SSIL targets, such as normal trade-related activities. The new sanctions are intended to prevent SSIL targets from obtaining new medium and long-term financing from U.S. sources.
- July 22, 2014: The U.S. Commerce Department's BIS added eleven (11) parties to its Entity List. Designation on the Entity List triggers a license requirement for the export, reexport or foreign transfer of items to designated parties. The BIS has also implemented a policy of denying applications for such exports, reexports and foreign transfers.
- July 29, 2014: OFAC added a new Russian entity (OJSC United Shipbuilding Corporation) to the SDN Lists, as well as three new entities to the SSIL as follows: Bank of Moscow; Russian Agricultural Bank; and, VTB Bank OAO.
- July 29, 2014: The BIS announced its new policy of denying exports, reexports or foreign transfers of certain items to Russia that may be used in oil exploration or production activities. OJSC United Shipbuilding Corporation was also added to the Entity List.
- July 31, 2014: The EU issued Council Decision 2014/512/CFSP and Council Regulation 833/2014 restricting dealings in loans and equity with certain Russian financial and energy firms, imposing an arms embargo on the Russian Federation, restricting exports of all dual-use goods and technology intended for a military end-user or military end-use in Russia and restricting exports of certain energy-related equipment and technology to Russia.
- August 1, 2014: The BIS published new Russian Industry Sector Sanctions in the Export Administration Regulations. Licensing requirements are triggered when a U.S. exporter, reexporter or foreign transferor knows (or is informed by the BIS) that its goods or technology will be used in Russia's energy sector for certain oil exploration or production activities. Applications for such licenses will be subject to a policy of denial by the BIS.
Melissa Miller Proctor is a Partner with Sandler, Travis and Rosenberg, P.A., resident in the firm's Arizona office. With significant experience in export controls, customs laws and regulations, and international trade, Melissa works closely with clients to expand their markets while ensuring their regulatory compliance. She may be reached at (480) 305-2110 or via e-mail at firstname.lastname@example.org.
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