Civil Law

On March 11, 2022, President Joseph Biden issued an Executive Order (EO) announcing further prohibitions on imports, exports and new investments related to Russia. This announcement was made at the same time that the president and the other G7 leaders of Canada, France, Germany, Italy, Japan and the United Kingdom, as well as the European Union, announced new economic actions which will revoke Russia’s “Most Favored Nation” status (see Update of March 12, 2022) and efforts to deny borrowing privileges from multilateral financial institutions. The EO prohibits the following:

• the importation into the United States of the following Russian products: fish, seafood and preparations thereof; alcoholic beverages; non-industrial diamonds;
• the exportation, reexportation, sale or supply, directly or indirectly, from the United States or by a U.S. person, of luxury goods;
• new investment in any sector of the Russian Federation economy;
• the exportation, reexportation, sale or supply, directly or indirectly, from the United States or by a U.S. person, of U.S. dollar-denominated banknotes to the government of the Russian Federation or any person located in Russia; and
• any approval, financing, facilitation or guarantee by a U.S. person of a transaction by a foreign person where the transaction by that foreign person would be prohibited by the above prohibitions if performed by a U.S. person or within the United States.

The EO authorizes the Departments of Commerce, State and the Treasury to impose additional import and export restrictions as well as new investment bans as may be appropriate. Further, the Department of the Treasury issued initial guidance, in the form of a Frequently Asked Question (FAQ 1,021), on the scope of these sanctions to make clear that all U.S. persons must comply with sanctions regulations “regardless of whether a transaction is denominated in traditional fiat currency or virtual currency.”

Relevant OFAC Actions

To implement aspects of the import prohibitions of the EO, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) released several General Licenses (GL). GL 17 authorizes the import of existing purchases of prohibited Russian products covered by the EO pursuant to written contracts entered into prior to March 11 until March 25, 2022. OFAC also issued Russia-related GL 18 authorizing certain activities regarding U.S. dollar-denominated banknote noncommercial, personal remittances from the United States or a U.S. person to an individual in Russia. GL 19 authorizes individuals who are U.S. persons located in the Russian Federation to engage in all transactions that are ordinarily incident and necessary to their personal maintenance within Russia, including payments such as housing expenses, goods for personal use, payment of taxes or fees, etc.

OFAC has also stated that the EO does not prohibit transactions such as the unwinding of contracts or other business-related activities by U.S. persons to comply with the import ban, nor does it prohibit U.S. persons from engaging in transactions to sell or re-direct shipments outside the United States of prohibited imports previously destined for the United States. New FAQs pertaining to the March 11 EO are available here.

OFAC has designated additional “Russian and Kremlin elites, oligarchs, and Russia’s political and national security leaders who have supported Russian President Vladimir Putin’s” invasion of Ukraine. These persons have been placed on OFAC’s Specially Designated Nationals (SDN) List and include members of the Russian State Duma; another Russian billionaire (and his aircraft and yacht); and VTB Banks’ entire management board. Detailed information on these SDN listings is available here.

Given the recently increased sanctions in the so-called Donetsk People’s Republic (DPR) and the Luhansk People’s Republic (LPR) regions of Ukraine, OFAC has also issued GL 23 authorizing various transactions that are in support of non-governmental organization (NGO) activities in these areas, including support of humanitarian projects and needs.

Relevant BIS Actions

To implement aspects of the export restrictions of the EO, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Rule effective March 11, 2022, amending the Export Administration Regulations (EAR) to restrict the export, reexport, or transfer (in-country) to or within Russia or Belarus of the following categories of “luxury goods”:

1. tobacco and tobacco products;
2. luxury watches;
3. high-end luxury apparel and fashion items, cosmetics, perfumes and designer clothing;
4. various decorative items, such as rugs, fine china and tableware, crystal, works of art, antiques and collectible items;
5. jewelry with pearls, gems, precious and semi-precious stones or precious metals;
6. electronic items such as televisions, video monitors, DVD players, personal digital assistants, music players and computer laptops;
7. luxury transportation items, including yachts, automobiles, racing cars, snowmobiles, motorcycles;
8. certain recreational items, such as musical instruments, recreational sports equipment; and
9. alcoholic beverages including wine, beer, ales, and liquor.

The Final Rule provides a detailed listing of the Schedule B numbers and descriptions from the Bureau of the Census’s Schedule B concordance of exports 2022. Two new license requirements have been implemented to apply these restrictions: one that applies to “luxury goods” subject to the EAR that are destined for Russia or Belarus regardless of end use, and another that applies to such items “that are destined for Russian and Belarusian oligarchs and malign actors, regardless of their geographical location, who have been designated by OFAC under certain Russia- or Ukraine-related Executive orders.” BIS has stated that very few license exceptions will be available for these restrictions (and none will be available for persons designated by OFAC) and that when an export license is required, they will be subject to a “policy of denial.”

While effective as of March 11, 2022, BIS has stated that exports of items impacted by the rules that were en route aboard a carrier to a port of export, reexport, or transfer (in-country) on March 11, 2022, pursuant to actual orders for reexport, or transfer (in-country) to or within a foreign destination, may proceed to that destination under any previous eligibility for a License Exception or reexport or transfer (in-country) without a license (NLR).

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