The March 11 Executive Order
On March 11, President Biden signed a new Executive Order ("EO") that expanded existing U.S. sanctions against Russia to, among other things, the import of fish, diamonds and alcohol and the export of luxury goods:
- The EO Bans Import of Fish, Diamonds, Alcohol - and the List May Get Longer: The importation into the United States of the following products of Russian Federation origin is banned: fish, seafood, and preparations thereof; alcoholic beverages; non-industrial diamonds; and any other products of Russian Federation origin as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Commerce;
- The EO Bans Export of Luxury Goods - and the List May Get Longer: The EO bans the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of luxury goods, and any other items as may be determined by the Secretary of Commerce, in consultation with the Secretary of State and the Secretary of Treasury, to any person (regardless of nationality) located in the Russian Federation;
- The EO Bans New Investment in Russia: The EO bans new investment in any sector of the Russian Federation economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, by a United States person, wherever located;
- The EO Bans Export of U.S. Banknotes: The EO bans the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of U.S. dollar-denominated banknotes to the Government of the Russian Federation or any person (regardless of nationality) located in the Russian Federation (see discussion of General Licenses below); and
- The EO Bans U.S. Persons from Facilitating Foreign Transactions with Russia that Could Not be Performed by a U.S. Person or Within the U.S.: The EO prohibits any approval, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by this section if performed by a United States person or within the United States.1
Associated General Licenses Allow Limited Transactions:
Concurrent with publication of the EO, the U.S. Treasury's Office of Foreign Assets Control ("OFAC") issued general licenses ("GL"s) covering the following types of transactions:
- Wind-down transactions involving the
importation of prohibited items:
- GL 17 authorizes transactions which would be prohibited by section 1(a)(i) of the EO (i.e., involving the importation into the United States of fish, seafood and other covered items) until March 25, 2022 (GL 17);
- Dollar transactions for personal use:
- GL 18 authorizes all transactions, with no date limitation, prohibited by section 1(a)(iv) of the EO (i.e., involving the transfer of dollars) that are ordinarily incident and necessary to the transfer of U.S. dollar-denominated banknote noncommercial, personal remittances from (i) the United States or a U.S. person, wherever located, to an individual located in the Russian Federation; or (ii) a U.S. person who is an individual located in the Russian Federation;
- GL 19 authorizes all transactions, with no date limitation, prohibited by section 1(a)(iv) of the EO (i.e., involving the transfer of dollars) that are conducted by U.S. persons located in the Russian Federation and that are ordinarily incident and necessary to their personal maintenance, including the payment of housing expenses, acquisition of goods or services for personal use, payment of taxes or fees, and purchase or receipt of permits, licenses, or public utility services;
- Transactions designed to support Non-Governmental
Organization ("NGO") activities in Donetsk and
Luhansk:
- Ukraine-related General License 23 authorizes transactions designed to support specified activities by NGOs in the so-called Donetsk People's Republic and Luhansk People's Republic regions of Ukraine, including humanitarian, educational, democracy-building and environmental protection projects.2
New FAQs
OFAC also issued new FAQs clarifying the following points:
- GL 17 provides a wind-down period through March 25, 2022 for transactions that are ordinarily incident and necessary to the importation into the United States of items covered by the March 11 EO (FAQ 1,023);
- the March 11 EO allows U.S. persons to sell or re-direct shipments outside the United States that were contracted prior to March 11, 2022 and that were previously destined for the United States (FAQs 1,023 and 1,024);
- noncommercial personal remittances denominated in dollars may be sent to U.S. persons in Russia pursuant to GL 18, which also authorizes withdrawals of U.S. dollars from ATM's and the hand-carrying of U.S. dollars (FAQ 1,028);
- non-U.S. persons are not subject to sanctions for importing items covered by the March 11 EO to jurisdictions outside of the U.S. so long as the transaction does not involve a sanctioned person and is not otherwise prohibited (FAQ 1,026);
- GL 6 of February 24, 2022, which covers the exportation of agricultural commodities, remains valid and authorizes, among other things, transactions ordinarily incident and necessary to the exportation or reexportation of agricultural commodities, as defined in GL6, including products such as fish and seafood to, from, or transiting the Russian Federation -- (provided such transactions are not for the importation of these Russian origin products into the United States, unless otherwise authorized by OFAC.) (FAQ 1,025);
- the sanctions extend to virtual currency and apply regardless of whether a transaction is denominated in traditional fiat currency or virtual currency (FAQs 1,021 and 560).3
Related Developments: new SDNs, WTO, and Russian countermeasures
In related developments:
- OFAC added several individuals and entities to the list of Specially Designated Nationals ("SDN").4 The new SDNs include executives of Russian banks who have been sanctioned and Duma members who sponsored legislation to recognize the so-called "Donetsk Peoples's Republic" and "Luhansk People's Republic."5
- The White House also announced that it plans to "work closely with Congress to deny Russia the benefits of its WTO membership and ensure that Russian imports do not receive most favored nation treatment in our economy."6
- The White House also announced that G7 leaders "will agree to ensure Russia cannot obtain financing from the leading multilateral financial institutions, such as the International Monetary Fund and the World Bank."7
- The Russian Ministry of Economic Development has prepared a bill that, under certain specified conditions, would allow Russian state entities to unilaterally take control of foreign businesses in Russia that have either left Russia or announced an intention to suspend their Russian operations.
- The Russian Government adopted a decree on March 6 denying intellectual property rights and protections to businesses from so-called "unfriendly states" (including the United States). According to our contacts, Russian courts have already begun relying on this decree to reject infringement suits brought by foreign businesses.
What does all this mean?
The U.S. sanctions against Russia are moving with extraordinary speed, and involve an ever-broadening range of transactions, commodities, and persons. As the war in Ukraine intensifies, we can expect more sanctions, more Russian countermeasures, and more U.S. law enforcement investigations of U.S. businesses that interact with Russia or that receive funds from Russian companies or individuals - directly or indirectly. Accordingly, U.S. companies should work in close consultation with qualified legal counsel to carefully scrutinize all of their Russia-related operations (including operations by their foreign branches, and their operations in the former Soviet Union generally) to ensure that they are compliant with all U.S. laws and all applicable foreign laws and to assess the associated current and future legal, business and reputational risks.
Footnotes
1. https://urldefense.com/v3/__https://home.treasury.gov/system/files/126/russia_eo_20220311.pdf__;!!N5JjT8_g!OYggb4AcuE3Hi8x7
8CrTVLOt6dplQrSftFo5q0q02wsFGg92W4nr_duicqUol4BXLw$
[home[.]treasury[.]gov]
2. https://home.treasury.gov/system/files/126/ukraine_gl23.pdf
3. https://urldefense.com/v3/__https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220311__;!!N5JjT8_g!LryBxfMEkAfOpMpdokU0CtI9yQ_lWob9SWJkLKE_ngRBma2gIr1OOxGsvYUSFiT04w$ [home[.]treasury[.]gov]
4. A complete list of the new additions can be found here: https://urldefense.com/v3/__https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220311__;!!N5JjT8_g!MpIxhCpeiJahHDpCBQIG9W7sBUyaVILmW1UU9SxZ-273MxLST5B7ksYIaeBbYyacxQ$ [home[.]treasury[.]gov]
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