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U.S. Export Controls and Sanctions Update: Russia, Belarus and Ukraine

March 15, 2022

Broad U.S. export controls and sanctions recently imposed on Russia, Belarus and specific areas of Ukraine may impact companies with international exposure to these regions, including but not limited to industries such as defense, aerospace, energy and finance. Generally, these U.S. export controls and sanctions:

  1. Impose new export license requirements;
  2. Add parties to export-restrictive export control and sanctions lists of the U.S.; and
  3. Prohibit transactions with certain individuals and entities, including financial institutions.

On February 21, 2022, Russian President Vladimir Putin recognized two regions of Ukraine, Luhansk People’s Republic (LNR) and the Donetsk People’s Republic (DNR), as independent states, indicating Russia would send military forces to the regions for "peacekeeping" operations. In response President Biden issued Executive Order (EO 14065) imposing sanctions on the two regions. EO 14065 further expands the scope of the multiple pre-existing executive orders relating to Russia and Ukraine generally stemming from Russia’s prior invasion of the Crimean Peninsula of Ukraine in 2014.

Subsequently, the Russian Federation Council authorized the use of military force in Luhansk and Donetsk. Then, on February 24, 2022, Vladimir Putin announced a special military operation in Ukraine, instigating the largest military attack on a sovereign state in Europe since World War II. As a result, on March 8, 2022, President Biden further issued Executive Order (EO 14066) prohibiting: (a) U.S. importation of oil, natural gas, and coal of Russian origin, and (b) new investments in the Russian energy sector.

In response to the Russian invasion of Ukraine, the U.S. Bureau of Industry and Security (BIS), one of the primary U.S. agencies charged with administering and enforcing U.S. export controls (U.S. Export Controls) under the Export Administration Regulations (EAR), implemented the following restrictions over the export and reexport of U.S. origin items (which includes U.S. origin equipment, software and technology, as well as foreign-direct products manufactured from U.S.-origin equipment, software and technology):

As to U.S. Export Controls under the EAR, U.S.-origin items subject to the EAR but not listed on the Commerce Control List (i.e., EAR99) may generally be exported or reexported to Russia, so long as those EAR99 items are not exported or reexported to, or generally incorporated into an item destined for, a Russia-Military End User on the Entity List; however, EAR99 items will require an export license in any event for export to Crimea, DNR, and LNR, except for permitted (a) food and medicine designated as EAR99 and (b) software necessary to enable the exchange of personal communications over the internet.

In addition to U.S. Export Controls, the U.S. Office of Foreign Asset Controls (OFAC), which is the U.S. agency charged with administering and enforcing U.S. sanctions (U.S. Sanctions), implemented the following additional U.S. Sanctions respecting transactions involving Russia, Belarus, and Ukraine:

It should be underscored that, as of the release date of this U.S. Export Controls and Sanctions Alert, OFAC has yet to implement a comprehensive Russia Sanctions Program or Belarus Sanctions Program. Rather, OFAC has imposed targeted U.S. Sanctions on select Russian and Belarusian State-Owned Enterprises, industry sectors (i.e., defense, finance, energy), and designated private entities and individuals. Some publicly recognized companies have unilaterally ceased engaging in Russian (and Belarusian) transactions, notwithstanding the fact that current U.S. Sanctions do not prohibit those transactions. Hence, a determination of whether a particular transaction or the parties thereto are subject to U.S. Sanctions must be based upon a specific analysis of all transaction facts relevant to the targeted U.S. Sanctions currently in effect for Russia and Belarus.

In general, parties with business interests in or transactions involving Russia, Ukraine, Belarus and surrounding countries such as Poland are strongly advised to consider:

  1. the dynamically evolving nature of these U.S. Export Controls and U.S. Sanctions;
  2. the complex interplay of the coordinated restrictions between these U.S. Export Control and U.S. Sanction regimes;
  3. the difficulty in assessing and maintaining legal compliance for multi-step international transactions subject to both (i) these U.S. Export Controls and Sanctions, and (ii) the newly emerging foreign laws governing this area; and
  4. the very time-sensitive and transaction-specific nature of whether a proposed international transaction is permitted under these laws.

The Miller Canfield Export Controls and Sanctions Practice Group possesses the depth of knowledge and experience necessary to successfully navigate you and your international transaction through these U.S. responses to the Russian invasion of Ukraine and compliance with these U.S. Export Controls and U.S. Sanctions. Please contact the authors to discuss these matters further.

For a discussion on the recent actions of the U.S. Federal Aviation Administration (FAA) and European Council restricting airspace to Russian flights that were taken in response to the Russian invasion of Ukraine, please see our previous alert.

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