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In response to Russia’s invasion of Ukraine, the U.S. government has deployed a whole-of-government approach to impose sanctions and tighter export controls on Russia. This alert summarizes key economic sanctions imposed by the U.S. Department of the Treasury’s Office of Foreign Assets Control (<a href="https://home.treasury.gov/policy-issues/office-of-foreign-assets-control-sanctions-programs-and-information" target="_blank" rel="noreferrer noopener">OFAC</a>). It is not intended to be and is not a comprehensive summary of the economic sanctions implemented as a result of the invasion of Ukraine. Rather, this alert is a tool to help companies, both U.S. and foreign, identify whether doing business with Russia, Belarus, or Ukraine (Covered Regions) is now prohibited due to the wide-ranging economic sanctions, which include import prohibitions, export prohibitions, and designation of hundreds of individuals, entities and vessels as sanctioned or blocked persons.

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OFAC’s economic sanctions generally complement the export, reexport and transfer (in-country) controls imposed by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) on items subject to the Export Administration Regulations (EAR) destined for Russia, Belarus, Ukraine (Covered Regions) or certain individuals and entities. The EAR governs the export, reexport and transfers (in-country) of most items exported from the United States, U.S.-origin items wherever located, and certain foreign-produced goods. For any transaction involving Russia, Belarus or Ukraine (Covered Regions), it is important to review both the OFAC sanctions and the EAR and to conduct screening of participants to determine whether a contemplated transaction is authorized. A summary of the current state of export controls implemented in response to the Russian Federation’s invasion of Ukraine can be found&nbsp;<a href="https://www.bakerlaw.com/insights/current-state-of-u-s-export-controls-in-response-to-the-russian-federations-invasion-of-ukraine-march-2024/" target="_blank" rel="noreferrer noopener">here</a>.

Executive Summary of Changes Since February 22, 2024

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Coinciding with the two-year anniversary of Russia’s “unprovoked and unlawful full-scale invasion of Ukraine” and the untimely death of Aleksey Navalny, effective February 23, 2024, OFAC and its sister agencies imposed further sanctions and export controls on Russia and those that support and assist Russia’s invasion of Ukraine.<a id="_ftnref1" href="#_ftn1">[1]</a> OFAC added more than 500 individuals, entities and vessels to its SDN List. Of the 500 newly designated SDNs, OFAC listed approximately 300 entities and individuals in Russia alongside parties in 11 third countries. Notably, the <a href="https://home.treasury.gov/news/press-releases/jy2117" target="_blank" rel="noreferrer noopener">press release</a> announcing OFAC’s designations stated that they included designations of three Russian government officials in connection with Navalny’s death and designations resulting from Russia’s repression and human rights abuses as well as its aggression against Ukraine. As highlighted below, the designations targeted Russia’s financial services sector; sanctions evasion, circumvention and backfill; the Alabuga UAV procurement network; and Russia’s military industrial base and other sectors of the Russian economy.

Russia’s Financial Services Sector. Effective February 23, Russia’s Mir National Payments Systems, a vital facilitator for financial transactions from and to Russia, became the latest big financial firm sanctioned by OFAC. As detailed in Annex 4 to the press release, 9 Russian banks and 5 investment firms and venture capital funds were designated for having operated in the financial services sector of the Russian economy, while 6 Russia-based fintech companies who support the financial services sector were designated for having operated in the technology sector of the Russian Federation economy.

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Sanctions Evasion, Circumvention and Backfill. The new designations targeted third country entities and individuals that evade and circumvent sanctions or backfill by procuring and transshipping critical technology and equipment to Russia’s military-industrial base. As detailed in Annex 3 to the press release, the new SDNs include Chinese technology suppliers, an EU-based illicit finance network that disguised the origin of Russian precious metals and assisted Russian clients to launder funds, Serbian based technology exporters, a freight forwarder involved in weapons shipments, and third country manufacturing and technology equipment suppliers, and aircraft and truck suppliers.

Alabuga UAV Procurement Network. These designations targeted the Russian defense ministry and various individuals and entities listed in Annex 1 to the press release, including Russia-based Joint Stock Company Special Economic Zone of Industrial Production Alabuga (SEZ Alabuga) and various related individuals, entities and financial facilitators, for allegedly supporting cooperation between Russia and Iran to produce one-way attack UAVs for use by the Russian military in Ukraine.

Russia’s Military Industrial Base and Other Sectors of the Russian Economy. These designations targeted &nbsp;entities and individuals active in Russia’s military-industrial base and the manufacturing, technology, metals and mining, electronics, aerospace, transportation, and engineering sectors of the Russian economy. As detailed in Annex 2 to the press release, those designated included manufacturers of weapons, additives, machine tools and equipment, chemicals, semiconductors, industrial automation, optics, navigational instruments, IT and software, energy storage and power supply, aerospace, logistics, diamonds, and engineering. &nbsp;&nbsp;&nbsp;

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According to OFAC’s press release, the U.S. government has now designated over 4,000 entities and individuals under various Russia-related sanctions authorities, including major institutions and sanctions evaders in Russia, Europe, Central Asia and the Middle East.

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I. Overview of OFAC Economic Sanctions Regulations Relating to Russia

A. Ukraine-/Russia-related Sanctions Regulations

B. Russian Harmful Foreign Activities Sanctions

II. OFAC Restrictions on Doing Business in Ukraine (Covered Regions)

Imposition of embargoes on Crimea and the Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine

III. Import Restrictions on Goods from Russia or of Russian Origin

A. Import Ban on Crude Oil, Petroleum and Related Energy Products

B. Import Ban on Items from Key Sectors (for example, seafood, alcohol and non-industrial diamonds)

IV. Restrictions on the Export of Key Services to Russia by U.S. persons

Export bans on accounting services, trust and corporate formation services, management consulting services, quantum computing, architecture services, and engineering services.

V. Restrictions Regarding Maritime Services in Connection with Russian Crude Oil and Petroleum Products

Summary of restrictions on the provision of certain services related to maritime transport of Russian-origin crude oil and petroleum products:

A. Services Related to Crude Oil Transport

B. Services Related to Petroleum Products Transport

VI. Sanctions Relating to Numerous Russian Economic Sectors

Persons determined to operate or to have operated in numerous sectors of the Russian economy may be sanctioned. The sectors are:

technology, defense and related materials as of April 15, 2021;

financial services as of February 22, 2022;

aerospace industries, electronics and marine as of March 31, 2022;

accounting services, trust and corporate formation services and management consulting services as of May 8, 2022;

quantum computing as of September 15, 2022;

metals and mining as of February 24, 2023; and

architecture, engineering, construction, manufacturing, and transportation as of May 19, 2023.

VII. Restrictions Regarding Financial Institutions, Financial Transactions and Related Transactions with Russia

D. Amended Directive 4 (Prohibited Transactions and Reporting Requirements)

E. Designations of Financial Institutions and Executives and Board Members of Financial Institutions as SDNs

F. Secondary Sanctions Against Foreign Financial Institutions

VIII. Further Specially Designated National and Blocked Person Designations

Additional SDN designations, including oligarchs, Russian elites, TV stations, key industry entities, vessels and aircraft.

IX. Humanitarian-Related Authorizations for Certain Activities In or Involving Russia Sanctions

I. Overview of OFAC Economic Sanctions Relating to Russia

The economic sanctions relating to the Russian invasion of Ukraine are being implemented primarily through two programs: the&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information/ukraine-russia-related-sanctions" target="_blank" rel="noreferrer noopener">Ukraine-/Russia-related Sanctions</a>&nbsp;program and the&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information/russian-harmful-foreign-activities-sanctions" target="_blank" rel="noreferrer noopener">Russian Harmful Foreign Activities Sanctions</a>&nbsp;program. OFAC also maintains sanctions against Russia under the&nbsp;<a href="https://ofac.treasury.gov/sanctions-programs-and-country-information/the-magnitsky-sanctions" target="_blank" rel="noreferrer noopener">Magnitsky Sanctions</a>&nbsp;program and the&nbsp;<a href="https://ofac.treasury.gov/sanctions-programs-and-country-information/countering-americas-adversaries-through-sanctions-act-related-sanctions" target="_blank" rel="noreferrer noopener">Countering America’s Adversaries Through Sanctions Act of 2017</a>, but these programs have not been deployed in response to the 2022 invasion and are not a focus of this summary.

As a general rule, OFAC’s economic sanctions against Russia and Ukraine (Covered Regions) apply to U.S. citizens, wherever located; U.S. permanent residents –&nbsp;i.e., “green card” holders, wherever located; entities formed in the United States, including their foreign branches; and anyone, including entities, located in or otherwise subject to the jurisdiction of the United States regardless of citizenship.

For information on General Licenses that may be applicable to certain of the prohibited activities described below, see&nbsp;<a href="https://ofac.treasury.gov/selected-general-licenses-issued-ofac" target="_blank" rel="noreferrer noopener">OFAC’s Selected General License page</a>, the&nbsp;<a href="https://ofac.treasury.gov/sanctions-programs-and-country-information/ukraine-russia-related-sanctions" target="_blank" rel="noreferrer noopener">Russian Harmful Foreign Activities Sanctions</a>&nbsp;page and the&nbsp;<a href="https://ofac.treasury.gov/sanctions-programs-and-country-information/ukraine-russia-related-sanctions" target="_blank" rel="noreferrer noopener">Ukraine-/Russia-related Sanctions</a>&nbsp;page.&nbsp;

A. Ukraine-/Russia-related Sanctions

The Ukraine-/Russia-related sanctions include the sanctions that were implemented in March 2014 in response to&nbsp;<a href="https://www.federalregister.gov/documents/2014/03/10/2014-05323/blocking-property-of-certain-persons-contributing-to-the-situation-in-ukraine" target="_blank" rel="noreferrer noopener">Executive Order (EO) 13660</a>, which declared a national emergency to deal with the threat posed by Russia to the security, stability and sovereignty of Ukraine, including the annexation of the Crimea region by Russia. In addition to the restrictions promulgated in EO 13660, these sanctions implement the restrictions imposed by three subsequent 2014 executive orders:&nbsp;<a href="https://www.federalregister.gov/documents/2014/03/19/2014-06141/blocking-property-of-additional-persons-contributing-to-the-situation-in-ukraine" target="_blank" rel="noreferrer noopener">EO 13661</a>&nbsp;(March 16, 2014),&nbsp;<a href="https://www.govinfo.gov/content/pkg/FR-2014-03-24/pdf/2014-06612.pdf" target="_blank" rel="noreferrer noopener">EO 13662</a>&nbsp;(March 20, 2014) and&nbsp;<a href="https://www.federalregister.gov/documents/2014/12/24/2014-30323/blocking-property-of-certain-persons-and-prohibiting-certain-transactions-with-respect-to-the-crimea" target="_blank" rel="noreferrer noopener">EO 13685</a>&nbsp;(December 19, 2014). As discussed in Part II below, this program also includes the first EO addressing the 2022 invasion (<a href="https://www.federalregister.gov/documents/2022/02/23/2022-04020/blocking-property-of-certain-persons-and-prohibiting-certain-transactions-with-respect-to-continued" target="_blank" rel="noreferrer noopener">EO 14065</a>) as well as the Ukraine-/Russia-related Sanctions Regulations, which are codified at&nbsp;<a href="https://www.ecfr.gov/current/title-31/subtitle-B/chapter-V/part-589?toc=1" target="_blank" rel="noreferrer noopener">31 C.F.R. Part 589</a>, and&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information/ukraine-russia-related-sanctions" target="_blank" rel="noreferrer noopener">general licenses</a>&nbsp;that have been issued authorizing certain transactions that would be prohibited under these sanctions (many of which are time-limited) as well as numerous FAQs and other guidance.

Select provisions of the Ukraine-/Russia-related Sanctions are outlined in Section II below. For more information on Ukraine-Related Sanctions, see&nbsp;<a href="https://ofac.treasury.gov/sanctions-programs-and-country-information/ukraine-russia-related-sanctions" target="_blank" rel="noreferrer noopener">OFAC’s page on the Ukraine-/Russia-related Sanctions</a>,&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220429" target="_blank" rel="noreferrer noopener">Amendment to the Ukraine-Related Sanctions Regulations and Associated Administrative List Updates</a>&nbsp;and OFAC’s&nbsp;<a href="https://ofac.treasury.gov/faqs/topic/1576" target="_blank" rel="noreferrer noopener">FAQs</a>&nbsp;on the sanctions applicable to Ukraine (Covered Regions).

B. Russian Harmful Foreign Activities Sanctions

The Russian Harmful Foreign Activities Sanctions program began in 2021 with the issuance of&nbsp;<a href="https://ofac.treasury.gov/media/57936/download?inline" target="_blank" rel="noreferrer noopener">EO 14024</a>, and the Russian Harmful Foreign Activities Sanctions Regulations (<a href="https://www.ecfr.gov/current/title-31/subtitle-B/chapter-V/part-587" target="_blank" rel="noreferrer noopener">RuHSR</a>) were issued in May 2022. The&nbsp;<a href="https://www.ecfr.gov/current/title-31/subtitle-B/chapter-V/part-587" target="_blank" rel="noreferrer noopener">RuHSR</a>, which are codified at 31 C.F.R. Part 587, implement the restrictions imposed by EO 14024 and any legal prohibitions or restrictions in executive orders issued pursuant to the national emergency declared in EO 14024. In EO 14024, the president declared an unusual and extraordinary threat to the national security, foreign policy and economy of the United States due to the Russian government’s efforts to undermine the democracy of the United States and its allies and partners, Russia’s “malicious cyber-enabled activities against the United States and its allies and partners,” and Russia’s violations of “well-established principles of international law.”

To supplement the RuHSR, OFAC issued&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information/russian-harmful-foreign-activities-sanctions" target="_blank" rel="noreferrer noopener">four directives</a>&nbsp;in 2022 that imposed additional restrictions regarding financial transactions relating to Russia (see Section VII below). As discussed below, an&nbsp;<a href="https://ofac.treasury.gov/media/918806/download?inline" target="_blank" rel="noreferrer noopener">amended Directive 4</a>&nbsp;was issued by OFAC on May 19, 2023. Under this program, OFAC also issued three additional executive orders in 2022 (discussed in Sections III and VI below) as well as numerous general licenses, FAQs and other guidance. As of March 6, 2024, there are&nbsp;<a href="https://ofac.treasury.gov/sanctions-programs-and-country-information/russian-harmful-foreign-activities-sanctions" target="_blank" rel="noreferrer noopener">57 active general licenses</a>&nbsp;under the RuHSR program, including authorizations for&nbsp;the offloading of cargo; <a href="https://ofac.treasury.gov/media/932601/download?inline" target="_blank" rel="noreferrer noopener">safety and environmental transactions</a>;&nbsp;<a href="https://ofac.treasury.gov/media/930431/download?inline" target="_blank" rel="noreferrer noopener">agricultural commodities and medicine</a>;&nbsp;<a href="https://ofac.treasury.gov/media/924326/download?inline" target="_blank" rel="noreferrer noopener">telecommunications</a>;&nbsp;<a href="https://ofac.treasury.gov/media/922211/download?inline" target="_blank" rel="noreferrer noopener">activities by nongovernmental organizations</a>;&nbsp;<a href="https://ofac.treasury.gov/media/922841/download?inline" target="_blank" rel="noreferrer noopener">overflight payments, emergency landings and air ambulance services</a>;&nbsp;<a href="https://ofac.treasury.gov/media/931016/download?inline" target="_blank" rel="noreferrer noopener">certain emergency vessel repairs or salvage operations</a>;&nbsp;<a href="https://ofac.treasury.gov/media/929386/download?inline" target="_blank" rel="noreferrer noopener">civil aviation safety</a>;&nbsp;<a href="https://ofac.treasury.gov/media/923976/download?inline" target="_blank" rel="noreferrer noopener">certain transactions involving Russia’s Federal Security Service</a>;&nbsp;<a href="https://ofac.treasury.gov/media/931011/download?inline" target="_blank" rel="noreferrer noopener">certain energy transactions related to the importation of Russian crude oil into Bulgaria, Croatia and certain landlocked EU member states</a>; and other support to people impacted by Russia’s further invasion of Ukraine.

Select provisions of the RuHSR program are outlined below. For more information on the program, see OFAC’s&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information/russian-harmful-foreign-activities-sanctions" target="_blank" rel="noreferrer noopener">Russian Harmful Foreign Activities Sanctions page</a>&nbsp;and&nbsp;<a href="https://ofac.treasury.gov/faqs/topic/6626" target="_blank" rel="noreferrer noopener">OFAC’s Russian Harmful Foreign Activities Sanctions FAQ page.</a>

II. OFAC Restrictions on Doing Business in Ukraine

As a result of the February 2022 invasion of Ukraine and Russia gaining control of the Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine (DNR and LNR regions, respectively), the United States imposed an embargo on the two regions. Specifically, on Monday, February 21, 2022, the president issued&nbsp;<a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2022/02/21/executive-order-on-blocking-property-of-certain-persons-and-prohibiting-certain-transactions-with-respect-to-continued-russian-efforts-to-undermine-the-sovereignty-and-territorial-integrity-of-ukraine/" target="_blank" rel="noreferrer noopener">EO 14065</a>, prohibiting “United States persons” from engaging in new investment in the DNR and LNR regions as well as engaging in trade – including the export, import, reexport, and sale or supply of goods, services or technology – with the DNR and LNR regions. The comprehensive embargo on transactions with the two regions mirrors the 2014 sanctions prohibiting transactions with the Crimea region of Ukraine.

These embargoes mean that exports of all U.S.-origin items (other than food and medicine designated as EAR99 and certain software and Internet-based personal communications) to Crimea or the DNR or LNR regions require a license. Also, U.S. persons, wherever located, are prohibited from approving, financing, facilitating or guaranteeing transactions by foreign persons that cannot be performed by U.S. persons because of the embargoes. Licenses from both BIS and OFAC may be needed for any export, reexport or transfer (in-country) and related transactions involving Crimea or the LNR or DNR regions.

Under the Ukraine-/Russia-Relation Sanctions program, OFAC has issued&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information/ukraine-russia-related-sanctions" target="_blank" rel="noreferrer noopener">general licenses</a>&nbsp;authorizing certain transactions with the DNR and LNR regions, mainly for humanitarian reasons, that would have otherwise been prohibited under the EO. For example,&nbsp;<a href="https://ofac.treasury.gov/media/918686/download?inline" target="_blank" rel="noreferrer noopener">General License 18</a>&nbsp;authorizes the “exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices” as well as “the prevention, diagnosis, or treatment of COVID-19.”&nbsp;<a href="https://ofac.treasury.gov/media/918696/download?inline" target="_blank" rel="noreferrer noopener">General License 20</a>&nbsp;authorizes transactions “for the conduct of the official business of certain international organizations and entities.” The Ukraine-Related Sanctions Regulations provide similar general licenses related to Crimea. In addition, under the Russian Harmful Foreign Activities Sanctions program, OFAC has issued&nbsp;<a href="https://ofac.treasury.gov/media/922211/download?inline" target="_blank" rel="noreferrer noopener">General License 27</a>&nbsp;authorizing certain humanitarian and democracy-building efforts by non-governmental organizations in Ukraine otherwise prohibited by those sanctions.

For further information, see&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220221_33" target="_blank" rel="noreferrer noopener">February 21, 2022 Issuance of Executive Order Blocking Property Of Certain Persons And Prohibiting Certain Transactions With Respect To Continued Russian Efforts To Undermine The Sovereignty And Territorial Integrity Of Ukraine</a>;&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220221_33" target="_blank" rel="noreferrer noopener">Issuance of Ukraine-related General Licenses</a>;&nbsp;<a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/21/fact-sheet-executive-order-to-impose-costs-for-president-putins-action-to-recognize-so-called-donetsk-and-luhansk-peoples-republics/" target="_blank" rel="noreferrer noopener">White House Fact Sheet</a>; and&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/faqs/1007" target="_blank" rel="noreferrer noopener">FAQ 1007</a>.

A number of import restrictions have been imposed on goods from the Russian Federation or goods that are of Russian origin. These restrictions include an import ban on crude oil, petroleum, energy products and gold, as well as a ban on certain items from key Russian sectors, including fish, seafood, and preparations thereof; alcoholic beverages; certain non-industrial diamonds; and diamond jewelry.

A. Import Ban on Crude Oil, Petroleum and Related Energy Products

Since March 8, 2022, pursuant to&nbsp;<a href="https://www.federalregister.gov/documents/2022/03/10/2022-05232/prohibiting-certain-imports-and-new-investments-with-respect-to-continued-russian-federation-efforts" target="_blank" rel="noreferrer noopener">EO 14066</a>, imports into the United States of Russian Federation-origin crude oil; petroleum; petroleum fuels, oils and products of their distillation; liquefied natural gas; coal; and coal products have been prohibited.

B. Import Ban on Items from Key Sectors

Since March 11, 2022, pursuant to&nbsp;<a href="https://ofac.treasury.gov/media/919281/download?inline" target="_blank" rel="noreferrer noopener">EO 14068</a>, imports of Russian Federation-origin goods from several notable sectors of the Russian economy, including fish, seafood and preparations, alcoholic beverages and non-industrial diamonds, also have been prohibited.

The import ban imposed by EO 14068 was expanded in three key ways pursuant to&nbsp;<a href="https://www.federalregister.gov/documents/2023/12/26/2023-28662/taking-additional-steps-with-respect-to-the-russian-federations-harmful-activities" target="_blank" rel="noreferrer noopener">EO 14114</a>, issued on December 22, 2023.

First, whereas prior to December 22, 2023, only “importation” was banned, the prohibition now extends to “the importation and entry into the United States, including importation for admission into a foreign trade zone located in the United States” (but see comments in Section III.C, below).

Second, the revised executive order, together with the&nbsp;<a href="https://ofac.treasury.gov/media/932451/download?inline" target="_blank" rel="noreferrer noopener">Determination Pursuant to Section 1(a)(i)(B) of Executive Order 14068, issued on December 22, 2023</a>, extended the import ban to “products . . . that were mined, extracted, produced, or manufactured wholly or in part in the Russian Federation or harvested in waters under the jurisdiction of the Russian Federation or by Russia-flagged vessels,&nbsp;notwithstanding whether such products have been incorporated or substantially transformed into other products outside of the Russian Federation: fish, seafood, and preparations thereof; diamonds and any other such products.” Pursuant to this authority, salmon, cod, pollock and crab that are incorporated in or substantially transformed into other products outside of Russia are subject to the import prohibition. On February 20, 2024, OFAC extended&nbsp;<a href="https://ofac.treasury.gov/media/932471/download?inline" target="_blank" rel="noreferrer noopener">GL 83</a>&nbsp;through issuance of GL83A&nbsp;to permit importation of such seafood derivatives through May 31, 2024, provided that the importation is pursuant to written contracts or agreements entered into prior to December 22, 2023.&nbsp;<a href="https://ofac.treasury.gov/faqs/1157" target="_blank" rel="noreferrer noopener">FAQ 1157</a>, as amended on January 18, 2024, states that OFAC intends to publish regulations defining salmon, cod, pollack and crab as articles falling under the Harmonized Tariff Codes specified in the FAQ.

Finally, revised EO 14068, in a new section 1(e), defined the previously undefined term “diamond” to include “any diamonds classifiable under subheadings 7102.10, 7102.31, and 7102.39 of the Harmonized Tariff Schedule of the United States” as well as subheadings specified in determinations made pursuant to the executive order.

The definition paved the way for two new determinations issued on February 8, 2024. The&nbsp;<a href="https://ofac.treasury.gov/media/932606/download?inline" target="_blank" rel="noreferrer noopener">first determination</a>&nbsp;expanded the import ban to include diamond jewelry and unsorted diamonds, whether of Russian origin or exported from Russia, effective March 1, 2024. The&nbsp;<a href="https://ofac.treasury.gov/media/932611/download?inline" target="_blank" rel="noreferrer noopener">second determination</a>&nbsp;banned importation of non-industrial diamonds mined, extracted, produced, or manufactured wholly or in part in Russia – effective March 1, 2024, for such diamonds with a weight of 1.0 carat or greater; and, effective September 1, 2024, non-industrial diamonds with a weight of 0.5 carats or greater. In both cases, the ban will apply&nbsp;notwithstanding whether such diamonds have been incorporated or substantially transformed into other products outside of the Russian Federation. On February 23, 2024, OFAC issued <a href="https://ofac.treasury.gov/faqs/topic/6626">FAQs 1164 – 1166</a> which provided further guidance on the diamond import bans.

Based on FAQs&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/faqs/1016" target="_blank" rel="noreferrer noopener">1016</a>,&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/faqs/1024" target="_blank" rel="noreferrer noopener">1024</a>&nbsp;and&nbsp;<a href="https://ofac.treasury.gov/faqs/1156" target="_blank" rel="noreferrer noopener">1156</a>, the import bans do not extend to U.S. persons engaging in transactions to sell or redirect shipments of goods covered by the import ban outside the United States that were previously destined for the United States.

Although OFAC has not issued clear guidance on how theories of incorporation or substantial transformation may impact the ban on importation of goods of Russian Federation origin into the United States, the December 22, 2023, and February 8, 2024, developments appear to clarify that the import ban only applies to items that have been incorporated or substantially transformed into a foreign-made product when an OFAC determination has been issued to that effect, i.e., currently, salmon, cod, pollock and crab; effective March 1, 2024, diamond jewelry, unsorted diamonds, and non-industrial diamonds with a weight of 1.0 carat or greater; and, effective September 1, 2024, non-industrial diamonds with a weight of 0.5 carats or greater.

Finally, previously issued FAQ 1019 defines “Russian Federation origin” to include “goods produced, manufactured, extracted, or processed in the Russian Federation, excluding any Russian Federation origin good that has been incorporated or substantially transformed into a foreign-made product.” Country-of-origin determinations are the purview of U.S. Customs and Border Protection regulations and guidelines, which, in the absence of a relevant determination, may offer some additional guidance for the purposes of OFAC’s ban on importation of Russian Federation-origin goods.

For more information on the sector-based import ban, see the&nbsp;<a href="https://ofac.treasury.gov/faqs/topic/6626" target="_blank" rel="noreferrer noopener">OFAC FAQs</a>.

Since&nbsp;<a href="https://home.treasury.gov/news/press-releases/jy0838" target="_blank" rel="noreferrer noopener">June 28, 2022</a>, pursuant to a determination issued under EO 14068 section 1(a)(i)(A) and&nbsp;<a href="https://ofac.treasury.gov/media/923986/download?inline" target="_blank" rel="noreferrer noopener">updated on December 22, 2023</a>, imports of newly mined or refined gold of Russian origin have been prohibited unless licensed or otherwise authorized by OFAC. However, the ban does not apply to gold of Russian origin that was located outside the Russian Federation prior to June 28, 2022. Although the updated December 22, 2023, determination states that the amended determination “reflects technical, non-substantive changes,” it seems to retroactively prohibit not only importation but “the importation and entry into the United States, including importation for admission into a foreign trade zone located in the United States.” This suggests that OFAC may view the additional language in the amended executive order as a clarification that is not intended to change the scope of the ban.

IV. Restrictions Imposed on the Export of Services to Russia

On May 8, 2022, pursuant to&nbsp;<a href="https://ofac.treasury.gov/media/922081/download?inline" target="_blank" rel="noreferrer noopener">EO 14071</a>, OFAC issued a&nbsp;<a href="https://ofac.treasury.gov/media/922956/download?inline" target="_blank" rel="noreferrer noopener">determination</a>&nbsp;that prohibited the export of certain professional services to Russia by U.S. persons. At that time, the scope of the prohibition covered accounting, trust and corporate formation and management consulting services, and the prohibitions took effect on June 7, 2022.

On September 15, 2022, also pursuant to EO 14071, OFAC issued&nbsp;<a href="https://ofac.treasury.gov/media/926591/download?inline" target="_blank" rel="noreferrer noopener">a second determination</a>&nbsp;prohibiting the provision of professional services related to quantum computing. On May 19, 2023, again, pursuant to EO 14071, OFAC issued a&nbsp;<a href="https://ofac.treasury.gov/media/931776/download?inline" target="_blank" rel="noreferrer noopener">third determination</a>&nbsp;related to services that prohibit the provision of professional services related to architecture and engineering to Russia by U.S. persons effective as of June 18, 2023. Note, however, that these prohibitions do not apply to services provided to entities in Russia that are owned or controlled by a U.S. person or to services provided in connection with the winding down or divestiture of an entity located in Russia that is not owned or controlled by a Russian person.

OFAC has&nbsp;<a href="https://ofac.treasury.gov/faqs/1034" target="_blank" rel="noreferrer noopener">broadly defined</a>&nbsp;the scope of all prohibited services as follows:

Accounting services&nbsp;include “services related to the measurement, processing, and transfer of financial data about economic entities.”

Trust and corporate formation services&nbsp;include “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.”

Management consulting services&nbsp;include “services related to strategic advice; organizational and systems planning, evaluation, and selection; marketing objectives and policies; mergers, acquisitions, and organizational structure; staff augmentation and human resources policies and practices; and brand management.”

Quantum computing&nbsp;includes “any of the following services when related to quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing: infrastructure, web hosting, or data processing services; custom computer programming services; computer systems integration design services; computer systems and data processing facilities management services; computing infrastructure, data processing services, web hosting services, and related services; repairing computer, computer peripherals, or communication equipment; other computer-related services; as well as services related to the exportation, reexportation, sale, or supply, directly or indirectly, of quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing to any person located in the Russian Federation.”

Architecture services&nbsp;includes “advisory services; pre-design services; design services, including schematic design, design development, and final design; contract administration services; combined architectural design and contract administration services; including post-construction services; and all other services requiring the expertise of architects.” The prohibition applies irrespective of focus (e.g., residential, institutional,&nbsp;etc.) and also extends to urban planning services and landscape architectural services.

Engineering Services&nbsp;includes “assistance, advisory, consultative, design, and recommendation services concerning engineering matters or during any phase of an engineering project; geotechnical, groundwater, and corrosion engineering services; integrated engineering services, such as those for transportation infrastructure or other projects; engineering-related scientific and technical consulting services, including geological, geophysical, geochemical, surface or subsurface surveying, and map making services; testing and analysis services of chemical, biological, and physical properties of materials or of integrated mechanical and electrical systems; and technical inspection services.” Note, however, that consistent with the price cap policy for crude oil and petroleum products discussed in Section V below, the term “engineering services” does not include maritime classification services.

In numerous&nbsp;<a href="https://ofac.treasury.gov/faqs/topic/6626" target="_blank" rel="noreferrer noopener">FAQs</a>, OFAC has provided additional guidance regarding the ban on the provision of services noted above. See&nbsp;<a href="https://ofac.treasury.gov/faqs/1128" target="_blank" rel="noreferrer noopener">OFAC FAQ 1128</a>&nbsp;for the complete May 19, 2023 designated sanctionable services definitions.&nbsp;

A. Services Related to Crude Oil Transport

On November 21, 2022, OFAC issued a&nbsp;<a href="https://ofac.treasury.gov/media/929501/download?inline" target="_blank" rel="noreferrer noopener">determination</a>&nbsp;pursuant to EO 14071 – the Prohibitions on Certain Services as They Relate to the Maritime Transport of Crude Oil of Russian Federation Origin – restricting maritime services in connection with the maritime transport of Russian crude oil. A&nbsp;<a href="https://ofac.treasury.gov/media/929776/download?inline" target="_blank" rel="noreferrer noopener">second determination</a>&nbsp;– Price Cap on Crude Oil of Russian Federation Origin – was issued on December 5, 2022, implementing the $60-per-barrel price cap agreed to by allied and participating nations, including the United States, the 27 member states of the European Union and the members of the G7. Under the determinations, U.S. persons are prohibited from providing a wide range of services, including trading/commodities brokering, financing, shipping, insuring (including reinsurance and protection and indemnity), flagging and rendering customs brokering services (“covered services”) related to the maritime transport of Russian crude oil that is priced above the $60 price cap.

The ban on covered services does not apply to services related to maritime transport of Russian crude oil priced at or below the price cap. The price cap excludes the cost of shipping, freight, customs and insurance, provided they are invoiced separately at commercially reasonable rates. There are also certain&nbsp;de minimis&nbsp;exceptions, and the price cap does not apply when crude oil is substantially transformed (when the crude oil loses its identity and is transformed into a new product with a change in name, character and use) in a jurisdiction other than Russia or has cleared another jurisdiction’s customs for onshore sale. OFAC does not consider certain blending activities alone to be substantial transformation of crude oil.

In addition, in some instances, the price cap will apply beyond the first point of sale:

If the Russian crude oil is imported into a country other than Russia, has cleared customs and is then exported back to Russia via maritime transport without undergoing a substantial transformation, the price cap still applies.

If the Russian crude oil is sold at sea, the price cap will still apply to the sale and transfer until it clears customs into a jurisdiction other than Russia.

On February 3, 2023, and again on December 20, 2023, OFAC issued updated and consolidated guidance (<a href="https://ofac.treasury.gov/media/931036/download?inline" target="_blank" rel="noreferrer noopener">Price Cap Guidance</a>) covering the price cap on both crude oil and petroleum products as well as the covered services prohibitions. The consolidated guidance did not change the price cap on crude oil or the scope of services that constitute covered services. The Price Cap Guidance now includes the crude oil and petroleum products guidance in one document. However, the guidance published by OFAC on November 22, 2022, remains applicable to the assessment of any violations that may have occurred prior to the issuance of the consolidated guidance (see&nbsp;<a href="https://ofac.treasury.gov/recent-actions/20221122" target="_blank" rel="noreferrer noopener">OFAC November 2022 Guidance on Implementation of the Price Cap Policy for Crude Oil of Russian Federation Origin)</a>.

With respect to both crude oil and petroleum products, the scope of covered services prohibited, including key definitions of terms, is as follows:

Trading/Commodities Brokering:&nbsp;Buying, selling or trading commodities and/or brokering the sale, purchase or trade of commodities on behalf of other buyers or sellers.

Financing:&nbsp;A commitment for the provision or disbursement of any debt, equity, funds or economic resources, including grants, loans, guarantees, suretyships, bonds, letters of credit, supplier credits, buyer credits and import or export advances. For the purposes of the determination, the term “financing” does not include the processing or clearing of payments by intermediary banks. [Note: This exclusion is subject to certain conditions as further provided in the guidance.]

Shipping:&nbsp;Owning or operating a ship for the purposes of carrying or delivering cargo and/or freight transportation, chartering or subchartering ships to deliver cargo or transport freight, brokering between shipowners and charterers, and serving as a shipping/vessel agent.

Insurance:&nbsp;The provision of insurance, reinsurance or protection and indemnity (P&amp;I) services; satisfying claims related to underwriting insurance policies that protect policyholders against losses that may occur as a result of property damage or liability; assuming all or part of the risk associated with existing insurance policies originally underwritten by other insurance carriers, including the reinsurance of a non-U.S. insurance carrier by a U.S. person; and liability insurance for maritime liability risk associated with the operations of a vessel, including cargo, hull, vessel, P&amp;I and charterers liability.

Flagging:&nbsp;Registering or maintaining the registration of a vessel with a country’s national registry of vessels. This definition does not include the deflagging of vessels transporting Russian oil sold above the price cap.

Customs Brokering:&nbsp;Assisting importers and exporters in meeting requirements governing imports and exports. This definition does not include legal services or assisting importers and exporters in meeting the requirements of U.S. sanctions.

Per the Price Cap Guidance, covered services do not include medical evacuation or other emergency services for crew members; health, travel or liability insurance for crew members; or classification, inspection, bunkering and pilotage.

Current State of U.S. Economic Sanctions Imposed in Response to Russia’s Invasion of Ukraine – March 7, 2024

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