Commerce Department Continues to Target Airlines, Entities; OFAC Extends Sanctions to New Parties, Imports of Gold

On June 24, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued Temporary Denial Orders (TDOs) against an additional three Russian airlines: Nordwind Airlines, Pobeda Airlines, and S7 Airlines. BIS cited apparent ongoing violations of the comprehensive export controls imposed on Russia. Under these TDOs, the airlines are banned from participating in transactions subject to the Export Administration Regulations (EAR), including exports from the United States and re-exports from abroad. The TDOs initially run for 180 days but will likely be extended.

The Russian aviation industry continues to be a focus of U.S. export controls. The June 24 actions mean that eight Russian airlines are now under TDOs, following similar actions against Aeroflot, Aviastar, Azur Air, Rossiya, and Utair. More information on TDOs against these airlines is in our June 1, April 27, and April 7 blog posts.

On June 16, BIS issued a TDO to Belarus state-owned airline, Belavia Belarusian Airline (Belavia), citing ongoing violations of the EAR. This is the first BIS action taken against a Belarusian airline. The TDO cuts Belavia off from accessing U.S. goods and services.

Commerce Adds 5 New Aircraft to Its List of Aircraft Operated in Violation of the EAR

On June 10 and 24, BIS updated its growing list of aircraft that have flown into Russia and/or Belarus in apparent violation of the EAR. BIS added four aircraft on June 10 and one on June 24. BIS also clarified existing entries on the list by adding a second tail number for 49 aircraft. BIS did not remove any aircraft from the list. The current list is here.

Commerce Adds 36 Entities across Nine Countries to the Entity List

On June 28, BIS issued a new rule adding 36 entities from China, Lithuania, Pakistan, Russia, Singapore, the United Arab Emirates, the United Kingdom, Uzbekistan, and Vietnam to the Entity List. Commerce noted that the following six entities were designated due to efforts to help Russia elude economic sanctions by back-filling certain contracts and orders:

  • Connec Electronics LTD – listed under China and the United Kingdom.
  • King Pai Technology Co., Ltd – listed under China, Russia, and Vietnam.
  • Sinno Electronics Co., Ltd – listed under China and Lithuania.
  • Winnie Electronic – listed under China.
  • World Jetta (H.K.) Logistics Limited – listed under China.
  • Promcomplektlogistic Private Company – listed under Uzbekistan.

The rule also removed two entities from the Entity List: Nanchang O-Film Tech in China and Mushko Electronics Pvt. Ltd in Pakistan.

BIS, FinCEN Issue Advice on Avoiding Evasion Efforts

On June 28, BIS and the Financial Crimes Enforcement Network (FinCEN), a U.S. Treasury Department agency, issued a joint alert advising financial institutions to be watchful for transactions seeking to avoid U.S. export controls related to Russia and Belarus. Among other things, the alert lists more than 20 compliance red flags indicative of potential evasion.

Treasury Targets Almost 100 Entities

On June 28, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC), took steps to implement its commitments made at the G7 Summit, designating 99 entities and individuals – the majority of which are associated with the Russian defense industrial base. OFAC also prohibited the importation of Russian gold into the United States.

Among the designated entities/individuals are:

  • State Corporation Rostec (Rostec), a holding company with more than 800 entities across a wide range of sectors. All entities that are 50 percent or more owned by Rostec are now blocked even if not identified by OFAC. Rostec is also sanctioned by Australia, Canada, the European Union, New Zealand, Switzerland, and the United Kingdom.
  • Public Joint Stock Company United Aircraft Corporation (UAC), a Rostec subsidiary.
  • KAMAZ Publicly Trade Company, Russia’s largest truck manufacturer.
  • Nefax Publicly Traded Company, a subsidiary of KAMAZ. (See GL 41 below.)
  • Sergei Anatolyevich Kogogin (Kogogin), KAMAZ’s general director, as well as Kogogin’s three other companies.
  • Federal Security Service (FSB), the Russian intelligence agency. (See GL 42 below.)
  • Alexander Aleksandrovich Kokorev, former FSB officer.
  • State Flight Testing Center Named After V.P. Chkalov, the testing center of the Aerospace Forces of Russia.
  • Interregional Social Organization Union of Donbas Volunteers, a “veterans” organization active in supporting Russia’s invasion of Ukraine by providing logistical, reconnaissance and intelligence support.
  • Limited Liability Company RSB-Group, a private military company.
  • Vitaliy Pavlovich Khotsenko, the newly appointed chairperson of the so-called government of the Donetsk People’s Republic (DNR), and six other individuals holding high-level positions in the DNR and the so-called Luhansk People’s Republic.

OFAC Issues Multiple General Licenses

While OFAC continues to expand restrictions on Russian parties and parties deemed to be assisting Russia, the agency also continues to issue or extend general licenses (GLs). In particular, OFAC has recently announced the following:

  • GL 8C – authorizes certain transactions related to energy involving one or more of the following entities: State Corporation Bank for Development and Foreign Economic Affairs, Public Joint Stock Company Bank Financial Corporation Otkritie, Sovcombank Open Joint Stock Company, Public Joint Stock Company Sberbank of Russia, VTB Bank Public Joint Stock Company, Joint Stock Company Alfa-Bank, the Central Bank of Russia. GL 8C supersedes GL 8B and expires on December 5, 2022.
  • GL 39 – authorizes transactions that are ordinarily incident and necessary to the wind-down of transactions involving State Corporation Rostec. GL 39 expires on August 11, 2022. As noted above, OFAC recently designated Rostec as a prohibited party.
  • GL 40 – authorizes transactions that are ordinarily incident and necessary to the provision, exportation, or re-exportation of goods and services to ensure the safety of civil aviation for aircraft registered outside of Russia. There is no expiration date associated with this GL. Note that this GL is limited in application and does not eliminate the need to comply with U.S. export controls
  • GL 41 – authorizes transactions ordinarily incident and necessary to the manufacture, sale and maintenance of agricultural equipment, spare parts, and components produced by Nefaz Publicly Traded Company and Tutaev Motor Plant. GL 41 expires on December 22, 2022.
  • GL 42 – authorizes certain transactions related to licenses, permits, certifications, and notifications issued by the Federal Security Service (FSB) and for the importation, distribution, or use of information technology products in Russia and those transactions necessary to comply with law enforcement, administrative actions or investigations involving the FSB. There is no expiration date associated with this GL.
  • GL 43 – authorizes certain transactions related to the divestment or transfer of debt or equity of Public Joint Stock Company Severstal or Nord Gold PLC. Further, the GL authorizes transactions ordinarily incident and necessary to the wind-down of derivative contracts involving the entities mentioned above. GL 43 expires on August 31, 2022.