The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in coordination with the United Kingdom, issued two new prohibitions Friday, April 12, 2024, concerning the importation and trading of certain Russian-origin metals. These restrictions are intended to disrupt the revenue Russia earns from its exports of aluminum, copper, and nickel in order to fund its war against Ukraine, in line with G7 efforts to reduce Russia’s revenues from metals.
To implement these policies, OFAC issued the following determinations:
- Prohibitions Related to Imports of Aluminum, Copper, and Nickel of Russian Federation Origin (“Metals Import Determination”): Issued under Executive Order (E.O.) 14068 of March 11, 2022 (“Prohibiting Certain Imports, Exports, and New Investment With Respect to Continued Russian Federation Aggression”), the Metals Import Determination prohibits the importation and entry into the United States, including importation for admission into a foreign trade zone (FTZ) located in the United States, of aluminum, copper, and nickel of Russian origin made on or after April 13, 2024. Russian-origin aluminum, copper, and nickel produced prior to April 13, 2024, is excluded.
- Prohibitions on Certain Services for the Acquisition of Aluminum, Copper, or Nickel of Russian Federation Origin (“Metals Services Determination”): Issued under E.O. 14071 of April 6, 2022 (“Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression”), the Metals Services Determination prohibits the exportation, reexportation, sale, or supply to any person in Russia of (1) warranting services for Russian-origin aluminum, copper, or nickel on a global metal exchange and (2) services to acquire Russian-origin aluminum, copper, or nickel as part of physical settlement of a derivative contract (collectively, “Covered Metals Acquisition Services”). As a result, the provision of any of the Covered Metals Acquisition Services to any person located in Russia from the United States or by a U.S. person is prohibited. Covered Metals Acquisition Services related to aluminum, copper, or nickel produced prior to April 13, 2024, are excluded.
In the wake of these actions, metal exchanges such as the London Metal Exchange (LME) and Chicago Mercantile Exchange (CME), which play a key role in facilitating the trading of industrial metals around the globe, are prohibited from accepting new aluminum, copper, and nickel produced by Russia, thus depriving Russia and its metal producers of an important source of revenue. On April 13, 2024, the LME issued Notice 24/171, providing in Appendix 1 a list of Russian brands that can still be warranted and traded. The CME on April 14, 2024, issued a Special Executive Report that lists the Russian aluminum brands suspended from approved status for warranting and delivery.
OFAC also released new FAQs that provide additional information concerning these determinations. Notably:
- Market participants and traders may reasonably rely on the Certificate of Analysis and Certificate of Origin of the relevant Russian metal, or other documentation available in the ordinary course of business, with respect to the date of production of said metal to ensure that Covered Metals Acquisition Services only involve metals produced prior to April 13, 2024, which are excluded from the prohibitions of the Metal Services Determination. However, market participants and traders should exercise caution if they have reason to believe that such documentation has been falsified or is otherwise erroneous. FAQ 1169.
- For purposes of the Metals Import Determination and Metals Services Determination, OFAC anticipates publishing regulations defining “copper,” “nickel,” and “aluminum” to include articles or products defined at the headings of Chapters 74, 75, and 76 of the Harmonized Tariff Schedule of the United States. FAQ 1170.
- The Metals Import Determination and Metals Services Determination do not apply to aluminum, copper, or nickel that has been incorporated or substantially transformed into other products outside of Russia. FAQ 1171.
- The Metals Services Determination does not impose new prohibitions on U.S. banks acting as intermediaries for payments related to Russian metals, where the banks are: (1) operating solely as intermediaries and (2) do not have any direct relationship with the person providing a service covered by the Metals Services Determination (e., the person is a non-account party) as it relates to the relevant transaction. However, U.S. banks are not authorized to provide any of the services prohibited by the Metals Services Determination themselves, directly or indirectly, to a person located in Russia with respect to Russian-origin aluminum, copper, or nickel. FAQ 1172.
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OFAC’s actions further expand the reach of Russia-related sanctions. Companies that operate in the industrial metals sector should heighten their due diligence with respect to dealing with Russia and Russian-origin metals. Contact us if you have questions about these new sanctions developments or their potential impact on your business.