U.S. Issues Extensive New Restrictions on Russia

February 25, 2023

As the war in Ukraine entered its second year, the United States on February 24, 2023, announced a wide array of economic sanctions, export controls, and tariffs it is imposing on Russia and countries supporting Russia in its illegal war on Ukraine, including Iran.  These measures, developed in coordination with U.S. allies, seek to degrade Russia’s military capabilities and limit its access to sources of revenue that support those capabilities.  These actions include the following, briefly summarized below.

Implementation of Additional Sanctions Against Russia and Belarus Under the Export Administration Regulations (EAR) and Refinements to Existing Controls

This rule, issued by the Department of Commerce’s Bureau of Industry and Security (BIS), expands and strengthens its existing sanctions again Russia and Belarus. This includes:

  • Expanding the number of items subject to BIS licensing requirements under the Russian and Belarusian industry sector restrictions, adding items to Supplements No. 2 (oil and gas production), No. 4 (commercial and industrial items), and No. 6 (chemical and biological precursors) to Part 746. These items are now identified only by a 6-digit HTS code and description (Schedule B numbers have been removed to align with controls used by U.S. allies); the HTS code, not the description, controls for determining whether a license is required and extends to items classified under the 10-digit or 8-digit HTS code beginning with the HTS 6-digit code.  The scope has also been expanded to include any modified or designed “components,” “parts,” “accessories,” and “attachments” for the items on these lists, regardless their HTS Code or HTS Description.
  • The addition of 276 items to the “Luxury Goods” sanctions that require licenses for export or reexport to or transfers within Russia or Belarus and for designated Russian and Belarusian oligarchs and malign actors worldwide.

Export Control Measures Under the Export Administration Regulations (EAR) To Address Iranian Unmanned Aerial Vehicles (UAVs) and Their Use by the Russian Federation Against Ukraine

In response to Russia obtaining Unmanned Aerial Vehicles (“UAVs,” or drones) from Iran, which have been found in some cases to contain U.S.-branded parts or components, BIS has issued a new rule imposing license requirements for a subset of EAR99 items that are destined to Iran, regardless of whether a U.S. person is involved in the transaction.  These new controls include:

  • The addition of new Supplement No. 7 to Part 746, a list of twelve 6-digit HTS codes identifying items used in Iranian UAVs. These items require a license when destined for Iran, Russia, or Belarus.
  • The creation of a new Iran FDP rule, which established jurisdiction over foreign-produced items that are the direct product of U.S.-origin software or technology classified in Commerce Control List (“CCL”) categories 3, 5 and 7, or are produced by a plant or major component of a plant that is itself a product of such software or technology. The scope of this rule is limited to items identified in new Supplement No. 7 to Part 746, including EAR99 items, and to Category 3, 5, and 7 items.
  • Expanding the license requirements for Iran in Section 746.7 of the EAR to include items in new Supplement No. 7 to Part 746. This amendment also specifies that a BIS license is not required for transactions involving foreign-produced items that would have otherwise met all of the terms and conditions of an Office of Foreign Assets Control (“OFAC”) general license.
  • The expansion of the Russia/Belarus Foreign Direct Product (“FDP”) Rule, which includes items in new Supplement No. 7 to Part 746, even if the items (including “parts” and “components”) are EAR99.

Addition of Parties to Restricted Lists

  • BIS issued two rules adding to its Entity List. The first adds 76 entities to the Entity List under the destination of Russia; the second adds 10 entities under 13 entries for destination including Canada (2), China (5), France (1), Luxembourg (1), Netherlands (1), and Russia (3).
  • The Departments of Treasury and State have imposed sanctions on over 200 individuals and entities that have been added to the Specially Designated Nationals (“SDN”) list.

Increased Tariffs on Russian Products

  • President Biden signed a proclamation raising tariffs on more than 100 products from Russia. Tariffs on most metal and metal products increased from 35 to 70 percent, and tariffs on additional Russia products, including chemicals and minerals, increased to 35 percent.  These key commodities are worth about $2.8 billion to Russia.
  • Pursuant to authorities under Section 232, President Biden in a separate proclamation implemented a 200 percent tariff on imports of Russian aluminum and articles that contain aluminum smelted or cast in Russia. This increase goes into effect March 10 for Russian-made aluminum, and on April 10 for articles that contain aluminum smelted or cast in Russia.

The measures summarized above supplement actions taken over the past year by the U.S. government. Companies should carefully review any current or future dealings in Russia, Belarus, and Iran, or with any of the above-listed individuals or entities, to determine if they are engaged in or plan to be engaged in any transactions covered by these or other applicable sanctions and export control programs. Contact us if you have questions about these developments or their potential impact on your business.

Export Controls and Sanctions