On July 8, 2024, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License 40C, “Authorizing Certain Transactions Involving the Exportation or Reexportation of Liquefied Petroleum Gas to Venezuela.” This revised general license continues authorization of all transactions and activities related to the exportation or reexportation, directly or indirectly, of liquefied petroleum (LP) gas to Venezuela, involving: (i) the Government of Venezuela, (ii) Petróleos de Venezuela, S.A. (PdVSA), or (iii) any entity in which PdVSA owns, directly or indirectly, a 50% or greater interest, that are prohibited by E.O. 13850, as amended by E.O. 13857, or E.O. 13884. The general license is effective through July 8, 2025.

OFAC has made clear that for its purposes, the term LP gas means – “a group of hydrocarbon gases, primarily propane, normal butane, and isobutane, derived from crude oil refining or natural gas processing. These gases may be marketed individually or mixed. They can be liquefied through pressurization (without requiring cryogenic refrigeration) for convenience of transportation or storage. The definition excludes ethane and olefins.”

General License 40C does not authorize any payment-in-kind of petroleum or petroleum products, and continues to prohibit any other activities otherwise prohibited by OFAC’s Venezuela Sanctions Regulations. This license replaces and supersedes General License 40B (see Update of July 13, 2023).

Key Notes:

  • The rule would implement Executive Order 14105 of August 9, 2023, “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern.”
  • Treasury has reiterated that any final rule will not prohibit all investment in a country of concern, and that the intent of this process is not to create a case-by-case review of transactions.
  • Treasury’s Office of Investment Security is seeking public comment by August 4, 2024, on the proposed rule. Treasury will consider this further input before issuing the final implementing regulations.

On June 21, 2024, the Department of the Treasury’s (Treasury) Office of Investment Security issued a proposed rule to implement President Joseph Biden’s Executive Order (EO) 14105 of August 9, 2023, “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern.” The proposed rule builds on the Advance Notice of Proposed Rulemaking, also issued in August 2023, that initially set forth proposed regulations prohibiting U.S. investments in certain industry sectors of countries of concern and imposing certain notification requirements. The president’s EO currently identifies only China (and the special administrative regions of Hong Kong and Macau) as a “country of concern.”

View the entire client update in HTML or PDF format.

On June 21, 2024, the Department of the Treasury issued a Notice of Proposed Rulemaking (NPRM), “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern.” The NPRM builds on the Advance Notice of Proposed Rulemaking (ANPRM) issued in August 2023 in response to President Joseph Biden’s Executive Order 14105 prohibiting U.S. investments in certain industry sectors of countries of concern and imposing certain notification requirements. The NPRM currently identifies only China (and the administrative regions of Hong Kong and Macau) as a “country of concern.” For additional details on these earlier actions, see Thompson Hine’s International Trade Update of August 11, 2023. The NPRM sets forth a full draft of the proposed regulations and seeks public comments.

A Treasury Department press release highlights that the United States remains “committed to fostering an open investment environment, and this new program will not change that.” The NPRM “will be a narrow and targeted national security program focused on certain U.S. outbound investments that contribute capital as well as intangible benefits to persons of a country of concern engaged in activities involving certain sensitive technologies and products that could pose risks to U.S. national security.” Specifically, the NPRM provides detail on key concepts and aspects of the program’s implementation, including:

  • Obligations of a U.S. person regarding a covered transaction;
  • Categories of covered transactions and excepted transactions;
  • Technical specifications to inform the scope of covered transactions based on certain technologies and products in the areas of semiconductors and microelectronics, quantum information technologies, and artificial intelligence;
  • Information that a U.S. person is required to provide to Treasury as part of a notification;
  • The knowledge standard and expectations for a U.S. person to conduct a reasonable and diligent inquiry prior to undertaking a transaction; and
  • Conduct that would be treated as a violation of the proposed rule and applicable penalties for such conduct.

Treasury has again stated that the intent of this process is not to create a case-by-case review of transactions. The relevant U.S. person engaged in an outbound transaction covered by the scope of the NPRM would have the obligation to determine whether the given transaction is prohibited, permissible but subject to notification, or not covered by the rule because either it is an excepted transaction or it is not within the jurisdiction set forth under the NPRM. The NPRM also provides for a “national interest exemption” from the notification requirement or prohibition set forth in the NPRM. Written comments on the NPRM may be submitted by August 4, 2024. The NPRM will be followed at a later date by final implementing regulations which will set an effective date for the program.

BIS Prohibition on Kaspersky Products

On June 20, 2024, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Determination that bans a range of transactions involving Kaspersky Lab, Inc. and its related entities’ (Kaspersky) cybersecurity and anti-virus products and services. The Final Determination prohibits Kaspersky from engaging in certain Information and Communications Technology and Services (ICTS) transactions in the United States or with U.S. persons. A non-exhaustive list of products and services covered by the Final Determination is available here. It outlines specific prohibitions that take effect at different times. Here is what U.S. businesses need to know:

  • From July 20, 2024: Kaspersky is prohibited from entering into any new agreement with U.S. persons involving one or more ICTS transactions identified in the Final Determination.
  • From September 29, 2024: Kaspersky is barred from providing any updates associated with the ICTS transactions; and operating the Kaspersky Security Network (KSN) in the U.S. or for U.S. persons. The following activities are prohibited:
    • Reselling Kaspersky cybersecurity or anti-virus software;
    • Integrating Kaspersky cybersecurity or anti-virus software into other products and services; and
    • Licensing Kaspersky cybersecurity or anti-virus software for purposes of resale or integration into other products or services.

The implications of this Final Determination are far-reaching for U.S. persons and businesses that currently rely on Kaspersky’s products and services for cybersecurity protection. The prohibition requires the cessation of use and disengagement from Kaspersky’s products and the search for alternative solutions to ensure continued protection against cyber threats. BIS provides a window for transition, but it is imperative for those affected to act promptly to comply with the new regulations.

See more details on BIS website here.

BIS Adds Kaspersky Companies to Entity List

On June 20, 2024, BIS announced new export restrictions on three entities linked to Russian cybersecurity company Kaspersky, the final rule for which goes into effect on June 24, 2024. The entities are:

  • AO Kaspersky Lab, located in Russia;
  • OOO Kaspersky Group, located in Russia; and
  • Kaspersky Labs Limited, located in the United Kingdom.

The Entity List identifies entities that are subject to additional license requirements and limits the availability of most license exceptions for exports, reexports, and transfers (in-country) of items subject to the Export Administration Regulations (EAR). For the three entities added by this rule, a license is required for all items subject to the EAR, and the license applications will be reviewed under a presumption of denial.

The addition of the three Kaspersky entities to the Entity List is a significant development for U.S. exporters and other parties that deal with items subject to the EAR. Businesses will need to ensure that they comply with the new license requirements and review their transactions and relationships with these entities.

OFAC Designations

On June 21, 2024, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated 12 individuals in executive and senior leadership roles at AO Kaspersky Lab. All the individuals were designated pursuant to E.O. 14024 for operating in the technology sector of the Russian Federation economy.

As a result, all property and interests in property of the designated persons that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50% or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.

Key Notes:

  • New sanctions and export controls on Russia and Belarus became effective June 12, 2024.
  • New OFAC prohibition on certain IT and software services to Russia begins September 12, 2024.
  • Hundreds of individuals and entities designated as SDNs for supporting Russia’s war efforts.
  • New license requirements for certain software exports to Russia and Belarus become effective September 16, 2024.
  • BIS narrows License Exception Consumer Communications Devices (CCD) for Russia and Belarus.
  • BIS adds high-risk addresses and more entities to Entity List, enhancing screening and export control evasion prevention.
  • Over 500 HTS codes added to license requirement lists for Russia and Belarus.

On June 12, 2024, the Office of Foreign Assets Control (OFAC) and the Bureau of Industry and Security (BIS) announced new sanctions and export control restrictions on Russia and Belarus. These measures have significant implications for companies that do business with or in these regions, as they may face new licensing requirements, limitations, or prohibitions on their transactions and operations.

View the entire client update in HTML or PDF format.

On June 12, 2024, the Office of Foreign Assets Control (OFAC) and the Bureau of Industry and Security (BIS) announced new sanctions and export control restrictions on Russia and Belarus. These measures have significant implications for companies that do business with or in these regions, as they may face new licensing requirements, limitations, or prohibitions on their transactions and operations.

OFAC Sanctions

OFAC announced new sanctions to increase pressure on Russia over its war against Ukraine. These measures include the following:

  • Broader Secondary Sanctions: Foreign financial institutions face greater risk of secondary sanctions, as OFAC has broadened the definition of Russia’s military-industrial base to include all persons blocked pursuant to Executive Order (E.O.) 14024. This means that foreign financial institutions risk being sanctioned for conducting or facilitating significant transactions, or providing any service, involving any person blocked pursuant to E.O. 14024. OFAC has also updated the Specially Designated Nationals and Blocked Persons List (SDN List) for five sanctioned Russian financial institutions to include the addresses and aliases of their foreign locations to help clarify the sanctions risk for foreign financial institutions.
  • Software and IT-Related Services: OFAC restricted access to certain software and IT-related services. To implement this, OFAC has issued a new determination under E.O. 14071, which prohibits providing to any person in Russia (1) IT consultancy and design services; and (2) IT support services and cloud-based services for enterprise management software and design and manufacturing software. The determination will take effect on September 12, 2024. This means that starting from that date, U.S. persons will be prohibited from providing these services to Russia. OFAC also issued FAQs Nos. 1184, 1185, 1186, 1187, and 1188 to clarify what activities are considered prohibited.
  • New Designations: OFAC designated as SDNs hundreds of individuals and entities both in Russia and outside its borders. These include:
    • Sanctions Evasion Networks: Russia-based and other foreign persons designated for their roles in complex schemes and supply chains aimed at evading sanctions and supporting Russia’s war efforts.
    • Russia’s War Economy: Russia-based persons within defense, manufacturing, technology, transportation, and financial services sectors for contributing to the country’s war economy.
    • Limiting LNG Revenue: Persons involved in key Russian liquefied natural gas (LNG) projects and related construction and manufacturing, in line with G7 commitments to restrict Russia’s future energy revenues.

BIS Export Control Restrictions

The BIS issued a final rule that imposes additional export control measures against Russia and Belarus under the Export Administration Regulations (EAR) that affect exports, reexports, and transfers (in-country) to or within Russia and Belarus (the document is unpublished in official form; it is scheduled to be published on June 18, 2024 but is effective as of June 12, 2024). The changes include:

  • Software Export Restrictions: BIS is imposing license requirements on the export, reexport, or in-country transfer of certain EAR99-designated “software” and software updates, including enterprise management and design software, to Russia and Belarus.
  • Narrowing License Exceptions: The scope of License Exception Consumer Communications Devices (CCD) has been narrowed, excluding items like lower-level graphics processing units from export to Russia or Belarus. BIS can revoke or suspend license exceptions for entities aiding in export control evasion.
  • Entity List: The BIS is implementing a new regulatory framework to list high-risk addresses on the Entity List, making it difficult for shell companies to engage in unlawful trade. Enhanced screening is now required. As of today, BIS added eight addresses in Hong Kong to the Entity List. In addition, many other entities were added to the Entity List.
  • Expanded List of Goods: BIS added over 500 additional Harmonized Tariff System (HTS) codes to lists of items requiring a license if destined to Russia and Belarus, covering 22 entire chapters of HTS codes. These include certain oil and gas equipment, aerospace and defense products, and chemicals.

In addition to that, BIS has issued two Temporary Denial Orders (TDOs) against Russian procurement networks for exporting aircraft parts to Russia through third countries in violation of U.S. export controls, affecting several companies and individuals involved in hundreds of shipments.

Implications for Companies

These new sanctions and export control restrictions on Russia and Belarus pose significant challenges and risks for companies. Companies should review their existing and potential transactions, contracts, and relationships with persons or entities that may be subject to the new measures, and ensure that they have the necessary licenses, authorizations, or exemptions to comply with the U.S. regulations. Companies should also monitor the developments and updates from OFAC and BIS, as well as consult with legal counsel, to stay alert of the changing regulatory landscape and avoid potential violations or penalties.

On May 31, 2024, the Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS) published a Federal Register notice announcing the seventh phase of the Lacey Act’s import declaration requirement, adding enforcement of Phase VII will begin on December 1, 2024. Known as “the United States’ oldest wildlife protection statute,” the Lacey Act (16 U.S.C. §§ 3371–3378) went into effect in 1900 and prohibits importing, exporting, transporting, selling, receiving, acquiring, or purchasing any illegally taken wildlife, fish, or plant. In 2008, Congress expanded the Lacey Act’s protections, adding, among other amendments, a prohibition to import certain plants, including plant products, without an import declaration. Since 2008, APHIS has phased in what plants and plant products are subject to the import declaration regime, and the newest phase adds all remaining plant products in the Harmonized Tariff Schedule (HTS) that are not 100% composite materials.

As acknowledged by a press release issued by APHIS, Phase VII “includes the broadest range of items” covering a myriad of plants and plant products spanning twenty-six HTS chapters. The press release notes that the newest phase is so comprehensive in scope that “[i]f an importer imports items that contain plant products, but do not currently file a Lacey Act [import] declaration, they likely will need to file [now] under Phase VII.” Items covered by Phase VII include industrial or medicinal plants, handbags, plywood, laminated wood, tools, matches with natural wood stems, products of natural cork, products of bamboo and rattan, footwear, and more. The full range of items can be found on APHIS’s dedicated Lacey Act webpage. 

Enforcement of Phase VII, however, will not begin until “at least 6 months’ notice to persons and industries affected by [the] changes,” hence why enforcement will not start until December 1, 2024. 

Public Comment

APHIS is seeking public comments addressing the products to be covered under Phase VII, as well as on any additional HTS code(s) that should be included in the newest phase. Note that APHIS is only responsible for the plant provisions of the Lacy Act; the Department of the Interior’s Fish and Wildlife Service is responsible for the wildlife provisions of the Lacey Act, and the Department of Homeland Security works with both agencies to oversee the import declarations at the borders and ports. Comments must be received by APHIS no later than July 30, 2024.

Cubaflag

On May 28, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) revised the Cuban Assets Control Regulations (CACR) to enhance support for the Cuban people and independent Cuban private sector entrepreneurs. These amendments, effective on May 28, 2024, aim to promote internet freedom and broaden financial services in Cuba. In announcing these amendments, OFAC stated they were “in support of internet-based services to promote internet freedom in Cuba, support independent Cuban private sector entrepreneurs, and expand access to certain financial services for the Cuban people.” The U.S. Embassy in Cuba issued a press statement providing further details.

The latest amendments to the CACR will be effective on May 29, 2024, and include the following key revisions:

  • Internet-Based Services: The scope of authorized internet services has been expanded to include social media, video conferencing, e-learning, and cloud-based services, among others. Training and support for communication-related software development are also enhanced, and restrictions on certain export classifications have been lifted.
  • Support for Entrepreneurs: The term “self-employed individual” has been updated to “independent private sector entrepreneur,” now including private cooperatives and small businesses with up to 100 employees. This change aligns with Cuba’s authorization of small- and medium-sized enterprises. However, Cuban officials and Communist Party members are excluded from this definition.
  • Banking Access: Independent private sector entrepreneurs who are Cuban nationals are authorized to open, maintain, and remotely use U.S. bank accounts, including through online payment platforms, to conduct authorized or exempt transactions, regardless of their location.
  • U-Turn Transactions: The authorization for “U-turn” transactions, previously revoked in 2019, has been reinstated. This allows for certain fund transfers involving Cuba to pass through U.S. banks, provided that neither the originator nor beneficiary is under U.S. jurisdiction.
  • Reporting Requirements for Telecommunications: The amendment replaces the fax or mail reporting requirement for telecommunications-related transactions with an email reporting requirement and clarifies that the reporting requirement applies only to the non-banking institution entity providing telecommunications services.

Additionally, OFAC has updated and released new FAQs on its website to assist with the understanding of these changes (See FAQs 1174-1179 and FAQs 732, 736, 745, 748, 757, 769, 770, and 785), including a detailed definition of the term “independent private sector entrepreneur” and examples of authorized services.

On May 24, 2024, the Office of the United States Trade Representative (USTR) announced that it was further extending certain product exclusions in the Section 301 Investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. The current 429 product-specific exclusions were scheduled to expire on May 31, 2024. However, under the forthcoming Federal Register notice, the USTR announced that only 164 product exclusions will be extended while the rest will expire as of June 14, 2024.

The 164 product exclusions that have been granted extensions will not expire until May 31, 2025. In allowing these extensions, the USTR announced that it “has found that extending these exclusions will support efforts to shift sourcing out of China, or provide additional time where, despite efforts to source products from alternative sources, availability of the product outside of China remains limited.” The exclusions that are extended are identified in Annex C to the notice.

For those product exclusions that were not granted any extension, the USTR noted that 102 of them received no public comments requesting an extension. For the remaining exclusions expiring on June 14, the USTR stated that the “public comments do not demonstrate that further extending the exclusion would aid efforts to shift sourcing out of China in the near term or do not demonstrate that products covered by the exclusion are unavailable outside of China.” It appears that the USTR specifically declined to extend product exclusions in instances where U.S. importers indicated no plans or efforts to shift sourcing outside of China, or where vague explanations were offered on seeking alternative sourcing. The exclusions that will expire are identified in Annex D to the notice. To provide a transition period for these expiring exclusions, the USTR has extended their expiration date from May 31, 2024, until June 14, 2024.

On May 28, 2024, the Office of the U.S. Trade Representative (USTR) posted in the Federal Register a request for comments regarding its proposed modifications to certain tariffs related to the Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation that was initiated in 2018 and resulted in a recently released statutorily mandated four-year review report. For additional details on this report, see Thompson Hine Update of May 15, 2024. The proposed modifications, directed by President Joe Biden, will either add or increase Section 301 duties on certain imported Chinese products in strategic sectors. Also included in the notice are proposed subheadings eligible for an exclusion process by which interested persons may request that particular machinery used in domestic manufacturing be temporarily excluded from this tariff and a proposal to grant 19 temporary exclusions for certain solar manufacturing equipment.

Annex A to the USTR’s request for comments proposes 382 Harmonized Tariff Schedule of the United States (HTSUS) subheadings and five statistical reporting numbers of the HTSUS for the Section 301 tariff. The products include: (i) batteries; (ii) electric vehicles; (iii) medical gloves, facemasks and other medical items; (iv) critical minerals; (v) semiconductors; (vi) cranes; (vii) solar cells; and (viii) steel and aluminum products. The USTR proposes that increases for these products take effect on August 1, 2024, January 1, 2025, and January 1, 2026, as noted in this Annex. 

The USTR is establishing an exclusion process by which interested persons may request that particular machinery used in domestic manufacturing and classified within certain subheadings under Chapter 84 (nuclear reactors, boilers, machinery and mechanical appliances; parts thereof) and Chapter 85 (electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles) of the HTSUS be temporarily excluded from the Section 301 tariff. The HTSUS subheadings eligible for consideration of this temporary exclusion are set forth in Annex B of the USTR’s request for comments. Procedures for requesting exclusions under this process will be published in a separate notice; and exclusions granted through this process will be effective through May 31, 2025.

At the direction of President Biden, the USTR is also proposing 19 temporary exclusions for solar manufacturing equipment that fall under the HTSUS four-digit subheading 8486. The proposed temporary exclusions are set forth in Annex C to the request for comments. These proposed exclusions will be effective May 28, 2024 through May 31, 2025.

Request for Comments

As to USTR’s proposed modification for adding or increasing Section 301 duties on certain imported Chinese products listed in Annex A, interested persons are invited to comment on:

  • The effectiveness of the proposed modification in obtaining the elimination of or in counteracting China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.
  • The effects of the proposed modification on the U.S. economy, including consumers.
  • The scope of the product description to cover ship-to-shore cranes under subheading 8426.19.00 (Transporter cranes, gantry cranes and bridge cranes).
  • For facemasks, medical gloves, and syringes and needles, whether the tariff rates should be higher than the proposed rates.
  • For facemasks, whether additional statistical reporting codes under tariff subheading 6307.90.98 should be included.
  • Whether the tariff subheadings identified for each product and sector adequately cover the products and sectors included in the President’s direction to the USTR.

For the exclusion process, the USTR seeks comments on whether the subheadings listed in Annex B should or should not be eligible for consideration in the machinery exclusion process and whether Annex B omits certain subheadings under Chapters 84 and 85 that cover machinery used in domestic manufacturing and should be included.

Finally, for the proposed solar manufacturing machinery exclusions in Annex C, the USTR requests comments on the scope of each exclusion, including any suggested amendments to the product description. The USTR web portal and public docket (Docket No. USTR–2024–0007) at https://comments.ustr.gov will open for interested persons to submit comments on May 29, 2024, and close on June 28, 2024. All public comments must be submitted via this online portal.