On October 30, 2023, the U.S. Supreme Court declined to hear another Section 232 national security steel tariff appeal. On July 21, 2023, PrimeSource Building Products, Inc. filed Petition for a Writ of Certiorari with the U.S. Supreme Court, after the U.S. Court of Appeals for the Federal Circuit reversed the lower court decision of the U.S. Court of International Trade (CIT) and upheld the imposition of additional Section 232 national security tariffs on derivatives of certain imported steel articles implemented by former President Donald Trump under Section 232 of the Trade Expansion Act of 1962. With the Supreme Court denying the petition, this litigation has concluded and the Federal Circuit’s decision stands.

Our Updates of July 31, 2023, April 27, 2023 and February 8, 2023 provide details on PrimeSource’s Petition for a Rehearing En Banc at the Federal Circuit and the three-judge panel’s opinion that reversed the CIT decision. See also Updates of April 6, 2021 and January 28, 2021 for additional background on the case and the CIT’s dismissal of other claims.

Key Notes:

  • On September 29, 2023, the United States Department of Commerce launched a new funding opportunity for projects involving the construction, expansion, or modernization of semiconductor materials and semiconductor manufacturing equipment facilities under the CHIPS Act of 2022.
  • Projects within scope are expected to involve a complete capital investment range between $20 million and $300 million.
  • The funding application includes significant technical, financial, workforce and economic information, and effectively requires applicants to coordinate with other stakeholders and agencies.
  • Applicants are expected to demonstrate that they comply with eligibility requirements and various security expectations related to cybersecurity, intellectual property, supply chain resiliency, and regulatory requirements.
  • The Department of Commerce will begin taking initial applications on December 1, 2023, and the application window will close on February 1, 2024.

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On October 25, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued amended Russia-related General License No. 8H once again extending the authorization to conduct transactions involving Vnesheconombank, Bank Financial Corporation Otkritie, Sovcombank, Sberbank, VTB Bank, Alfa-Bank, Rosbank, Bank Zenit, Bank Saint-Petersburg, and the Central Bank of Russia that are related to energy until May 1, 2024.

The original General License No. 8, issued on February 24, 2022, had previously been amended to expand the list of Russian financial institutions and was scheduled to expire on November 1, 2023. The term “related to energy” means the extraction, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication, transport, or purchase of petroleum, including crude oil, lease condensates, unfinished oils, natural gas liquids, petroleum products, natural gas, or other products capable of producing energy, such as coal, wood, or agricultural products used to manufacture biofuels, or uranium in any form, as well as the development, production, generation, transmission, or exchange of power, through any means, including nuclear, thermal, and renewable energy sources.

General License No. 8H authorizes energy-related transactions through 12:01 a.m. EST, May 1, 2024. Certain dealings remain unauthorized under this general license and therefore require close analysis.

For prior updates on this topic, see Updates dated May 8, 2023, December 15, 2022,  June 14, 2022, April 7, 2022, and February 28, 2022.

Key Notes:

  • For a period of six months, OFAC permits a wide range of transactions tied to Venezuela’s oil and gas sector, including new investments and financial dealings with specific Venezuelan banks.
  • OFAC allows all forms of transactions with Minerven, the Venezuelan state-owned gold mining company, nullifying prior sanctions solely in this sector.
  • OFAC lifted restrictions on secondary trading of selected Venezuelan sovereign bonds and debt and equity related to PdVSA, enabling both purchase and sale within the U.S. market.
  • These licenses are conditional; OFAC retains the right to rescind if conditions are not met.
  • Other sanctions on Venezuela remain in effect.

On October 18, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued several new and amended Venezuela-related General Licenses (GL) authorizing various transactions that would otherwise be prohibited. These developments occurred in response to a political agreement between Venezuelan President Nicolás Maduro’s representatives and the Unitary Platform as a step forward in restoring democracy in Venezuela. According to the Department of the Treasury, this easing is conditional and could be rescinded if commitments are not met. All other sanctions on Venezuela remain in effect.

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On October 17, 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Rule adding two Chinese entities and their subsidiaries (a total of 13 entities) to the Entity List due to their involvement in the development of advanced computing chips and having been found to be engaged in activities contrary to U.S. national security and foreign policy interests. According to BIS, these entities are involved in the development of advanced computing integrated circuits (ICs) that can be used to provide artificial intelligence capabilities to further development of weapons of mass destruction, advanced weapons systems and high-tech surveillance applications that create national security concerns.

For all 13 entities, BIS has imposed a license requirement for all items subject to the Export Administration Regulations (EAR), which will be reviewed under a presumption of denial. These entities will also be subject to restrictions on foreign-produced items made with U.S. technology. The Entity List specifies the license requirements that BIS imposes on each listed entity. Such license requirements are independent of, and in addition to, license requirements imposed elsewhere in the EAR.

For the changes being made in this Final Rule, shipments of items removed from eligibility for a License Exception or export, reexport or transfer (in-country) without a license (NLR) as a result of these Entity List designations that were en route aboard a carrier to a port of export, reexport or transfer (in-country), on October 17, 2023, pursuant to actual orders, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) before November 16, 2023. Any such items not actually exported, reexported or transferred (in-country) before midnight on October 17, 2023, will require a license from BIS.

On October 12, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned two entities and identified as blocked property two vessels that used Price Cap Coalition service providers while carrying Russian crude oil above the Coalition-agreed price cap. See here for additional identifying information on these entities. 

The United States is part of an international coalition including the G7, the European Union and Australia (the Price Cap Coalition) that have agreed to prohibit the import of crude oil and petroleum products of Russian Federation origin. These countries also agreed to restrict a broad range of services related to the maritime transport of crude oil and petroleum products of Russian Federation origin—unless that oil is bought and sold at or below the specific price caps established by the Coalition. The crude oil price cap took effect in December 2022 with a cap on Russian crude oil at $60 per barrel. For additional information on this Russian oil price cap, see Updates of September 6, 2022, November 29, 2022, December 5, 2022, and February 8, 2023.

As a result of these sanctions, all property and interests in property of the persons placed on OFAC’s SDN List 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, 50% or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. 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.

OFAC did issue Russia-related General License (GL) 73 that authorizes limited safety and environmental transactions involving the two sanctioned vessels. Application of the GL is limited and should be reviewed carefully as the GL continues to prohibit certain activities.

In addition, the Price Cap Coalition released a statement and an advisory to provide recommendations concerning specific best practices in the maritime oil industry. The advisory reflects “efforts to promote responsible practices in the industry to prevent and disrupt sanctioned trade, and enhance compliance with the price caps on crude oil and petroleum products of Russian Federation origin.” The advisory notes that a loss of transparency and “shadow” trade in oil has become more pronounced and identifies certain heightened risks. It then recommends the following best practices:

  • Require appropriately capitalized P&I insurance.
  • Receive classification from an International Association of Classification Societies member society.
  • Best-practice use of Automatic Identification Systems (AIS).
  • Monitor high-risk ship-to-ship transfers.
  • Request associated shipping and ancillary costs.
  • Undertake appropriate due diligence.
  • Report ships that trigger concerns.

By adopting these recommendations, the advisory notes that “industry stakeholders can reduce their exposure to possible risks associated with recent developments in the maritime oil trade.”

On October 6, 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) added 49 entities from China, Estonia, Finland, Germany, India, Turkey, United Arab Emirates (UAE), and the United Kingdom to the Entity List after determining that these companies were “acting contrary to the national security or foreign policy interests of the United States.” These entities were added to the Entity List for providing support to Russia’s military; specifically, for supplying Russian consignees connected to the Russian defense sector with U.S.-origin integrated circuits. Such U.S.-origin items require a license under the Export Administration Regulations (EAR) when destined to Russia or Belarus. For additional identifying details on these newly designated entities, the Federal Register notice is available here.

As a result, going forward, transactions with these entities have a license requirement for all items subject to the EAR, with a license review policy of denial. Shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of these Entity List designations that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on October 6, 2023, pursuant to actual orders, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) before November 6, 2023. Any such items not actually exported, reexported or transferred (in-country) before midnight on October 6, 2023, will require a license from BIS.

On September 26, 2023, the Department of Homeland Security added three entities to the Uyghur Forced Labor Act (UFLPA) List as a result of each entity’s work with the government of the Xinjiang Uyghur Autonomous Region to recruit, transport, transfer, harbor or receive forced labor or Uyghurs, Kazakhs, Kyrgyz, or members of other persecuted groups out of the Xinjiang Uyghur Autonomous Region.  The entities are:

  • Xinjiang Tianmian Foundation Textile Co., Ltd.
  • Xinjiang Tianshan Wool Textile Co. Ltd.
  • Xinjiang Zhongtai Group Co. Ltd.

For additional details, see DHS’ Federal Register Notice. This brings the total number of entities designated on the UFLPA Entity List to 27. Since enforcement of the UFLPA began in June 2022, Customs and Border Protections (CBP) has reviewed more than 5,300 shipments valued at more than $1.8 billion under the UFLPA. For background information on the UFLPA, see Thompson Hine’s International Trade Update of June 2022.

On September 19, 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) announced additional items considered significant to Russian weaponry and are now restricted for export to both Russia and Belarus. In coordination with the United Kingdom and European Union, BIS continues to identify “high-priority items” by their six-digit Harmonized System (HS) codes that Russia seeks to procure for its weapons programs. Items described by these HS codes have been found in multiple Russian weapons systems used against Ukraine. In the September 2023 notice, BIS is more clearly identifying the current 45 high-priority items to highlight that pose a heightened risk of being diverted illegally to Russia because of their importance to Russia’s war efforts. In addition, BIS has added seven new HS codes to the list, including bearings needed for heavy vehicles or other machinery and antennae used for navigation systems.

All items on the list are subject to export controls under the Export Administration Regulations (EAR) and require a license for export to, reexport to, or transfer within Russia and Belarus.  The list is divided into four tiers, according to their “relative degree of criticality”:

  • Tier 1: Items of the highest concern due to their critical role in the production of advanced Russian precision-guided weapons systems, Russia’s lack of domestic production, and limited global manufacturers.
  • Tier 2: Additional electronics items for which Russia may have some domestic production capability but a preference to source from the United States and its partners and allies.
  • Tier 3: A broader range of electronic items, as well as navigation and camera components, that Russia has sourced from foreign companies.
  • Tier 3.A: Further electronic components used in Russian weapons systems, with a broader range of suppliers.
  • Tier 3.B: Mechanical and other components utilized in Russian weapons systems.
  • Tier 4: Manufacturing, production and quality testing equipment for electric components, circuit boards and modules.

BIS has prioritized the nine HS codes in Tier 1 and Tier 2 – covering items such as integrated circuits and radio frequency (RF) transceiver modules – that have extensive commercial applications but have also been found in Russian missiles and drones on the battlefield in Ukraine. See Thompson Hine Update of June 20, 2023 and BIS Notice of May 19, 2023 for additional details. These items are set forth in Supplement No. 7 to Part 746 of the EAR. Tier 3 has now been divided into mechanical and non-mechanical items “to provide greater clarity.” Tier 4, the lowest tier of priority remains unchanged. Tier 3 and 4 items are included in Supplement No. 4 to Part 746 of the EAR. The items in these 45 HS codes include both lower technology items designated EAR99, as well as more sensitive items on the Commerce Control List (CCL), including items designated under Export Control Classification Numbers (ECCNs), 3A001, 3A002, 3A090, 3A991, 3A992, 3B001, 3B991, 3B992, 5A001, 5A991, 6A002, 6A003, 6A993, 7A003, and 7A994. 

For all of these high-priority HS codes, BIS notes that exporters are “strongly encouraged to conduct due diligence when encountering the listed HS codes to identify possible third-party intermediaries and attempts at evasion of U.S. export controls.”

On September 14, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced another round of sanctions and economic restrictions targeting Russian elites and Russia’s industrial base, financial institutions, and technology suppliers. According to a press release, the sanctions on over 100 individuals and entities continues the effort “to leverage sanctions and economic restrictions to undermine Russia’s capacity to wage its war against Ukraine.” These sanctions include designations by the Department of State on entities involved in expanding Russia’s energy production and export capabilities as well as Russia’s metal and mining sector. Both agencies also targeted Russia’s defense industrial base and third-party actors seeking to assist Russia in evading sanctions.

The sanctions continue OFAC’s sustained efforts to target individuals and entities that enable, or attempt to enable, Russia’s ability to procure high-tech and dual-use goods. As such, OFAC sanctioned a Finland-based network that specializes in shipping foreign electronics to Russia-based end-users, including UAV cameras, high-performance optical filters and lithium batteries. OFAC also designated two entities based in Türkiye that have engaged in shipments to Russia of components for UAVs, sensors and measuring tools.

Numerous additional electronics, technology, automotive, manufacturing and construction firms were also designated by OFAC. The State Department sanctions involve designations of entities involved in expanding Russia’s energy production and future export capacity, entities in Russia’s metal and mining sectors, various defense entities that provide repair and maintenance services to the Russian defense sector, and two vessels.

For additional identifying details on these newly designated individuals and entities, the SDN List is available here.

As a result of these actions, all property and interests in property of the persons placed on OFAC’s SDN List above 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, 50% or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. 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.

OFAC did issue Russia-related General License (GL) 72 that authorizes the wind down of transactions with certain newly sanctioned entities. GL 72 authorizes transactions prohibited by Executive Order (E.O.) 14024 that are ordinarily incident and necessary to the wind down of any transaction involving eight (8) of the Russian entities placed on the SDN List. Such activities are authorized through 12:01 a.m. EST, December 13, 2023, provided that any payment to such an entity is made into a blocked account in accordance with the Russian Harmful Foreign Activities Sanctions Regulations. Application of the GL should be reviewed carefully as the GL does continue to prohibit certain activities.

OFAC has also issued revised Russia-related GL 55A which continues to authorize certain services related to the maritime transport of crude oil originating from the Sakhalin-2 project.