On July 26, 2023, the Department of Commerce’s Bureau of Industry and Security published an internal policy memorandum announcing two new measures the Office of Antiboycott Compliance will implement to enhance enforcement efforts and diminish participation by U.S. companies in boycott-related activities. The two announced enhancements are:

  1. The Boycott Reporting Form has been amended to require that U.S. persons reporting the receipt of a boycott-related request must now identify the specific party from whom the request was received. Previously, U.S. persons were only required to report the type of boycott request made and the country from which it came. Revising the form to require the identity of the party from which the boycott request was received is intended to assist in enforcement and also allow for “diplomatic engagement” to hold those foreign persons accountable.
  2. BIS will place an antiboycott policy statement on OAM and SAM.gov websites, in cooperation with the Department of Commerce’s Office of Acquisition Management, detailing the requirements of the antiboycott regulation and their applicability to U.S. government acquisition contracts.

The memorandum follows an October 6, 2022 policy memorandum in which the Office of Antiboycott Compliance made other changes to enhance compliance, increase transparency, incentivize deterrence and increase accountability. These actions included requiring companies entering into settlement agreements resulting from a violation to admit to their misconduct in a statement of facts. In also included the implementation of increased penalties, as well as announcing an increased focus on compliance by controlled foreign subsidiaries of U.S. parent companies.

The BIS is charged with administering and enforcing the antiboycott laws under the Export Administration Act. These antiboycott laws were adopted to encourage and, in some circumstances, require U.S. companies to refuse to participate in foreign boycotts that the United States government does not sanction. According to BIS, the laws “have the effect of preventing U.S. firms from being used to implement foreign policies of other nations which run counter to U.S. policy.”

On July 20, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) implemented further sanctions against Russia to restrict “access to products that support its military and war efforts; reduce Russia’s revenue from the metals and mining sector; undermine its future energy capabilities; degrade Russia’s access to the international financial system; and starve Russia of G7-produced technology needed for its technology, aerospace, and defense sectors.” An OFAC press release summarizes this latest round of sanctions and those persons and entities that have been designated and placed on the Specially Designated Nationals (SDN) List.   

In this round of sanctions toward Russia, OFAC targeted Russia’s use of third-party intermediaries and transshipment points outside of Russia to evade sanctions, as well as additional Russia companies involved in key industry/economic sectors. The targeted entities that have been placed on the SDN List include:

  • numerous entities based in the Kyrgyz Republic that have been frequent exporters of controlled electronics components and other technology to Russia;
  • various Russia-based companies who received shipments from the identified Kyrgyz entities;
  • additional Russia and non-Russia evasion facilitators and Russia-based companies that import dual-use electronic components and technology from abroad;
  • numerous additional entities involved in Russia’s munitions factories and high-technology industries that support Russia’s defense sector;
  • several additional Russian banks;
  • various entities involved in Russia’s revenue from its metals and mining industries and manufacturers of equipment and chemicals for Russia’s energy industry; and
  • 14 Russia flagged container, cargo and passenger vessels.

For additional identifying details on these newly designated individuals, entities, and vessels, 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 also issued two Russia-related General Licenses (GL) to allow for the wind down of activities with certain newly designated entities:

  • GL 70 – Authorizing transactions that are ordinarily incident and necessary to the wind down of transactions involving Joint Stock Company Ural Mining and Metallurgical Company through 12:01 a.m. EST, October 18, 2023.
  • GL 71 – Authorizing transactions that are ordinarily incident and necessary to the wind down of transactions involving several Russian banks through 12:01 a.m. EST, October 18, 2023.

On April 19, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License (GL) 5L, “Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or After October 20, 2023,” which continues to delay U.S. persons’ ability to enforce bondholder rights to the CITGO shares serving as collateral for the Petróleos de Venezuela, S.A. (PdVSA) 2020 8.5% bond until on or after October 20, 2023. The previous deadline had been July , 2023.  Effective July 19, 2023, this GL replaces GL 5K.

With this revised General License, U.S. persons remain prohibited until October 20, 2023 from engaging in any transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5% Bond unless specifically authorized by OFAC. In the modified FAQ 595, OFAC notes a favorable licensing policy toward those seeking to apply for a specific license in an effort to reach an agreement on proposals to “restructure or refinance payments due to the holders of the PdVSA 2020 8.5% bond.” 

On July 10, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License 40B, “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 10, 2024.

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 40B 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 8, 2022).

On June 28, 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) announced that the United States was joining its “Five Eye” partners – Australia, Canada, New Zealand, and the United Kingdom – in committing to formally coordinate on export control enforcement.  While these allied countries have shared intelligence and other national security information for years, this announcement confirms a formal commitment to coordination on export control enforcement and enhancing each country’s export control regimes.   The joint effort will attempt to minimize gaps in enforcement and foster joint investigations and coordinated enforcement actions. The countries will also continue efforts to strengthen enforcement partnerships with various industry sectors to inform and counter diversion efforts.  The announcement specifically notes that the partners “will leverage enforcement resources to expand each country’s capacity to take action to prevent and deter evasion of export controls, including by restricting Russia’s access to technologies that fuel its unlawful invasion of Ukraine.”

Key Notes:

  • The May 2023 FinCEN/BIS Joint Alert supplements the Joint Alert published by FinCEN and BIS in June 2022.
  • The Supplemental Joint Alert offers financial institutions new and updated information on export control restrictions imposed by BIS related to Russia.
  • Included is a list of certain “high priority” items organized according to their Harmonized System (HS) Codes, which should prompt enhanced, risk-based customer and transactional due diligence.
  • Nine new transactional and behavioral “red flags” are highlighted which should be considered in addition to the 22 “red flag” indicators of illicit or suspicious activity that were enumerated in the June 2022 Joint Alert.
  • The Joint Alert requests that financial institutions continue using the existing SAR code—FIN-2022-RUSSIABIS—when submitting SARs specifically related to Russian export control evasion.
  • Financial institutions are reminded of their Bank Secrecy Act (BSA) reporting obligations as well.

On May 19, 2023, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a Supplemental Joint Alert reminding financial institutions to remain vigilant against individuals and entities attempting to skirt export controls related to Russia—a tool of economic statecraft maintained by BIS to advance U.S. national security and foreign policy interests—and to provide additional and updated information on “ongoing U.S. Government engagements and initiatives designed to further constrain and prevent Russia from accessing needed technology and goods to supply and replenish its military and defense industrial base.” The joint alert serves as an auxiliary to an earlier FinCEN/BIS Joint Alert published in June 2022.

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On June 1, 2023, the Office of Foreign Assets Control (OFAC) issued four new Sudan-related General Licenses authorizing certain transactions that would otherwise be prohibited by Executive Order (EO) 14098 dated May 4, 2023 (See Update of May 4, 2023):

  • General License No. 1 authorizes transactions for the conduct of the official business of certain international organizations and entities, including but not limited to the International Centre for Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA); the Intergovernmental Authority on Development (IGAD); and the International Federation of Red Cross and Red Crescent Societies.
  • General License No. 2 authorizes certain transactions that are ordinarily incident and necessary to the certain described activities by nongovernmental organizations (NGOs), provided that the nongovernmental organization is not a person whose property or interests in property are blocked pursuant to EO 14098.  Covered activities must be non-commercial in nature and designed to directly benefit the civilian population, including:  (i) humanitarian projects, (ii) democracy building, and (iii) educational support.
  • General License No. 3 authorizes transactions related to the provision of agricultural commodities, medicine, medical devices, replacement parts and components, or software updates, and the extraction, processing, transport, sale, or distribution of water in Sudan; and
  • General License No. 4 authorizes the wind down of transactions through July 31, 2023 involving Defense Industries System or Al Junaid Multi Activities Co. Ltd., or any entity owned or controlled by these by a 50 percent or greater interest.  Note:  these two Sudanese entities were separately placed on OFAC’s Specially Designated Nationals (SDN) List on June 1, 2023. 

Certain transactions remain unauthorized under these general licenses and therefore require close analysis.

On Saturday, May 27, 2023, the 14 partners of the Indo-Pacific Economic Framework for Prosperity (IPEF) announced the substantial conclusion of negotiations for the IPEF Supply Chain Agreement (see U.S. Department of Commerce’s press statement here). The IPEF partners – Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, the United States, and Vietnam – concluded the agreement at the IPEF Ministerial Meeting in Detroit, Michigan. The agreement aims to enhance the resilience, efficiency, productivity, sustainability, transparency, diversification, security, fairness, and inclusivity of supply chains among the participating countries. The partners will undertake further steps, including domestic consultations and legal reviews, to finalize the proposed agreement before it undergoes each partner’s signature, ratification, acceptance, or approval processes.

The proposed IPEF Supply Chain Agreement focuses on understanding significant supply chain risks, improving crisis coordination and response, benefiting workers and businesses, preparing for and resolving supply chain bottlenecks, promoting regulatory transparency, upholding labor rights, and ensuring the availability of skilled workers.

The agreement also contemplates the establishment of three new bodies: the IPEF Supply Chain Council, IPEF Supply Chain Crisis Response Network and IPEF Labor Rights Advisory Board. These bodies will facilitate cooperation, information sharing, and collaborative actions among the IPEF partners on supply chain issues.

The supply chain agreement is the first outcome of the IPEF initiative. Negotiations are continuing for the other three pillars of the IPEF: (1) encouraging free and fair trade; (2) accelerating the development and deployment of clean energy technologies; and (3) promoting fair competition and enforcing tax, anti-money laundering and anti-bribery regulatory regimes (see Updates of September 9, 2022 and May 24, 2022).

On May 19, 2023, the Department of the Treasury issued a Determination pursuant to E.O. 14071 that prohibits the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a U.S. person, wherever located, of architecture or engineering services to any person located in the Russian Federation. The determination excludes the following: (1) any service to an entity located in the Russian Federation that is owned or controlled, directly or indirectly, by a United States person; and (2) any service in connection with the wind-down or divestiture of an entity located in the Russian Federation that is not owned or controlled, directly or indirectly, by a Russian person. OFAC has provided the full scope of the definitions for architecture and engineering services in a new FAQ  (see FAQ 1128). This determination takes effect at 12:01 a.m. EDT on June 18, 2023. 

In conjunction with this determination, the Office of Foreign Assets Control (OFAC) issued a related Determination pursuant to E.O. 14024, which allows for sanctions to be imposed on any individual or entity determined to operate or have operated in the following sectors of the Russian Federation economy: 

  • architecture,
  • engineering,
  • construction,
  • manufacturing, and
  • transportation.

OFAC has provided the full scope of the definitions for these sectors of the Russian economy in a new FAQ (see FAQ 1126).  A sector determination pursuant to E.O. 14024 exposes persons that operate or have operated in an identified sector to sanctions risk and allows for sanctions to be imposed on any individual or entity that may subsequently be determined and designated by OFAC to operate or have operated in this sector. The determination does not automatically impose sanctions on all persons who operate or have operated in the sector. This determination took effect on May 19, 2023.

With these new determinations, OFAC has also amended FAQs 1059 and 1061-1062 to further assist persons in understanding the full scope and impact of these determinations.

These determinations complement existing sanctions authorities against those that operate or have operated in the metals and mining (see Update of February 24, 2023), quantum computing (see Update of September 16, 2022), accounting, trust and corporate formation, management consulting (see Update of May 13, 2022), aerospace, marine, electronics (see Update of March 31, 2022), and defense and related materiel (see Update of March 7, 2022) sectors of the Russian Federation economy.

On May 23, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License 8L, extending authorization until November 19, 2023 for certain activities previously authorized under General License 8K. General License 8L authorizes the continuation of transactions and activities “ordinarily incident and necessary to the limited maintenance of essential operations, contracts, or other agreements,” that:

  1. are for safety or the preservation of assets in Venezuela;
  2. involve Petróleos de Venezuela, S.A. (PdVSA) or any entity in which PdVSA owns, directly or indirectly, a 50% or greater interest; and
  3. were in effect prior to July 26, 2019, for the following entities and their subsidiaries:
    • Halliburton
    • Schlumberger Limited
    • Baker Hughes Holdings LLC Weatherford International, Public Limited Company

The term “safety or the preservation of assets” covers transactions and activities necessary “to ensure the safety of personnel, or the integrity of operations and assets in Venezuela; participation in shareholder and board of directors meetings; making payments on third-party invoices for transactions and activities authorized” under this general license (or prior to April 21, 2020, if such activity was authorized at that time) as well as “payment of local taxes and purchase of utility services in Venezuela; and payment of salaries for employees and contractors in Venezuela.” The general license authorizes such activities involving PdVSA and the other listed entities through 12:01 a.m. EST, November 19, 2023.

As with past extensions, General License 8L does not authorize any activities related to Venezuelan-origin petroleum or petroleum products; the provision or receipt of insurance or reinsurance for such products; the design, construction or work on wells or other facilities or infrastructure in Venezuela; contracting any additional personnel or services (except as required for safety); or the payment of any dividends to PdVSA. Further, this General License does not authorize transactions related to the export or re-export of diluents to Venezuela; the issuance of any loans to, or accrual of additional debt by, or subsidization of PdVSA; or any transactions otherwise prohibited by OFAC’s Venezuela Sanctions Regulations (31 C.F.R. part 591) or with any blocked persons other than those identified in this General License.

General License 8L replaces and supersedes General License 8K. See also SmarTrade Update of November 28, 2022.