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Ukraine Conflict Response Alert New U.S. Commerce Department Rule Enhances Coordination Between U.S. Commerce Export Controls and U.S. Treasury Sanctions

Los Angeles, Calif. (March 26, 2024)  - Last week, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) released a final rule to impose additional restrictions under the Export Administration Regulations (EAR) on persons and entities identified under 14 sanctions programs, on the List of Specially Designated Nationals and Blocked Persons (SDN List) maintained by the Department of the Treasury’s Office of Foreign Assets Control (OFAC). 

The rule ensures that persons and entities blocked under 14 OFAC sanctions programs will also automatically be subject to stringent export, reexport, and transfer (in-country) controls under the EAR such that they will not be able to obtain certain items or financing. 

This final rule builds on an ongoing program by the U.S. Department of Commerce’s BIS to expand and strengthen its existing export control restrictions under the EAR against the Russian Federation, the Republic of Belarus, and the Islamic Republic of Iran. The goal of the program is to restrict the output of items needed by Russia to support its defense industrial base. The primary targets of the program are metals, parachutes, flying trainers, antennas, and airplane and helicopter parts. Some exceptions include medicinal products and luxury goods. 

The new rule allows the program to expand such that the persons and entities blocked under the OFAC sanctions programs are automatically subject to the EAR regulations. That is, where the regulations were previously designed to target certain items, they will now be used to target all persons and entities identified under the sanctions programs.

The 14 OFAC sanctions programs consist of: Seven Executive Orders related to Russia’s harmful foreign activities dating back to 2014, as well as the recent ones in 2022, and the undermining of democratic processes or institutions in Belarus. The OFAC sanctions also include two programs related to terrorism, the Weapons of Mass Destruction Proliferators Sanctions Regulations, and four programs related to narcotics trafficking and other criminal networks.

The EAR restrictions involving these 14 OFAC-administered sanctions programs serve as a “force multiplier” and complement OFAC's blocking sanctions, which 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 blocked persons, unless authorized by a general or specific license issued by OFAC, or exempt.

U.S. sanctions and related authorizations are subject to frequent changes. Lewis Brisbois’ experienced attorneys are helping clients navigate rapidly developing, sanction-related legal and business risks. For more information on these developments, contact the authors of this alert. Visit our Ukraine Conflict Response Practice page for more information about our capabilities and for similar alerts in this area.

Author:

Natalya Samsonova, Partner

Editors:

Anastasiya Menshikova, Associate

Andrew Pidgirsky, Partner and Chair of Ukraine Conflict Response Practice

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