Ukraine Crisis Resource Center
- Top Trade Developments
- Latest Russia Sanctions/Export Highlights
- The CHIPS Are Down and Incentives Flow as Congress Attempts to Vitalize the U.S. Semiconductor Industry
- FinCEN and the U.S. Department of Commerce Issue Joint Alert Highlighting Risks of Export Control Violations for Financial Institutions
- EU Institutions Reach Agreement on Foreign Subsidies Regulation
- Customs Rulings of the Week
This news bulletin is provided by the International Trade Group of Crowell & Moring. If you have questions or need assistance on trade law matters, please contact Jeff Snyder or any member of the International Trade Group.
Ukraine Crisis Resource Center
Crowell & Moring has a multidisciplinary working group helping clients navigate the rapidly evolving business, legal and operational issues associated with the crisis. Our group brings together lawyers and professionals with relevant senior government, industry, and private sector experience across a wide array of practices that intersect with the most critical issues in this unprecedented crisis. We are helping clients to mitigate risk, to implement practical approaches and sound business solutions, and anticipate and prepare for the opportunities and challenges that are on the horizon.
Top Trade Developments
Latest Russia Sanctions/Export Highlights
EU Extends Sanctions Six Months: On July 26, 2022, the EU renewed restrictions on specific sectors of Russia’s economy until January 31, 2023. This includes restrictions on finance, energy, technology and dual-use goods, industry, transport and luxury goods.
UK Designates 41 More Individuals and One Additional Entity: On July 26, 2022, the UK designated a number of additional parties, including Syrian and Palestinian individuals involved in recruiting mercenaries to support Russia’s fighters in Ukraine, regional governors in Russia, Russian officials, officials of the so-called Donetsk People’s Republic and Luhansk People’s Republic, a British video blogger, and a Syrian entity that has recruited mercenaries to fight in Ukraine.
UK Sanctions Licensing Time Frame Update: The UK Office of Financial Sanctions Implementation (“OFSI”) sent an email on July 28, 2022, stating that OFSI is unable to respond to specific licenses for four weeks due to “exceptionally high demand.” OFSI noted that it is prioritizing “cases where there are issues of personal basic needs and/or wider humanitarian issues at stake which are of material impact or urgency, or which are deemed to be of particular strategic, economic or administrative importance.” The agency also issued updated financial sanctions guidance.
UK Issues General License for Certain Insurance Payments: On July 22, 2022, the UK published General License INT/2022/2009156, which allows UK designated individuals and entities to pay UK insurers for insurance premiums and broker commissions related to the provision of building and engineering insurance for UK properties. It also permits UK insurers to make payments to UK designated parties for successful claims made against an insurance policy, or for refunds for any over-payments made pursuant to the license. The license includes authorization to process and receive such payments.
U.S. Russia-Related General Licenses: On July 22, 2022, OFAC issued two new general licenses (“GLs”), and two new “Frequently Asked Questions” (“FAQs”), clarifying the “new investment” prohibitions under Executive Order (“E.O.”) 14071, and updated two FAQs relating to E.O. 14071.
- GL 45: permits “all transactions” in debt or equity issued by an entity in the Russian Federation (a “Russian Entity”) ordinarily incident to the wind-down of financial agreements entered into on or before June 6, 2022 (“Covered Contracts”), through October 19, 2022, notwithstanding the new investment prohibitions in E.O. 14071 § 1(a)(i). GL 45 expressly permits (1) U.S. persons to purchase Russian Entity debt or equity to the extent the purchase is necessary to wind down Covered Contracts, and (2) U.S. persons to facilitate, clear, and settle such purchases, to the extent necessary to wind down Covered Contracts.
- GL 46: permits “all transactions related to the establishment, administration, participation in, and execution of an auction process” as announced by the EMEA Credit Derivatives Determination Committee (the “Auction”), to settle credit derivative transactions with a reference entity of “the Russian Federation.” GL 46 permits U.S. persons to purchase or receive debt obligations of the Russian Federation, to the extent prohibited by E.O. 14071 § 1(a)(i), “for the period beginning two business days prior to the announced date of the auction and ending eight business days after the conclusion of the auction.” GL 46 also permits transactions ordinarily incident and necessary to facilitate, clear, and settle such transactions. There is no expiration date for the authorizations in GL 46.
- OFAC issued FAQ 1071, explaining that GL 45 permits U.S. persons to purchase, or facilitate purchases of, Russian Entity debt or equity to cover or close out a short position, pursuant to a securities lending agreement, if the agreement was entered into on or before June 6, 2022.
- OFAC issued FAQ 1072, explaining that GL 45 permits Auction participants and their customers to submit and accept bids and offers of physical settlement requests, or delivery of Russian Federation debt obligations and corresponding settlement amounts. While U.S. persons may purchase or receive Russian Federation debt obligations within certain periods (two business days prior to the announced Auction date, and ending eight days after the conclusion of the Auction), there is no deadline to clear and settle such transactions. GL 46 presumably should allow the restart of the credit default swap market relating to Russian Federation-bonds, which had been substantially frozen following the issuance of OFAC’s FAQs 1053 and 1054, which had established that the prohibition on “new investment” in E.O. 14071 prohibited the purchase or sale of Russian Entity debt or equity by U.S. persons.
- OFAC updated FAQs 1053 and 1054 to note the authorizations provided by GLs 45 and 46, and explained that the purpose of GL 45 is to “authorize the close out of financial contracts entered into on or before June 6, 2022 that might not otherwise be considered a divestment of debt or equity securities issued by entities in the Russian Federation.”
G7 Plans to Implement Russian Oil Price Cap by December 5: According to media reports, the G7 plans implement a price cap mechanism for Russian oil by December 5, the date on which the EU ban on Russian oil sea imports takes effect. The G7 has discussed this with the Indian and Chinese governments, and reports indicate that they will publicize the set price. Media reports suggest that the price cap will be above the cost of production but below the current market rate.
U.S. Senators Introduce Bill to Sanction Chinese Purchases of Russian Energy: On July 26, 2022, three Republican senators introduced a bill that would sanction any entity insuring or registering tankers shipping Russian oil or liquified natural gas to China. According to media reports, there is skepticism that the bill would be put up for a vote in the Democrat-controlled Senate.
For more information, contact: Jeff Snyder, Carlton Greene, Dj Wolff, Michelle Linderman, Caroline Brown, Nicole Succar, Anand Sithian, Brian McGrath, Laurel Saito, Rachel Schumacher
The CHIPS Are Down and Incentives Flow as Congress Attempts to Vitalize the U.S. Semiconductor Industry
Last week, the United States Congress passed the $280 billion CHIPS and Science Act of 2022 (CHIPS Act) to bolster domestic semiconductor and microchip manufacturing in the United States. The bipartisan legislation will facilitate federal investments in the form of grants, loans, and loan guarantees to eligible entities and create significant business opportunities for companies in the U.S. The legislation also provides funding and new programs to boost advanced workforce training and research and development in a range of scientific and technology areas. The legislation now awaits the signature of President Biden, who hailed its passage as “exactly what we need to be doing to grow our economy right now.”
The legislation seeks to reverse the decades-long decline in U.S. microchip and semiconductor manufacturing and counter the rise of China as a source for technologically advanced manufacturing processes and products. By boosting domestic manufacturing and supply chains, the legislation also aims to relieve the global semiconductor shortage that has plagued manufacturers of a diverse set of products – everything from automobiles to children’s toys – and has contributed to the nation’s supply chain woes for more than two years.
The cornerstone of the legislation is $52 billion that will be allocated to the U.S. Department of Commerce semiconductor initiative to develop and expand domestic manufacturing capacity. Implementation of that program was already underway at the Department of Commerce, following Congressional authorization in the Fiscal Year 2021 National Defense Authorization Act (FY21 NDAA), and the legislation passed last week now provides the critical funding needed to commence direct federal incentives for the construction, expansion, or modernization of semiconductor manufacturing facilities.
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For more information, contact: W. Scott Douglas, Stephanie Crawford, Lyndsay Gorton, Byron Brown
FinCEN and the U.S. Department of Commerce Issue Joint Alert Highlighting Risks of Export Control Violations for Financial Institutions
On June 28, 2022, the Financial Crimes Enforcement Network (“FinCEN”) and the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued a joint alert (the “Alert”), urging financial institutions regulated under the Bank Secrecy Act (“BSA”) to remain vigilant of efforts by third parties to evade the extensive U.S. export controls imposed on Russia and Belarus relating to Russia’s invasion of Ukraine. The Alert provides BSA-regulated financial institutions (“Covered Institutions”) with guidance on how to identify customers and transactions that may pose elevated export controls evasion risks. The Alert reflects the Biden Administration’s “whole of government” approach to prevent Russian circumvention of U.S. export controls.
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For more information, contact: Carlton Greene, Jeff Snyder, Anand Sithian, Chandler Leonard, Jeremy Iloulian
EU Institutions Reach Agreement on Foreign Subsidies Regulation
On June 30, 2022, the EU co-legislators (the European Parliament and the Council) reached agreement on a new, far-reaching Regulation aimed at tackling the distortive effects of subsidies from non-EU governments in the EU internal market. The Foreign Subsidies Regulation (FSR) adds three new tools to the European Commission’s regulatory arsenal: a mandatory filing obligation for M&A activity fueled by foreign subsidies, a requirement to notify foreign financial contributions when submitting bids for public contracts, and a general investigation tool. The new regime is expected to become effective in mid-2023.
As we wrote in an earlier client alert, the European Commission proposed the FSR in May 2021 to close a regulatory gap and level the playing field between undertakings receiving subsidies from EU Member States, which are subject to strict state aid rules, and recipients of third-country subsidies, which so far escaped scrutiny. The proposal followed a public consultation on the European Commission’s June 2020 White Paper on Foreign Subsidies.
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For more information, contact: Karel Bourgeois, Vassilis Akritidis, Karl Stas, Flavie Van Maldegem
Customs Rulings of the Week
- Country of Origin of Sea Urchin Uni
- Classification of Halloween-Themed Pet Toys
- Classification of an Air Pods Case Cover
For more information, contact: Frances Hadfield, Martín Yerovi
Crowell Speaks
John Brew will be leading a session at the 2022 Fall International Compliance Professionals Association (ICPA) conference in Grapevine, TX, October 16-18, on Understanding Court of International Trade (CIT) Cases: Has CBP ever issued a decision that makes no sense and will cause your company significant harm? This session explains when and how you should appeal adverse CBP decisions to the US Court of International Trade (CIT). John will also explore what the CIT considers when determining to uphold or overturn government actions, and what impact CIT opinions might have on other government actions.
Crowell Welcomes
Dmitry Bergoltsev – Prior to joining Crowell & Moring, Dmitry served as a Project Associate at the Atlantic Council’s Scowcroft Center for Strategy & Security in Washington, D.C. There he implemented administrative and contractual arrangements associated with foreign and domestic partners, managed the dissemination of reports and policy briefs for the Council’s Asia Security Initiative, and created a new data-driven database for monitoring Sino-Russian energy relations. Before this he was a graduate intern at the U.S. Department of Commerce’s Office of China and Mongolia. While there he drafted presentations, reports, and memos on US-China trade and technology issues (including AD, CVD, and Section 301 cases) for U.S. Foreign Commercial Service Officers based in Beijing, Shanghai, and Washington DC, and translated PRC government statements in Mandarin into English.
Dmitry is a 2021 graduate of the Johns Hopkins University School of Advanced International Studies (SAIS).
Emily Devereaux – Prior to joining Crowell & Moring, Emily served as a Consultant at COVID Collaborative. There she aggregated and regularly updated data on county-level vaccination trends across the US to inform various projects and provided daily briefings on the state of COVID-19, associated policymaking, public health measures, and other relevant information. Before this she was an intern at Louisiana Clean Fuels (LCF). While there she tabulated fleet data for organizations partnered with LCF using a tool created by the Department of Energy, visualized and mapped optimal placement of Jump Bikes and EV Chargers based on maps and geographic information, and published a new Louisiana Green Fleets website which provided coded interactive maps for viewers.
Emily is a 2022 graduate of American University.
For further information, please contact:
Jeffrey L. Snyder, Partner, Crowell & Moring
jsnyder@crowell.com
