On July 10, BIS released new guidance strongly encouraging companies involved in exporting, reexporting, or transferring (in-country) Common High Priority List (CHPL) items to screen transaction parties against the list maintained by the Trade Integrity Project (TIP) (in addition to the Consolidated Screening List).

TIP is an initiative of the UK-based Open-Source Centre that monitors military and dual-use trade with Russia. The TIP website displays entities that have shipped CHPL items to Russia since 2023, according to publicly available trade data.

The guidance also outlines the different actions that BIS takes to inform industry and academia about parties—beyond those identified on public screening lists like the Entity List—that present diversion risks.

Back to a new normal?

As of 30 June 2024, the EU’s Temporary Crisis and Transition Framework for state aid measures, which was introduced following the Russian invasion of Ukraine, has expired in relation to state aid measures applicable to most sectors. Measures relating to the primary agriculture, fishery, and aquaculture sectors remain covered by the Framework until 31 December 2024. We will explore the potential consequences of this in more detail below.

Background

The full-scale invasion of Ukraine by Russia on 24 February 2022 led to the imposition of several packages of sanctions by the European Union. The most recent one, the 13th to date, was passed by the European Council on the two-year anniversary of the war – 23 February 2024.

In response to these, Russia introduced counter-sanction measures, and notably made the decision to cut off gas supplies to a number of EU Member States, such as Bulgaria and Poland. The impact on these countries, as well as on the internal market generally, was significant. Companies had to cope with the resulting spike in energy prices. In this context, on 23 March 2022, the European Commission adopted the Temporary Crisis Framework (the “Framework”) to enable Member States to support their economies by way of state aid measures.

The principle: state aid is prohibited

Under EU law, the general principle contained in Article 107 TFEU is that state aid measures are prohibited, as they are contrary to the continuing integration of the internal market. State aid can however be justified, if it is needed to ‘remedy a serious disturbance in the economy of a Member State’ (Article 107(3)(b)). The Framework explicitly states that state aid granted ‘to remedy the liquidity shortage faced by undertakings that are directly or indirectly affected by the serious disturbance of the economy caused by the Russian military aggression against Ukraine, the sanctions imposed by the EU or by its international partners, as well as the economic counter measures taken’ may be permissible.

It should be noted that this is not the first temporary framework set up by the European Union in response to global events. A similar framework to weather the COVID-19 storm was set up in 2020, and expired on 30 June 2022. Under both frameworks, the approach taken by the EU is not a blanket approval of state aid granted to companies: measures are subject to conditions to be considered permissible. For example, the Framework specifies that any undertaking may not benefit from total aid exceeding EUR 400 000 at any given point in time. It also requires for the undertaking to actually be “affected by the crisis”. Special rules also apply to the primary agriculture, the fishery and aquaculture sectors. Despite recognising the Russo-Ukrainian war and its economic consequences as an exceptional circumstance, the EU therefore presented itself as remaining cautious when considering state aid.

Commission decisional practice

It is nonetheless interesting to note that the Commission has not made any decisions to initiate formal investigation procedures into any state aid measure granted after 23 March 2022 and justified on the basis of the Framework. While such decisions are not the norm in any context, this remains remarkable: in the same period, the Commission initiated an investigation into 17 other measures justified on other pieces of legislation (such as, for example, on the basis of the Agricultural Guidelines). This suggests a certain leniency when considering cases justified on the basis of the Framework: whether an undertaking is “affected by the crisis” can namely be interpreted quite widely.

In a decision dated 13 November 2023, the Commission for example considered that a financial aid measure granted by the Polish state to raspberry producers, in light of increased competition from Ukrainian raspberries, was justifiable on the basis of the Framework. While higher energy prices were cited, other, more indirect factors, were also cited by the Commission in its analysis. It for example considered the difficulties of keeping the fruit frozen due to power outages in Ukraine, and the impact this had on the market in Poland. This evidences the Commission’s wide approach to what may be considered a consequence of the crisis.

Looking to the future

The Framework was first extended in October 2022. It was then amended in March 2023, and rebranded as the Temporary Crisis and Transition Framework. In line with the EU Green Deal, this amended Framework aims to also cater to measures which have as their objective to foster the transition to a net-zero economy. The expiry date for the Framework was also set at 30 June 2024, with some exceptions in relation to specific sectors, as previously mentioned.

The Framework coming to an end could be seen as surprising: when the COVID Framework came to an end in June 2022, the height of the pandemic had passed in most EU Member States. The Ukraine war is however currently still a ‘hot’ conflict, as shown notably by the May 2024 Kharkiv offensive. A 14th package of sanctions was introduced by the EU on 24 June 2024, included a ban on reloading services relating to Russian LNG in the EU for the purpose of transshipment operations to non-EU countries, the purchase, import or transfer Russian LNG through LNG terminals in the Union that are not connected to the interconnected natural gas system, as well as restrictive measures against Russian LNG projects. More about this can be read in the Reed Smith client alerts here and here.  This comes against the backdrop of recent sanctions enforcement by the wider G7 coalition targeting Russian LNG projects: many of the factors explaining the introduction of the Framework therefore appear to remain current.

However, wider economic and political circumstances could be the explanation. Most notably, the EU’s dependence on Russian gas has fallen from 45% in 2021 to only 15% in 2023, allowing for energy prices to somewhat stabilize. Simultaneously, a number of Member States who were initially very committed to supporting Ukraine in its defense efforts are showing signs of lassitude: for example, in a much-publicized move in April 2023, Poland banned imports of Ukrainian wheat and corn. More recently, on 14 May 2024, the EU adopted regulations imposing caps on duty-free imports for some Ukrainian produce, including eggs, poultry, and certain types of grains.

As the impact of the conflict on EU markets somewhat stabilizes, the end of the Framework and the progressive return to regular state aid rules therefore appears to mark the return to a new normal. The end of the Framework could however entail a shift away from the Commission’s permissive attitude, and undertakings receiving state aid should be aware of the risks associated with this. In tandem with the ongoing imposition of sanctions and counter-sanctions, the regulatory landscape therefore presents complexities: as the Russia-Ukraine conflict evolves, the situation could also be subject to rapid changes. Undertakings affected by the fall out of the war should seek appropriate advice in order to navigate these issues, and to ensure regulatory changes are anticipated promptly.

On 24 June 2024, the European Union (EU) agreed the long-awaited 14th package of sanctions against Russia. These latest measures introduce several new thematic restrictions and are introduced off the back of several new UK and U.S. restrictions imposed over the course of the past few weeks.

The latest measures are contained in (A) Council Regulation 2024/1746 which amends Council Regulation (EU) No 269/2014; and (B) Council Regulation (EU) 2024/1745 which amends Council Regulation (EU) No 833/2014.

Asset Freeze Restrictions

The EU has imposed asset freeze measures on an additional 116 individuals and entities. These can be found here. Of note in the transportation industry are Sovcomflot and the Volga Dnepr Group.

Continue Reading EU 14th Sanctions Package against Russia

On June 12, the Office of Foreign Assets Control (OFAC) and Bureau of Industry and Security (BIS) released new sanctions and export controls intended to further target Russia and Belarus, as well as those who transact with sanctioned entities and create diversion risks for export-controlled items.

New restrictions on certain IT and software services, effective September 12

In addition to sanctioning over 300 individuals and entities, OFAC issued a determination that prohibits the export, reexport, sale, or supply, directly or indirectly, of the following services by a U.S. person or from the United States to any person in Russia:

  • IT consultancy services[1]
  • IT design and development services for applications[2]
  • IT support services[3] for enterprise management or design and manufacturing software (collectively, “Covered Software”)
  • Cloud-based services[4] for Covered Software

“Enterprise management software” includes:

  • Enterprise resource planning (ERP) software
  • Customer relationship management (CRM) software
  • Business intelligence (BI) software
  • Supply chain management (SCM) software
  • Enterprise data warehouse (EDW) software
  • Computerized maintenance management system (CMMS) software
  • Project management software
  • Product lifecycle management (PLM) software

“Design and manufacturing software” includes building information modelling (BIM), computer aided design (CAD), computer-aided manufacturing (CAM), and engineer to order (ETO) software.

The determination does not affect services:

  • To an entity in Russia that is directly or indirectly owned or controlled by a U.S. person
  • In connection with the wind down or divestment of an entity located in Russia that is not directly or indirectly owned or controlled by a Russian person
  • For software subject to the Export Administration Regulations (EAR) that is authorized by the Bureau of Industry and Security (BIS) for export, reexport, or transfer (in-country) to or within Russia
  • For software that is not subject to the EAR but would be eligible for a license exception or otherwise authorized for export, reexport, or transfer (in-country) to or within Russia by BIS if it was subject to the EAR

Expanded definition of Russia’s “military-industrial base” under Executive Order 14114

OFAC expanded the definition of Russia’s military-industrial base to include all persons sanctioned under Executive Order 14024. Consequently, foreign financial institutions that conduct or facilitate significant transactions with any person sanctioned under Executive Order 14024, including VTB Bank and Sberbank, now have a secondary sanctions risk.

OFAC concurrently published a Compliance Advisory for foreign financial institutions.

Russia-related amendments to the EAR

On June 18, BIS will publish a final rule in the Federal Register amending the EAR to:

  • Require a license (subject to certain exceptions) to export, reexport, or transfer (in-country) Covered Software subject to the EAR and classified as EAR99 to or within Russia or Belarus. The license requirement includes software updates and will go into effect 90 days after the notice is published. Exports, reexports, and transfers (in-country) to wholly owned U.S. subsidiaries or subsidiaries of companies headquartered in Country Group A:5 or A:6 will not require a license.
  • Consolidate the Russia and Belarus-related controls into one section (15 C.F.R. § 746.8).
  • Add 522 additional Harmonized Tariff Schedule (HTS)-6 codes to Supplement No. 4 to Part 746. These products will require a license to export, reexport, or transfer (in-country) to or within Russia or Belarus.
  • Add new controls on certain riot control agents.
  • Narrow the scope of the items eligible for export, reexport, or transfer (in-country) to or within Russia or Belarus under License Exception CCD (Consumer Communications Devices).

New address-only Entity List entries that apply to all entities using that address

BIS’s final rule will add a new provision to the EAR (15 C.F.R. § 744.16(f)) allowing BIS to identify addresses on the Entity List that present a high risk of diversion. These addresses can be added without a specific entity name and will be labelled “Address #.” (e.g., Address 1, Address 2).

Each entry will identify the specific license requirements, review policies, and license exception restrictions that apply to that address. The restrictions associated with that address will apply to any entity using that address (unless the entity has its own Entity List entry, in which case the more restrictive entry will control).

If an Entity List entry has a named entity and an address, a party to a transaction that uses that same address will still only be considered a potential “red flag.” The exporter, reexporter, or transferor should then undertake sufficient due diligence to verify the party to the transaction is not the, in fact, the Entity List entity or acting on behalf of the Entity List entity.

[1] “IT consultancy services” include “providing advice or expert opinion on technical matters related to the use of information technology, such as: (a) advice on matters such as hardware and software requirements and procurement; (b) systems integration; (c) systems security; and (d) provision of expert testimony on IT related issues.” U.S. Dept’ of the Treasury, Off. of Foreign Assets Control, FAQ 1187 (June 12, 2024), https://ofac.treasury.gov/faqs/1187.

[2] “IT design and development services for applications” include “services of designing the structure and/or writing the computer code necessary to create and/or implement a software application, such as: (a) designing the structure of a web page and/or writing the computer code necessary to create and implement a web page; (b) designing the structure and content of a database and/or writing the computer code necessary to create and implement a database; (c) designing the structure and writing the computer code necessary to design and develop a custom software application; (d) customization and integration, adapting (modifying, configuring, etc.) and installing an existing application so that it is functional within the clients’ information system environment.” Id.

[3] “IT support services” include providing technical expertise to solve (1) “problems for the client in using software, hardware, or an entire computer system, such as: (a) providing customer support in using or troubleshooting the software; (b) upgrading services and the provision of patches and updates; (c) providing customer support in using or troubleshooting the computer hardware, including testing and cleaning on a routine basis and repair of IT  equipment; (d) technical assistance in moving a client’s computer system to a new location; (e) providing customer support in using or troubleshooting the computer hardware and software in combination”; and (2) “specialized problems for the client in using a computer system, such as:  (a) auditing or assessing computer operations without providing advice or other follow-up action including auditing, assessing and documenting a server, network or process for components, capabilities, performance, or security; (b) data recovery services, i.e. retrieving a client’s data from a damaged or unstable hard drive or other storage medium, or providing standby computer equipment and duplicate software in a separate location to enable a client to relocate regular staff to resume and maintain routine computerized operations in event of a disaster such as a fire or flood; and (c) other IT technical support services not elsewhere classified.” Id.

[4] “Cloud-based services” include “the delivery of software via the internet or over the cloud, including through Software-as-a-Service (SaaS), or SaaS cloud services in relation to such software.” Id.

On 14 September 2022, as part of a suite of regulatory changes targeting cross-border supply chains, the European Commission presented its proposal for a Forced Labour Regulation.

In November 2023, the European Parliament adopted its position on the Commission’s proposal, followed by the Council of the EU adopting its General Approach in January 2024. After intensive inter-institutional negotiations, EU co-legislators (the Council of the EU and the European Parliament) reached a provisional agreement on the text of the Forced Labour Regulation on 5 March 2024. On 23 April 2024, it was adopted by the Parliament and will be formally endorsed by the Council in the coming weeks.

The Forced Labour Regulation prohibits the sale or export of products made with forced labour, including child labour, within the EU. Our lawyers delve into the details of this new regulation and its link with the Corporate Sustainability Due Diligence Directive in their latest client alert.

Background

Russia’s military action against Ukraine has had a profound impact on Ukraine’s ability to trade with the rest of the world. Under such exceptional circumstances and to mitigate the negative economic impact of Russia’s aggression on Ukraine, the EU decided in May 2023 to grant sweeping concessions to Ukraine in the form of trade-liberalisation measures for all products. One year on, those concessions have had a significant impact on EU farmers themselves, who have been asking for better protection from Ukrainian imports.  The EU just agreed to continue the existing trade liberalisation, but with the inclusion of new safeguard mechanisms, and in parallel to increase tariffs on imports of grain from Belarus and Russia, to release the pressure on EU farmers at expense of both countries, and not the Ukraine.

  1. The existing measures and their consequences on EU farmers

On 31 May 2023 the EU adopted Regulation (EU) 2023/1077, which suspended for one year:

  • The application of the entry price system to fruit and vegetables;
  • Tariff quotas and import duties;
  • Existing anti-dumping duties; and
  • The creation of certain safeguard measures.

As a result, EU farmers have been facing growing competition from imports of grains from Ukraine.  EU farmers also face significant competition from Russian and Belarusian grain.

The EU has been working for months on measures that take into account to interest of EU farmers, while maintaining its support for Ukraine’s farmers. 

In February and March 2024, the European Commission proposed two new measures: a regulation extending the above-mentioned suspensions for another year and a regulation increasing tariffs on imports into the EU of grain products (cereals, oilseeds, and derived products) from Russia and Belarus. Both measures have been endorsed by the Council of the European Union and will enter into force on 6 June 2024 and 1 July 2024, respectively.

  1. Extension of trade-liberalisation measures for Ukrainian imports

On 14 May 2024, the Council of the EU and the European Parliament adopted Regulation 2024/1392 extending the temporary trade-liberalisation measures (the ‘renewal Regulation’).  It will enter into force on 6 June 2024

To counter the potential negative effect of the measures on EU farmers, the renewal Regulation incorporates several changes compared to Regulation (EU) 2023/1077, including the following safeguard mechanisms:

  • If a product originating from Ukraine that is covered by the trade-liberalisation measures is imported under conditions which adversely affect the Union market or the market of one or several member states for like or directly competing products, the Commission may now impose any necessary measures by means of an implementing act. Such measures may only be imposed upon a duly substantiated request from a member state.
  • Automatic safeguard mechanism which obliges the Commission to reintroduce tariff-rate quotas if the cumulative import volume of either eggs, poultry, sugar, oats, maize, groats, or honey exceeds the arithmetic mean of import volumes recorded in the second half of 2021, all of 2022 and all of 2023.
    • The automatic safeguard measure under Regulation (EU) 2023/1077 only covered eggs, sugar, and poultry. The renewal Regulation extends this measure to oats, maize, groats, and honey, offering better coverage for EU farmers. The renewal Regulation also shortens the delay for the Commission to act from 21 days to 14 days.
    • In addition – and this has been the object of much debate – the renewal Regulation extends the reference period to determine if imports have exceeded the arithmetic threshold to include the second half of 2021. Under Regulation (EU) 2023/1077, the threshold was assessed only for all of 2022 and 2023.

The renewal Regulation excludes from its scope the exemption for anti-dumping duties. As a result, all anti-dumping dumping duties will apply again on 6 June 2024.

  1. Increased tariffs on Russian and Belarusian grain products

In parallel, on 22 March 2024, the Commission proposed to increase the tariffs on imports into the EU of grain products (cereals, oilseeds, and derived products), as well as beet-pulp pellets and dried peas, from Russia and Belarus. The products concerned are classified under Chapters 7, 10, 12, 14, 15 and 23 of the Combined Nomenclature (CN) and are not currently subject to sanctions. This proposal was endorsed by the Council on 30 May 2024 and will enter into force on 1 July 2024.

This Regulation aims to:

  • Prevent EU market destabilisation by mitigating the growing risk to EU farmers.
  • Tackle Russian exports of illegally appropriated grain produced in the territories of Ukraine.
  • Prevent Russia from using revenues from exports to the EU – of both Russian and illegally appropriated Ukrainian grain products – to fund its war against Ukraine.

Depending on the product concerned, the tariffs will increase either to a fixed duty of €95 per tonne or to an ad valorem duty of 50%. Lastly, the EU’s WTO quotas on grain, which offer better tariff treatment for some products, will no longer be applicable to Russia and Belarus.

Looking ahead

  1. Next steps for the Regulation concerning Ukrainian grain imports

The renewal Regulation will enter into force on 6 June 2024 and will remain applicable until 5 June 2025.

  1. Next steps for the Regulation concerning Russian and Belarusian grain imports

The Regulation has been published in the EU’s Official Journal and will enter into force on 1 July 2024, meaning the increased tariffs will be imposed from that date.

Effective May 17, the Department of Homeland Security (DHS) is adding 26 China-based cotton traders and warehouse facilities to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List based on the U.S. government’s reasonable cause to believe the entities source or sell cotton from China’s Xinjiang Uyghur Autonomous Region (Xinjiang). These companies will now be subject to the UFLPA’s rebuttable presumption that the products they produce, wholly or in part, are prohibited from entry in the U.S.

The additions further DHS’s Textile Enforcement Plan. The 26 entities being added to the UFLPA Entity List are:

  • Binzhou Chinatex Yintai Industrial Co., Ltd.
  • China Cotton Group Henan Logistics Park Co., Ltd., Xinye Branch
  • China Cotton Group Nangong Hongtai Cotton Co., Ltd.
  • China Cotton Group Shandong Logistics Park Co., Ltd.
  • China Cotton Group Xinjiang Cotton Co.
  • Fujian Minlong Warehousing Co., Ltd.
  • Henan Yumian Group Industrial Co., Ltd.
  • Henan Yumian Logistics Co., Ltd. (formerly known as 841 Cotton Transfer Warehouse)
  • Hengshui Cotton and Linen Corporation Reserve Library
  • Heze Cotton and Linen Co., Ltd.
  • Heze Cotton and Linen Economic and Trade Development Corporation (also known as Heze Cotton and Linen Trading Development General Company)
  • Huangmei Xiaochi Yinfeng Cotton (formerly known as Hubei Provincial Cotton Corporation’s Xiaochi Transfer Reserve)
  • Hubei Jingtian Cotton Industry Group Co., Ltd.
  • Hubei Qirun Investment Development Co., Ltd.
  • Hubei Yinfeng Cotton Co., Ltd.
  • Hubei Yinfeng Warehousing and Logistics Co., Ltd.
  • Jiangsu Yinhai Nongjiale Storage Co., Ltd.
  • Jiangsu Yinlong Warehousing and Logistics Co., Ltd.
  • Jiangyin Lianyun Co. Ltd. (also known as Jiangyin Intermodal Transport Co. and Jiangyin United Transport Co.)
  • Jiangyin Xiefeng Cotton and Linen Co., Ltd.
  • Juye Cotton and Linen Station of the Heze Cotton and Linen Corporation,
  • Lanxi Huachu Logistics Co., Ltd.
  • Linxi County Fangpei Cotton Buying and Selling Co., Ltd.
  • Nanyang Hongmian Logistics Co., Ltd. (also known as Nanyang Red Cotton Logistics Co., Ltd.)
  • Wugang Zhongchang Logistics Co., Ltd.
  • Xinjiang Yinlong Agricultural International Cooperation Co.

Since the UFLPA was signed into law in 2021, 65 entities have been added to the UFLPA Entity List.

President Biden issued an order requiring a Chinese-owned crypto mining company to vacate and sell certain real property and remove equipment from land in close proximity to Warren Air Force Base (AFB) in Cheyenne, Wyoming.

In June 2022, the crypto mining company acquired 12.06 acres within 1 mile of the Warren AFB, a strategic missile base and home to Minuteman III intercontinental ballistic missile.  The parties to the transaction did not voluntarily notify CFIUS at the time of the transaction, and no filing was required.  Instead, approximately two years after the sale closed, a tip from the public led CFIUS to review the real estate transaction under its authority to review certain, so-called non-notified transactions. 

CFIUS identified national security risks relating to the proximity of the real property to Warren AFB and the presence of specialized equipment used to conduct cryptocurrency mining operations, some of which is foreign-sourced and potentially capable of facilitating surveillance and espionage activities. CFIUS determined mitigation measures would not be effective to address these national security risks and referred the transaction to the President.

President Biden ordered the crypto mining company to (1) sell or transfer the property within 120 calendar days; and (2) remove all equipment and improvements within 90 calendar days. The crypto mining company and its affiliates are immediately barred from any physical or logical access to the real estate, equipment, or improvements until divestment and removal are complete to CFIUS’s satisfaction. Additionally, they are required to cooperate fully, provide regular updates, and allow CFIUS access and inspection on reasonable notice to all premises and facilities in the United States for purposes of verifying and enforcing compliance. 

President Biden’s order is the first Presidential prohibition based on CFIUS’s real estate jurisdiction and the eighth Presidential prohibition in CFIUS’s approximately 48 years. This development highlights the need for foreign investors to evaluate their real property holdings and investments in the United States, particularly, but not limited to, those investors who are ultimately owned or controlled by Chinese nationals.  This development also demonstrates how CFIUS’s roll-out of tip reporting hotlines and other measures to review non-notified transactions continue to have an impact on existing investments in the United States.

On May 14, the Office of U.S. Trade Representative (USTR) published its report on the four-year review of the Section 301 tariffs on Chinese-origin goods first imposed in 2018. The report concludes that the tariffs have been effective, but China has not yet eliminated the technology transfer-related acts, policies, and practices at issue in the original investigation. Consequently, the USTR will continue to impose Section 301 tariffs on the products currently subject to additional duties.

The USTR is also proposing the following additions or increases to the Section 301 tariffs:

ProductCurrent TariffProposed Tariff
Battery parts (non-lithium-ion batteries)7.5%25% in 2024
Electric vehicles (EVs)25%100% in 2024
Facemasks and respirators (PPE)0–7.5%25% in 2024
Lithium-ion EV batteries7.5%25% in 2024
Lithium-ion non-EV batteries7.5%25% in 2026
Natural graphite0%25% in 2026
Other critical minerals0%25% in 2024
Permanent magnets0%25% in 2026
Rubber medical and surgical gloves7.5%25% in 2026
Semiconductors25%50% in 2025
Ship-to-shore cranes0%25% in 2024
Solar cells (whether or not assembled into modules)25%50% in 2024
Steel and aluminum products0–7.5%25% in 2024
Syringes and needles0%50% in 2024

The additions are intended to target China’s high-tech “new three”: solar products, lithium-ion batteries, and electric vehicles.

The USTR is also proposing creating an exclusion process targeting machinery used in domestic manufacturing, including 19 exclusions for certain solar manufacturing equipment (outlined at the end of the report).

The USTR will issue a Federal Register notice next week, which will provide additional details about the proposed modifications and exclusion process, as well as an opportunity for public comments.

The USTR’s report does not specifically address the current Section 301 exclusions that are set to expire on May 31.

On Friday, the Office of Foreign Assets Control (OFAC) published an interim final rule that will amend the Report, Procedures and Penalties Regulations, 31 C.F.R. Part 501, effective August 8, 2024. The updates include:

  • Electronic filing and submission requirements: Filers will generally be required to use the electronic OFAC Reporting System (ORS) to submit (1) initial reports of blocked property (which will also need to be maintained for the filer’s records); (2) annual Reports of Blocked Property; and (3) rejected transaction reports. Filers will also be required to submit the required documentation and notifications related to unblocked or transferred blocked property via email. Reports of unblocked or transferred blocked property can be submitted via email or ORS.
  • Unblocked or transferred blocked property reports: Filers will be required to submit unblocked or transferred blocked property reports (via email or ORS) within 10 business days of the unblocking or transfer, including pursuant to a valid order issued by a government agency or court.
  • Rejected transaction reports: The interim final rule clarifies that non-financial institutions’ rejected transaction reporting obligations includes transactions related to securities, checks, or foreign exchange, as well as sales or purchases of goods or services. The interim final rule also clarifies that the information that must be reported for a rejected transaction only applies to the extent the information is available to the filer at the time the transaction was rejected.
  • Compliance release requests for blocked property: The interim final rule extends the procedure for unblocking funds believed to have been blocked due to mistaken identity to any property blocked due to “typographical or similar errors leading to blocking.” Requests to release those funds can be emailed to OFAC’s Compliance Division. Only the person who mistakenly blocked the funds, however, may request a Compliance Release. Others will be required to request an unblocking license from OFAC’s Licensing Division.
  • Additional reports financial institutions may be required to provide: Under the interim final rule, if OFAC has reason to believe an account or transaction may involve a blocked person’s property or property interests, OFAC may issue instructions to a financial institution that (1) provide information or criteria to help identify the blocked property; or (2) require the financial institution to report transactions meeting specific criteria and notify OFAC before processing those transactions.

Interested parties can submit written comments about the interim final rule until June 10.