OFAC adds 1, updates 1 Ukraine/Russia General License, + FAQs

Today, OFAC issued a new General License for the Ukraine/Russia-related sanctions program. General License 14 authorizes transactions that are “ordinarily incident and necessary to the maintenance or wind down of operations, contracts, or other agreements, including the importation of goods, services, or technology into the United States” related to United Company RUSAL PLC and its 50 Percent Rule holdings for 6 more months (till October 23rd). Turns out UC Rusal has a US subsidiary (which my firm had already authorized).

Additionally, General License 12 has been replaced with 12A, which extends the deadline for other wind-down operations until June 5th (basically, an extra month).

OFAC also issued the following FAQs:

574. Will foreign persons be subject to sanctions for doing business with the individuals or entities designated under E.O. 13661 or E.O. 13662, or blocked pursuant to OFAC’s 50 percent rule on April 6, 2018 as a result of such a designation?

Section 228 of CAATSA amends SSIDES by inserting a mandatory sanctions provision on foreign persons that Treasury determines, inter alia, knowingly facilitate significant transactions, including deceptive or structured transactions, for or on behalf of any person subject to U.S. sanctions with respect to the Russian Federation, or their child, spouse, parent, or sibling.  Additionally, section 226 of CAATSA amends UFSA by making the sanctions in that section mandatory.  Under the amended section 5 of UFSA, foreign financial institutions face correspondent account or payable through account sanctions if the Secretary of the Treasury determines, inter alia, that they knowingly facilitate significant financial transactions on behalf of any Russian person added to OFAC’s SDN List pursuant to UFSA, E.O. 13660, E.O. 13661E.O. 13662E.O. 13685, or any other E.O. addressing the crisis in Ukraine.

As described in FAQs 542 and 545, a transaction is not “significant” if U.S. persons would not require specific licenses from OFAC to participate in it.  Therefore, activity authorized by Ukraine-/Russia-related General Licenses 12A and 13, and occurring within the time period authorized in these general licenses, would not be considered “significant” for the purposes of a sanctions determination under section 10 of SSIDES, as amended by CAATSA, and section 5 of UFSA, as amended by CAATSA.  Nothing in the general licenses should be construed as authorizing deceptive or structured transactions.    

The intent of the designations on April 6, 2018 is to impose costs on Russia for its malign behavior.  The United States remains committed to coordinating with our allies and partners in order to mitigate adverse and unintended consequences of these designations.  [04-23-2018]


575. Why is OFAC issuing General License 14, and what new activity does it authorize?

The purpose of General License 14 is to allow United Company RUSAL PLC (RUSAL) or any other entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest, to continue maintenance or wind down activities until October 23, 2018. Although all funds blocked prior to 12:01 a.m. eastern daylight time, April 23, 2018 remain blocked, the general license authorizes the use of these blocked funds for the maintenance and wind down activities described in General License 14. In addition, U.S. persons are not required to block transactions authorized by General License 14 that occur on or after April 23, 2018, except for transactions involving blocked persons other than RUSAL or any other entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest. For a discussion of the relationship between General License 14 and foreign persons, please see FAQs 579 and 580

[04-23-2018]


576. Under what circumstances can OFAC give further sanctions relief to RUSAL or any other entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest?

Consistent with OFAC regulations, parties may be removed by demonstrating a change in the circumstances that led to their designation. In the case of RUSAL, absent other adverse information and consistent with the facts and circumstances of any petition for delisting, the path for the United States to provide sanctions relief is through divestment and relinquishment of control of RUSAL by Oleg Deripaska. 

[04-23-2018]


577. I am a U.S. person holding accounts for or other property of RUSAL or another entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest. Does General License 14 allow me to unblock this property?

No. All accounts or other property of RUSAL or any other entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest blocked as of April 23, 2018 remain blocked, except for the use in maintenance and wind-down activities described in General License 14. U.S. persons, however, may engage in transactions authorized by General License 14 that occur on or after April 23, 2018 without blocking payments associated with such transactions, except for transactions involving blocked persons other than RUSAL (including any other entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest).

[04-23-2018]


578. How is General License 12A different from General License 12?

General License 12A now reflects the authorization in General License 14. Specifically, U.S. persons are not required to place into a blocked account payments to or for RUSAL, or any other entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest, for activities authorized by General License 14. Activities necessary to the maintenance or wind down of operations or existing contracts of RUSAL and any other entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest, are authorized pursuant to General License 14 through October 23, 2018.

[04-23-2018]


579. Will foreign persons be subject to sanctions under CAATSA for engaging in activity with RUSAL or any other entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest?

As described in FAQs 542545, and 574, a transaction will not be considered “significant” for the purposes of a sanctions determination under section 10 of SSIDES, as amended by section 228 of CAATSA, and section 5 of UFSA, as amended by section 226 of CAATSA, if U.S. persons would not require specific licenses from OFAC to participate in such a transaction. Therefore, activity authorized by General License 14, and occurring within the time period authorized by General License 14, would not be considered “significant” for the purposes of a sanctions determination under section 10 of SSIDES, as amended by CAATSA, or section 5 of UFSA, as amended by CAATSA.

[04-23-2018]


580. I am a foreign person that seeks to pay RUSAL or another entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest for goods or services connected with maintenance or wind-down activities authorized by General License 14. Am I required to deposit payment into a blocked account at a U.S. financial institution in order for my payment to not be considered “significant” for purposes of section 10 of SSIDES, as amended by section 228 of CAATSA, or section 5 of UFSA, as amended by section 226 of CAATSA? 

No. U.S. persons may engage in activities authorized by General License 14 that occur on or after April 23, 2018, except for activities involving blocked persons other than RUSAL (or any other entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest) without making associated payments into a blocked account. Similarly, foreign persons may engage in activities that would be authorized by General License 14 if engaged in by a U.S. person without making associated payments into a blocked account. 

[04-23-2018]


581. I am a U.S. person that seeks to supply goods to RUSAL. Am I permitted to export those goods from the United States to RUSAL pursuant to General License 14?

Yes. General License 14 does not restrict exports to RUSAL (or any other entity in which RUSAL owns, directly or indirectly, a 50 percent or greater interest), provided that the activity is for maintenance or wind down and consistent with the requirements of other federal agencies.

[04-23-2018]


582. I am located outside of the United States and seek to export goods from a third-country location in connection with activity for the maintenance or wind down of an entity listed on General License 12A (or any other entity in which a listed entity in 12A owns, directly or indirectly, a 50 percent or greater interest). Would such exports be prohibited under General License 12A or otherwise subject to section 10 of SSIDES, as amended by section 228 of CAATSA, or section 5 of UFSA, as amended by section 226 of CAATSA?

No. Although General License 12A does not authorize the exportation of goods from the United States, paragraph (c)(4) of General License 12A does not similarly apply to the exportation of goods from a third country to another location. 

[04-23-2018]

And Treasury issued the following press release:

Treasury Extends Wind-Down Period for United Company RUSAL PLC

 
APRIL 23, 2018

OFAC Issues General License to Mitigate Impact on Parties Affected by Deripaska Designation

 

WASHINGTON – The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today issued General License 14in the Ukraine-/Russia-related sanctions program. 

General License 14 authorizes U.S. persons to engage in specified transactions related to winding down or maintaining business with United Company RUSAL PLC (RUSAL) and its subsidiaries until October 23, 2018.  In accordance with preexisting OFAC guidance, OFAC will not impose secondary sanctions on non-U.S. persons for engaging in the same activity involving RUSAL or its subsidiaries that General License 14 authorizes U.S. persons to engage in.

“RUSAL has felt the impact of U.S. sanctions because of its entanglement with Oleg Deripaska, but the U.S. government is not targeting the hardworking people who depend on RUSAL and its subsidiaries,” said Treasury Secretary Steven T. Mnuchin. “RUSAL has approached us to petition for delisting.  Given the impact on our partners and allies, we are issuing a general license extending the maintenance and wind-down period while we consider RUSAL’s petition.”  

In addition to General License 14, today OFAC also published several FAQs regarding to the general license’s authorizations and limitations, and issued an amended General License 12A.

On April 6, 2018, OFAC designated RUSAL for being owned or controlled by, directly or indirectly, EN+ Group.  In that same action, OFAC designated EN+ Group for being owned or controlled by, directly or indirectly, Oleg Deripaska and other entities he owns or controls.  RUSAL is based in the Bailiwick of Jersey and is one of the world’s largest aluminum producers.

Nice, touch, by the way – the Recent Actions page now shows links to related Press Releases.

Links:

OFAC Notice

Ukaine/Russia Related General Licenses – 12A14

New FAQs

Treasury Press Release

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