US Imposes Export Controls on Luxury Goods, Issues More Russia Sanctions
The U.S. announced a set of new export controls and sanctions against Russia last week, including new restrictions on luxury goods and full blocking sanctions on Russian government officials and bank executives. The measures, outlined in a March 11 executive order, also include new banking and financing-related restrictions meant to further cut Russia’s economy off from the global financial system and target Russian oligarchs.
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The export restrictions on luxury goods, which also apply to Belarus, bring both countries more closely in line with trade restrictions against North Korea, the only other country subject to those U.S. luxury good restrictions, said Thea Kendler, the Bureau of Industry and Security's assistant secretary for export administration. “Today’s action should remind [Russian President Vladimir] Putin and his Russian and Belarusian cronies that the world strongly condemns the horrors they have wrought,” Kendler said.
The restrictions will apply to exports of high-end watches, luxury vehicles, high-end apparel, high-end alcohol, jewelry and other “goods frequently purchased by Russian elites,” the White House said in a fact sheet. The annual export value of the goods covered by the new controls is nearly $550 million, the White House said. “These are the latest steps we're taking,” President Joe Biden said of the export controls, “but they're not the last steps.”
In a final rule effective March 11, BIS said it will impose a license requirement on all "luxury goods" subject to the Export Administration Regulations that are destined for Russia or Belarus, with "very limited" license exceptions. It will also impose another license requirement -- with no available exceptions -- on luxury exports destined to certain Russian and Belarusian oligarchs and "malign actors" sanctioned by the Treasury Department, regardless of their "geographical location." BIS will impose a license review policy of denial.
BIS also created a new section in the EAR to help exporters determine what items constitute a luxury good. The section, supplement no. 5 to part 746 of the EAR, lists goods subject to the new license requirements, their "Schedule B, 2-Digit Chapter Headings, and 10-Digit Commodity Descriptions and Per Unit Wholesale Price in the U.S. if applicable." All exports that now require a license as a result of these changes that were aboard a carrier to a port as of March 11 may proceed to their destinations under the previous eligibility, BIS said.
Biden's executive order also authorizes Commerce, after consultation with the State and Treasury departments, to impose controls on “any other items” that may be going to “any person located in the Russian Federation.” Other provisions block exports, reexports, sales or supplies of U.S. dollar-denominated banknotes to Russia and restrict U.S. people from financing a transaction by a foreign person if that transaction would normally be blocked in the U.S. by the order.
Along with the export controls, Treasury’s Office of Foreign Assets Control issued blocking sanctions on more Russian officials and oligarchs, including billionaires Yuri Kovalchuk and Viktor Feliksovich Vekselberg. Others targeted include 10 executives at sanctioned VTB Bank and members of the Russian Duma who sponsored legislation to recognize the so-called “Donetsk People’s Republic” and “Luhansk People’s Republic.”
Treasury also issued several new general licenses to allow certain transactions and activities under the new executive order. GL 18 authorizes certain noncommercial, personal remittances involving U.S. dollar-denominated banknotes; GL 19 authorizes certain transactions related to Russia that are necessary for “personal maintenance,” including housing expenses, taxes or public utility services; and GL 23 authorizes certain transactions involving non-governmental organizations in the so-called Donetsk People’s Republic or Luhansk People’s Republic regions of Ukraine.
Newly-issued frequently asked questions provide more information on the order and the licenses. In FAQ 1,021, the agency stressed that the new restrictions and sanctions also extend to transactions conducted with virtual currency. OFAC warned that Russia uses “a wide variety of measures in their efforts to evade U.S. and international sanctions” and urged U.S. people and companies to be “vigilant against attempts to circumvent OFAC regulations.” The agency said it’s “closely monitoring” efforts to evade U.S. sanctions, including through virtual currencies, and will use “broad enforcement authorities to act against violations and to promote compliance.”
The sanctions are part of a coordinated effort with G-7 countries to raise “pressure” on Russia and target more oligarchs, Biden said. He also said the countries are “increasing coordination” to seize their frozen assets. “They support Putin, they steal from the Russian people and they seek to hide their money in our countries,” Biden said.“They must share in the pain of these sanctions.”
In a joint statement, the G-7 countries, including the EU, said they are strongly monitoring Russian attempts to evade sanctions and "stand ready" to impose more export restrictions on "key" goods and technologies. The EU also plans to ban exports of luxury goods to Russia. "We will make sure that the elites, proxies and oligarchs that support President Putin’s war are deprived of their access to luxury goods and assets," the countries said. "The elites who sustain Putin’s war machine should no longer be able to reap the gains of this system, squandering the resources of the Russian people."