International Trade Law News

Published by Jacobson Burton Kelley PLLC

By Doug Jacobson and Michael Burton, Jacobson Burton PLLC

Today the U.S. Government took two measures to place pressure on Russia for its recent annexation of Crimea.

Addition of Chernomorneftegaz to BIS Entity List

First, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) added Crimea-based oil and gas company Chernomorneftegaz to the BIS Entity List in response to the recent expropriation of the company by Crimea's parliament.

Chernomorneftegaz, also known as NJSC Chornomornaftogaz, is a regional oil and gas company in Crimea that is a subsidiary of the Ukrainian company Naftogaz. Various news reports state that Chernomorneftgaz's assets are now being overseen by Russian government interests, including Gazprom.

The BIS Entity List, found in Supplement No. to Part 744 of the U.S. Export Administration Regulations (EAR), includes the names of businesses, research institutions, government organizations and individuals that have been identified as being involved in activities that merit additional scrutiny and licensing requirements. The entries on the Entity List specify the license requirements and license review policy that are applicable to shipments to each listed entity and in many cases the listed entities are prohibited from receiving items subject to U.S. jurisdiction. 

In this case, the Entity List designation for Chernomorneftegaz imposes a license requirement for the export, reexport or in-country transfer of items subject to the U.S. Export Administration Regulations to Chernomorneftegaz, with the presumption of denial. Thus, the practical impact of today's action is that no U.S. origin product, software or technology may be exported or reexported to Chernomorneftegaz.

Chernomorneftegaz is being identified under two separate entries on the Entity List, one in "Crimea (Occupied)" with an additional entry under "Ukraine".

In October 2012 BIS added 164 parties to the Entity List who were identified during a U.S. government investigation as assisting a network of companies and individuals involved in the procurement and delivery of U.S. electronic products to Russia.

Addition of Chernomorneftegaz and Seven Individuals to OFAC's SDN List

In a related move, the U.S. Department of the Treasury designated Chernomorneftegaz and seven individuals in Crimea under section 1 of Executive Order 13660 because of their alleged involvement in the "misappropriation of state assets of Ukraine or of an economically significant entity in Ukraine." 

These individuals and Chernomorneftegaz are now included on OFAC's SDN List under the [Ukraine] designation. 

The SDN listing for Chernomorneftegaz states that it does not include its parent company Naftogaz.

Executive Order 13660 prohibits U.S. persons from engaging in transactions with SDNs and requires and requires the freezing of any assets within U.S. jurisdiction that they may have.