Overview
Following Russia’s military invasion of Ukraine on February 24, 2022, the United States and other major global economies have taken a range of actions to impose economic costs on Russia and Russian interests. These actions initially consisted of economic sanctions targeting Russian companies and individuals, but have been expanded to include trade in goods.
On March 11, 2022, the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States), as well as the European Union, issued a statement announcing their intention to impose additional economic costs on Russia in response to its military invasion of Ukraine, including with respect to trade in goods. The joint statement included a range of commitments aimed at isolating Russia from the world’s major economies and global financial institutions, including revoking Russia’s “Most Favored Nation” (MFN) status, which affords Russian imports access to favorable tariff rates among World Trade Organization (WTO) members, and imposing additional restrictions on exports and imports of “key goods and technologies” to Russia.
As discussed below, the United States, the European Union, and the United Kingdom have each taken steps to effectuate the G7 statement. In addition to revoking Russia’s MFN status, thereby increasing the cost of Russian imports generally, these jurisdictions have all imposed certain product-specific restrictions on the importation and/or exportation of specific goods from and/or to Russia. In certain instances, these measures have also been extended to cover trade with Russia’s ally Belarus.
United States
In addition to economic sanctions and export controls, the United States has imposed other limitations on trade in goods between the United States and Russia. While the overall level of bilateral trade between the United States and Russia is relatively low, with the United States importing USD 29.7 billion from and exporting USD 6.4 billion to Russia in 2021, trade in certain sectors (e.g., certain titanium products used by the US aerospace industry, petroleum/oil, etc.) remains significant. For instance, in 2021, the United States imported about 700,000 barrels of Russian crude oil and petroleum per day, which represents approximately half of all Russian imports (by value) into the United States.
Trade-oriented actions by the United States have thus far fallen into two categories: (1) targeted, product-specific restrictions on imports from and exports to Russia; and (2) the removal of MFN (also referred to as “Permanent Normal Trade Relations” or “PNTR”) status from Russia and its ally Belarus.
Product-Specific Restrictions
On March 8, 2022, the Biden Administration issued an Executive Order “Prohibiting Certain Imports and New Investments With Respect to Continued Russian Federation Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine.” In addition to several investment-related restrictions, the March 8 Executive Order also prohibits imports of Russian-origin crude oil; petroleum; petroleum fuels, oils, and products of their distillation; liquefied natural gas; coal; and coal products.
According to guidance published by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), the March 8 Executive Order is limited to the identified energy products and does not prohibit imports of non-Russian origin items, even if such items transit through or depart from Russia. Under OFAC General License No. 16, imports of Russian-origin energy products that were made pursuant to written contracts or agreements entered prior to March 8, 2022 are authorized through 12:01 a.m. eastern daylight time on April 22, 2022.
In parallel with the Administration, the US Congress has also acted to restrict Russian energy imports into the United States, with the House (H.R. 6968) and Senate (S.A. 5021) passing legislation that bans all Russian-origin products classified under Chapter 27 of the Harmonized Tariff Schedule of the United States (HTSUS). The legislation authorizes the President to waive the prohibition for national interest reasons, subject to congressional approval.
In connection with the joint statement of the G7 members, the Biden Administration issued on March 11, 2022 an Executive Order, “Prohibiting Certain Imports, Exports, and New Investment with Respect to Continued Russian Federation Aggression” imposing a range of prohibitions against trade and financial activities with Russia, including:
- Importation of Russian-origin fish, seafood, and preparations thereof; alcoholic beverages; non-industrial diamonds; and any other products of Russian origin determined by the Secretary of the Treasury;
- Exportation, re-exportation, sale, or supply, directly or indirectly, from the United States, or by U.S. persons, of luxury goods, and any other items determined by the Secretary of Commerce to any person located in Russia; and
- Exportation, re-exportation, sale, or supply, directly or indirectly, from the United States, or by U.S. persons, of U.S. dollar-denominated banknotes to the Government of the Russian Federation or any person located in Russia
- Presidential authority to unilaterally raise tariff rates on Russian and Belarussian imports to levels above Column 2 tariff rates until January 1, 2024;
- Presidential authority to restore, for periods not to exceed one year, PNTR for Russia and Belarus, subject to the certification to Congress of certain conditions (e., withdrawal of forces from Ukraine and cessation of military hostilities) and congressional disapproval; and
- Instruction to the Office of the US Trade Representative to take steps to encourage other WTO members to suspend trade concessions to Russia and Belarus and to consider further actions with a view toward suspending Russia from the WTO and halting Belarus’s WTO accession process.
- Deny imports from Russia and Belarus treatment under the United Kingdom’s MFN tariff rates;
- Impose an additional 35% tariff rate on top of current tariff rates; and
- Ban exports of certain luxury items to Russia.