On April 12, 2024, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued two new restrictions which prohibit the import of Russian-origin aluminum, copper, and nickel into the United States and limit the use of such metals on global metal exchanges and in over-the-counter derivatives trading. This action stems from the recent G7 Leaders’ Statement on February 24, 2024 detailing an interest in reducing Russia’s revenues from metals.

New US Restrictions

OFAC issued a new determination under Executive Order (“EO”) 14068, which prohibits the importation into the United States of Russian-origin aluminum, copper, and nickel produced on or after April 13, 2024. On the same day, OFAC also issued a determination under EO 14071, which prohibits the exportation, re-exportation, sale, or supply, from the US or by a US person, to any person located in Russia of:

(1) warranting services[1] for aluminum, copper, or nickel produced on or after April 13, 2024 on a global metal exchange; and/or

(2) services to acquire such metals as part of the physical settlement of a derivative contract.

As a result of these actions: (i) no Russian-origin aluminum, copper, and/or nickel can be imported into the US; (ii) US global metal exchanges (including the Chicago Mercantile Exchange) are prohibited from accepting such metals in any capacity (e.g. providing clearing services, or acting as a central counterparty to the trade of such metals); and (iii) US persons are prohibited from providing services to acquire such metals as part of a physically settled derivative contract. Accordingly, business entities in the metal industries should confirm whether any relevant metals originate in Russia.

For additional information on this action, see OFAC’s FAQs 1168 through 1172.

New UK Restrictions

On the same day, the UK government announced that it was taking action (jointly with the US) to “clamp down harder on prohibited Russian metal exports”, confirming that the London Metal Exchange (the “LME”) and the Chicago Mercantile Exchange will no longer trade new aluminium, copper and nickel produced by Russia.

This builds on the existing ban on the import of Russian metals discussed in our previous update. When those measures were introduced, they were accompanied by a trade licence permitting the LME, its members and their clients to acquire a warrant (relating to Russian metal located in a third country) on a global metal exchange, subject to certain conditions. That trade licence has now been amended so that it only applies to Russian metals located in a third country and produced before 23:59 on 12 April 2024.

The LME has published a notice with information on its understanding of this amendment and the measures that it is introducing to comply.

[1] OFAC in FAQ 1128 defines “warranting services” as issuing, registering, accepting, or acquiring a warrant or the underlying metal on a global metal exchange (i.e., a commodities exchange that provides infrastructure and services for the international trading of base metal derivatives contracts).

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We will continue to monitor developments in this area and encourage you to subscribe to be kept informed of latest developments. Please contact the authors or your usual Herbert Smith Freehills contacts for more information.

Jonathan Cross
Jonathan Cross
Partner, New York
+1 917 542 7824
Susannah Cogman
Susannah Cogman
Partner, London
+44 20 7466 2580
Elizabeth Head
Elizabeth Head
Counsel, London
+44 20 7466 6443
Christopher Boyd
Christopher Boyd
Associate, New York
+1 917 542 7821
Brittany Crosby-Banyai
Brittany Crosby-Banyai
Associate, New York
+1 917 542 7837
Yash Dattani
Yash Dattani
Law Clerk, New York
+1 917 542 7896