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Rusal's US contract customers can receive aluminum until June 5: attorney

New York — US customers of Rusal with a contract with the Russian aluminum producer pre-dating April 6 can continue to receive product until June 5, Cortney Morgan, a Washington-based partner in the law firm Husch Blackwell, told S&P Global Platts on Wednesday.

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Morgan noted, however, that there are issues around payment terms. "Payments must be made to a [blocked] US interest-bearing account," she said, adding that there are also a number of reporting of activity considerations.

The US sanctions are administered by the Office of Foreign Assets Control (OFAC), part of the US Treasury Department. Morgan's specialty at the firm is in export controls and sanctions. Unlike trade cases, such as the recent aluminum Section 232/tariffs -- which are based on material and physical shipments -- she explains that OFAC actions are financial.

"I don't think any aluminum would be seized," she said. "That's more the trade side; this is financial whereby accounts are frozen."



Morgan noted that OFAC also "doesn't have the manpower or the enforcement mechanism" to seize material.

Exemptions and exclusions have also been the talk in relation to tariffs -- but not so in sanctions cases.

On the OFAC side, if there is a US wholly owned subsidiary, it is also blocked -- meaning transactions prohibited, and assets frozen. "The intent is to financially hurt the parent company," Morgan said, "so it's unlikely that Rusal America would be exempted."

An OFAC general license would allow a certain activity until June 5, but after that it becomes a blocked entity.

On Friday, April 6, the US sanctioned a set of Russian individuals and entities, including Rusal owner EN+ Group (See stories, 1838, 2057 GMT). As a result of these sanctions, Rusal is not permitted to sell material into the US and its assets under US jurisdiction are frozen. US citizens are also forbidden from dealing with sanctioned parties, and non-US persons knowingly facilitating transactions between Rusal and US entities could also face punishment.

"In view of this development we request that you immediately withhold all payments and remittances to UC Rusal until further notice," Steve Hodgson, CEO, wrote to customers last Friday. "By this request, UC Rusal does not waive its rights to such payments or remittances, and reserves all remedies available to the company under our contracts and applicable law," he added.

Hodgson stressed to customers that the company was "working intensively to ensure continuity of our business together and are continuing to assess this development and payment pathways that are consistent with the terms of applicable law and the changing circumstances related to this designation."

Links for more information:

Husch Blackwell:https://www.huschblackwell.com/industries_services/export-controls-and-economic-sanctions

Treasury:https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_general.aspx

--Joe Innace, joseph.innace@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com