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November 01, 2007 

BIS Update 2007, Day 1, Breakout Session: Foreign Policy Controls & Economic Sanctions Q's & A's

Susan Hutner, one of two licensing division chiefs at OFAC led the session on Foreign Policy and Economic Sanctions. Distinguishing OFAC from other enforcement agencies of sanctions programs, Ms. Hunter explained that the agency administers politically-based sanctions against targeted governments and targeted entities. The sanctions are in the form of export and import restrictions, as well as financial restrictions.

Sanctions programs administered by OFAC began in 1995, with programs geared towards combating terrorism, weapons proliferation, international drug trafficking, and rogue regimes. The sanctions on rogue regimes, explained Hunter, are intended to target certain members of regimes such as individual government actors and certain individual entities. A distinguishing factor of this type of sanction is that it does not involve territorial restrictions. Rather, the programs target individuals and designated persons, wherever located.

With respect to restrictions on financial transactions, such sanctions are of great importance to OFAC, because financing will always be an integral part of trade transactions. Financial institutions often transact business with the many entities designated by one of the programs program. Financial institutions, for example, could be a downstream intermediary or one of the banks at the front lines of financing a trade transaction.

Sanctions programs play a different role than export controls. The current sanctions programs administered for terrorist designated countries are Cuba, Iran, North Korea, Sudan and Syria. The sanctions programs that include territorial restrictions and export restrictions are Burma, Cuba, Iran, Sudan and Syria. The most comprehensive programs include trade restrictions, as well as blocked assets.

Comprehensive sanctions are approached differently. For example, the sanctions on Iran include no blocking activities. Under the Cuban program, however, the assets of the government and non-Cuban nationals that are subject to OFAC jurisdiction may be blocked. For Sudan, the only assets blocked are those belonging to the government. With respect to Syria, BIS administers the ban on the exportation of U.S. origin goods to that country, while OFAC administers the program that blocks certain assets.

Today, most OFAC programs provide a list of entities whose assets are blocked. The list includes both individuals and vessels. These programs, which target rogue regimes endeavor to curtail terrorism, narcotics trade and proliferation activities. Blocked property may include trade goods, trade contracts and trade documents. In other words, the contracts are considered “property” and are subject to being blocked.

Because the sanctions programs may be subject to one of two relevant laws (i.e., IEEPA and TWEA), it may be necessary to read the regulations in light of the Executive Order.

Summary of Major Actions in Past Year:

For Sudan, the President signed an Executive Order to lift sanctions on Southern Sudan, while maintaining sanctions programs against the North.

With respect to Iran, four additional banks and the Iranian military were sanctioned as part of new list based programs. Iran, as well as Lebanon are part of the evolving list-based programs administered by OFAC.

Lebanon and Iran are now subject to new list-based programs. Such programs entail a process through which certain individuals who are undermining peaceful development of these governments, or supporting terrorist activities are identified.

Glen Kaminsky, an attorney in BIS's Office of Chief Counsel, characterized these recent developments as a change in strategy. He noted that the trend now is to respond to threats in a more targeted way. As country based programs are more heavily criticized and seen as less effective, the agencies have begun to target individual entities that are linked with terrorism and weapons of mass destruction proliferation. Under targeted sanctions, the agencies seek to identify rogue actors, so that the trade community can be informed about which entities to avoid.

In other news, OFAC announced that the regulations implementing the Darfur Peace and Accountability Act were published in yesterday's Federal Register (see related post from October 31st).

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