Libya Sanctions and Restrictions: An Update for U.S. Companies
As a result of the recent events in Libya the United States and United Nations have announced various sanctions and other restrictions on transactions involving Libya. The following is a summary of these actions and their impact on U.S. companies:
Executive Order 13566 and OFAC
On Friday, February 25, 2011 President Obama signed an Executive Order (EO 13566) blocking the property and interests in property on the Gaddafi (Qadhafi) family, senior officials of the Libyan Government and others involved in the human rights abuses in Libya. The members of the immediate family of Colonel Muamar Gaddafi have been added to OFAC's SDN List. OFAC will soon be adding additional persons and entities to the SDN List.
The EO also blocks property and interests in the property of the Government of Libya, including the Government of Libya's "agencies, instrumentalities, and controlled entities." As a result, no transactions involving agencies of the Libyan Government can occur (such as the Ministries of Energy and Health, Civil Aviation Authority, etc.) or companies owned or controlled by the Libyan Government (such as the Libyan National Oil Company (NOC) can take place until further notice. OFAC considers any entity in Libya that is owned 50% or more by the Government of Libya to be owned or controlled by the Government of Libya.
While OFAC issued a General License (Libya General License No. 1) authorizing transactions with third-country financial institutions owned or controlled by the Government of Libya General License it remains to be seen how this General License can used for trade-related transactions.
While the U.S. has not yet reimposed the comprehensive ban on exports/reexports to or imports of commercial items from Libya (although see BIS and DDTC information below), given the large number of state-controlled companies in Libya, particularly in the oil and gas sector, U.S. companies should seek guidance before engaging in future transactions and payments involving companies that may be owned or controlled by the Government of Libya (this also applies to sales of medical products and medical devices to Libya's Ministry of Health and government operated hospitals in Libya). Most items subject to the Export Administration Regulations that are not classified as EAR99 currently require an export or reexport license to Libya.
BIS - Suspension of Export and Reexport Licenses
On March 3, 2011 the U.S. Department of Commerce's Bureau of Industry and Security (BIS) announced that it has suspended indefinitely all licenses that it has issued for exports or reexports to Libya. As a result, no further shipments may be made against BIS licenses for exports or reexports to Libya.
DDTC Suspension of ITAR Licenses and Exemptions
On February 26, 2011, the Directorate of Defense Trade Controls announced the immediate suspension of all export licenses for defense articles and technical data that have been issued under the ITAR. In addition, no ITAR exemptions may be utilized to export items subject to the ITAR to Libya.
The Census Bureau has advised that all such shipments to Libya reported to the Automated Export System will be fatally rejected with the following response message:
Response Code: 5C1 - DDTC License Suspended For Country
While the U.S. does not permit the export of weapons to Libya, section 126.1(k) of the ITAR currently authorizes the issuance of licenses and TAAs to Libya on a case by case basis to export to Libya non-lethal defense articles and services and non-lethal safety of use defense articles as spare parts.
FAA - Notice to Operators of Civil Aircraft
The U.S. Federal Aviation Administration has issued a notice to U.S. operators of civil aircraft to "exercise extreme caution" with respect to flight operations to or from Libya. The notice indicates that "that the ongoing unrest and reported Libyan military operations, to include aerial bombardments and unplanned military flights departing the [Tripoli airports], may a post a hazard to civil aviation.
U.S. companies planning to use corporate aircraft to remove personnel working in Libya should check with their flight handling company and the FAA for further updates.
Financial Crimes Enforcement Network (FinCEN) Advisory to Financial Institutions
FinCEN has issued an advisory to U.S. financial institutions to take "reasonable risk-based steps" with respect to any movement of assets involving Libya and reminding them of their requirement to apply enhanced scrutiny for private banking accounts held by or on behalf of senior foreign political figures and to monitor transactions that could potentially represent misappropriated or diverted state assets, proceeds of bribery or other illegal payments, or other public corruption proceeds.
U.S. financial institutions that know, suspect, or have reason to suspect that a transaction relating to senior foreign political figures in Libya involves illegal or suspicious activity they are required to file a Suspicious Activity Report (SAR).
United Nations Security Resolution 1970
By a 15-0 vote, the U.N. Security Council last night adopted resolution 1970 imposing sanctions and other actions on Libya. Many of these sanctions have already been implemented by the U.S. The full text of S/RES/1970 (2011) can be found here. Among other things, Security Resolution 1970 requires U.N. members to take the following measures with respect to Libya:
1. Arms Embargo and Other Arms Restrictions:
- All U.N. member states are prohibited to provide any kind of arms to Libya and allowing the transit to Libya of mercenaries.
- Libya is prohibited from exporting any arms to any other state.
- U.N. members should inspect suspicious cargo that may contain arms. When such arms are found, states are required to seize and dispose of them.
- Should strongly discourage their nationals from traveling to Libya to contribute to human rights violations.
- Seventeen Gaddafi loyalists are subject to an international travel ban.
- Six of these individuals, including Colonel Gaddafi and his immediate family members, are also subject to a freeze of their assets.
- The Security Council committed to ensure that any frozen assets will be made available to benefit the people of Libya.
- A Sanctions Committee is established to impose targeted sanctions on additional individuals and entities who commit serious human rights abuses, including ordering attacks and aerial bombardments on civilian populations or facilities.
3. Humanitarian assistance
- All U.N. members are called upon to work together to facilitate humanitarian assistance and support the return of humanitarian agencies.
- The Security Council expressed its readiness to consider additional measures to achieve the delivery of such assistance.
All U.N. members must implement the multilateral sanctions announced by the U.N. Security Council. The following are some links to these and other sanctions imposed by other countries on Libya:
- United Kingdom - On February 26, 2010 HM Treasury implemented the U.N. sanctions.
- Canada - In addition to the U.N. sanctions, on February 27, 2010 Canada announced that it will impose an asset freeze on, and a prohibition of financial transactions with the Government of Libya, its institutions and agencies, including the Libyan Central Bank. The Canadian implementing regulations can be found here.
- European Union - On February 28, 2011, the Council of the EU announced that it adopted a decision to implement the UN sanctions. In addition, the Council also stated that it would prohibit trade with Libya in equipment which might be used for internal repression.
- Switzerland - On February 24, 2011, Switzerland issued a regulation freezing the assets of 29 Libyans.