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December 07, 2015 

Update on Iran and Other OFAC Sanctions Programs

By Glen Kelley, Doug Jacobson and Michael Burton, Jacobson Burton Kelley PLLC

During the past few weeks there have been a number of important developments in varoius US economic sanctions programs adminsitered by the US Treasury Department's Office of Foreign Assets Control (OFAC). The following is a summary of some of the key developments and links to the relevant documents. 

A. Timing of Iran Sanctions Relief Under Iran Nuclear Agreement 

There is widespread interest in the timing of the implementation of the sanctions relief called for under the July 2015 multilateral agreement with Iran. This agreement, the Joint Comprehensive Plan of Action (JCPOA), is commonly referred to as the Iran nuclear agreement. 

As discussed in our previous update, on October 18, 2015 the United States and the EU marked “Adoption Day” of the JCPOA. On that day Iran formally began to implement its extensive obligations to dismantle significant portions of its nuclear program.

When Iran has completed these obligations, as verified by the IAEA, the “Implementation Day” milestone will be reached under the JCPOA, and the JCPOA sanctions relief will take place. There is widespread speculation as to when Implementation Day will occur. Numerous Iranian government officials and some EU government officials have suggested that sanctions relief will take place as early as January 2016. In our view January 2016 is optimistic, given the numerous steps that Iran must implement to comply with the JCPOA and since everything related to the JCPOA has taken much longer than anticipated. 

As we have previously noted, after Implementation Day there will be very few changes in the broadest US sanctions on Iran that are applicable to US persons, companies and US-origin products. Rather, the changes will primarily involve the easing of US secondary (extraterritorial) sanctions on Iran, and the lifting of primary sanctions on Iran imposed by the EU and other countries.

B. US Treasury Department Statement and Guidance on Iran Business Activities

Reacting to the interest in Iran-related business expressed by many companies, on November 25, 2015 the US Treasury Department spokesperson for the Office of Terrorism and Financial Intelligence issued a statement on sanctions relief under the JCPOA, which noted:
“non-U.S. companies and individuals will not be subject to U.S. sanctions if they engage in initial discussions about potential business opportunities or travel to Iran to examine the possibilities of business relationships after sanctions are lifted. However, entering into contracts involving Iran prior to Implementation Day may be sanctionable. For this reason, we recommend the companies seek expert guidance before executing any contract or beginning a formal business relationship involving Iran prior to Implementation Day.”
The Treasury spokesperson also referred to OFAC guidance released on Adoption Day stating that before JCPOA implementation, a non-US person may be penalized under US sanctions if they enter into a contract involving Iran or its government, even if the contract is made contingent on the JCPOA sanctions relief. As always, whether US primary or secondary (extraterritorial) sanctions apply to a non-US person depends upon a number of factors involving the parties and activities involved.

This statement appears to strike a balance between encouraging non-US companies to consider the possibility of re-engaging with Iran in certain areas, after the JCPOA sanctions relief is implemented, and reminding companies that primary and secondary sanctions are still in place. 

C. Belarus Sanctions Temporarily Suspended

On October 30, 2015 the United States temporarily suspended its sanctions targeting certain Belarusian companies and the EU suspended most, but not all, of its sanctions against Belarus the following day. These measures are particularly significant for petroleum and petrochemical companies, which had been unable to engage in many transactions in Belarus due to the pervasive and non-transparent roles the sanctioned entities play, particularly Belneftekhim (the Belarusian State Concern for Oil and Chemistry).
            
The suspension of US sanctions on these entities should mitigate this compliance challenge, though certain transactions may still be prohibited if they involve President Lukashenko or any other person who remains on OFAC's List of Specially Designated Nationals (“SDN list”). However, companies should bear in mind that it is possible the US or EU will not renew the respective sanctions suspensions when they expire in April and February 2016. 

Our detailed explanation of the US and EU suspension of the Belarus sanctions is available here.

D. Cuba Payments Guidance

The US government has signaled that it will continue to try to clear the way for US companies and financial institutions to engage in the transactions relating to Cuba that are now authorized under the recent amendments to US sanctions, although most transactions remain prohibited. We summarized the last major round of Cuba sanctions relief and related guidance in our September 21,2015 update.

In a further small step in this direction, on November 25, 2015 OFAC added a new item to its frequently asked questions guidance for the Cuba, available here. This new guidance is intended to assist US financial institutions in becoming more comfortable in processing payments related to authorized travel to and from Cuba. It reads in part as follows:
52. Is a financial institution required to independently verify that an individual’s travel is authorized when processing Cuba travel-related transactions?
No. A financial institution may rely on U.S. travelers to provide their certifications of authorized travel directly to the person providing travel or carrier services when processing Cuba travel-related transactions, unless the financial institution knows or has reason to know that the travel is not authorized by a general or specific license.
E. US Sanctions Relating to Conflicts in Africa

There have been a number of recent developments in US sanctions relating to various African conflicts.

First, on November 12, 2015, President Obama issued Executive Order 13710 terminating the OFAC sanctions program targeting former Liberian President Charles Taylor and other persons. President George W. Bush had originally established this program in 2004. Along with the lifting of the Liberia sanctions program, a number of individuals now playing significant roles in Liberia’s companies and political scene were removed from the SDN list.

Separately, on November 23, 2015, President Obama issued Executive Order 13712 creating a US sanctions program for specified individuals in Burundi. Four individuals were immediately designated under the order, two being senior Burundi government officials and two being two senior opposition figures that earlier this year had led a failed coup seeking to overthrow the current government. Additional individuals may be designated for contributing to instability, undermining democratic processes, violating human rights or committing acts of violence in Burundi.

The United States, in many cases acting alongside the UN or EU, has recently imposed or updated targeted sanctions on individuals and entities involved in several other conflicts in African countries. These include the sanctions programs for the Central African Republic (established in 2014), Cote-d’Ivoire (2006), the Democratic Republic of the Congo (2006), Somalia (2010), South Sudan (2014) and Zimbabwe (2003).

F. US Sanctions Network Providing Support to Syrian Government and Facilitating Oil Purchases from ISIL

On November 25, 2015, the US Treasury Department added four individuals and six entities to the SDN List for allegedly providing support to the Government of Syria, acting pursuant to Executive Order 13582 of 2011. All assets of the designated persons that are located in the US or that are in the control of US persons must be blocked (frozen) and US persons are generally prohibited from engaging in transactions with the designated persons.

As explained in the Treasury Department’s statement, the designations were made for various reasons, including facilitation of oil purchases by the Syrian Government from the Islamic State of Iraq and the Levant (ISIL or ISIS). One of the designated individuals is a Russian national who has served for many years as president of the World Chess Federation (FIDE). OFAC also added to the SDN List a Syrian engineering company, a Russian bank, a trading company and several other companies owned by the individuals that were designated.

G. OFAC Updates List of Medical Supplies Eligibile to be Exported to Iran Under a General License

OFAC recently published an updated list of medical supplies that are eligible to be exported to Iran under the general license contained in OFAC’s Iranian Transactions and Sanctions Regulations (ITSR). 

Items that are included on OFAC’s list of medical supplies do not require a specific license to be obtained from OFAC prior to being exported or reexported to Iran, but can be exported to permissible customers in Iran under the authority of the general license.  

The updated list includes a number of new cardiology, radiology and other medical products, including CPAP systems and contraceptives. 

To reflect that this list now contains a broader category of items than basic medical supplies, OFAC also changed the name of the list to “List of Medical Supplies” from “List of Basic Medical Supplies”. 


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Monday, December 07, 2015 |posted by Douglas N. Jacobson| |

November 01, 2015 

US and EU Temporarily Suspend Certain Sanctions on Belarus

By Glen Kelley, Doug Jacobson and Michael Burton, Jacobson Burton Kelley PLLC 

 The United States and European Union last week announced that the targeted sanctions against Belarus that were first imposed in 2004 will be relaxed effective October 30, 2015. 

Although the sanctions relief at this point is of limited duration and scope, it will allow new transactions with Belneftekhim State Concern for Oil and Chemistry, one of Belarus' largest groups of companies. 

For several months EU officials had been signaling that the EU might suspend certain sanctions targeting Belarusian companies and individuals, if the Belarusian government took steps to better respect political and social rights. With the Belarusian government’s release of political prisoners in August, and elections in October that were perceived to involve less government intimidation of the opposition than in recent years, the EU is taking the view that this condition has been met.

On October 29, 2015 the EU announced the suspension of most, but not all, of its sanctions against Belarus. The EU sanctions suspensions are effective as of October 31, 2015, the date each year when the EU sanctions targeting Belarusian companies and individuals either expire or are renewed.

In a less widely expected move, on October 29 the US also suspended many of its sanctions targeting certain Belarusian companies on the US list of Specially Designated Nationals and Blocked Persons ("SDN list"), effective October 30. In announcing the suspension, a US State Department spokesperson commented that “this limited reprieve from sanctions opens the door to expanded commercial ties for the Belarusian economy”.

The key documents on the EU side include an implementing regulation, available here. On the US side, the US Treasury Department's Office of Foreign Assets Control (“OFAC”) issued Belarus General License No. 2 that can be found here. 

 Subject to a number of caveats mentioned below, OFAC Belarus General License 2 provides that "All transactions otherwise prohibited by Executive Order 13405 involving the following named entities, or any entities that are owned, individually or in the aggregate, directly or indirectly, 50 percent or more by one or more of the following named entities, are authorized":
  • Belarusian Oil Trade House
  • Belneftekhim (formally known as Belneftekhim State Concern for Oil and Chemistry)
  • Belneftekhim USA, Inc.
  • Belshina OAO
  • Grodno Azot OAO
  • Grodno Khimvolokno OAO
  • Lakokraska OAO
  • Naftan OAO
  • Polotsk Steklovolokno OAO
The OFAC and EU measures are particularly significant for US and EU petroleum and petrochemical companies, which had largely been prohibited from engaging in many transactions in Belarus due to the pervasive and non-transparent roles these entities play. In particular, the Belneftekhim Concern has numerous affiliates that are widely involved in Belarus' oil and gas sector. 

 At the same time, OFAC's general license does not authorize transactions, directly or indirectly, with any other person whose property and interests in property are blocked pursuant to the Belarus sanctions program. Also, the US sanctions relief only applies to prospective transactions with the named entities, meaning the blocked (frozen) assets of the named entities must remain blocked.

Please note that the Belarusian entities covered by the OFAC general license remain on the SDN list even through sanctions against them have been suspended, so automated sanctions screening systems may continue to pick up any references to these entities.


While the US and EU actions clearly were coordinated and intended to complement each other, there are some important practical differences in the US and EU sanctions and the sanctions relief, including the following.

First, the EU sanctions suspensions have effect only for four months, through February 29, 2016, while the US suspensions will remain in place for six months, unless modified by OFAC, until April 30, 2016. Whether the sanctions will remain suspended will be evaluated early next year by the EU and US governments.

Second, the EU suspended its sanctions on many Belarusian individuals and government officials, including President Lukashenko. By contrast, the US did not suspend any sanctions targeting Lukashenko or any other individuals.

Third, the impact of sanctions designations on the subsidiaries and other affiliates of designated persons is different under EU and US sanctions, and arguably broader on the US side:
  • Under EU sanctions it is prohibited to indirectly make available funds or other economic resources to a designated person, and this could for example impact some transactions with a non-designated subsidiary of a designated person.
  • On the US side, under OFAC's "50% rule", an entity is considered “blocked by operation of law" (subject to asset freezing), even if it is not on the SDN list, if one or more persons on the SDN list have a 50% or greater ownership interest in that entity. The Belarus sanctions program was the initial context for OFAC to release the 50% rule.
OFAC's 50% rule was particularly challenging to apply under the Belarus sanctions because Belneftekhim is widely understood to be effectively a holding company for the government’s extensive interests in companies across the Belarusian economy, in many cases through non-transparent structures. The suspension of US sanctions on Belneftekhim and other entities should mitigate this compliance challenge, though certain transactions may still be prohibited if they involve President Lukashenko or any other person who remains on the SDN list. We expect that OFAC would approach the degree of involvement by an individual blocked person similar to the manner its approach under the Russia/Ukraine sanctions program.

Fourth, the US has imposed a reporting requirement on US persons that engage in transactions with any of the Belarusian entities for which sanctions are suspended. The EU has not imposed such a special reporting requirement. US persons must submit reports must to the US Department of State within 15 days of any transaction or series of transactions that have an aggregate value exceeding US $10,000.

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Sunday, November 01, 2015 |posted by Douglas N. Jacobson| |

October 19, 2015 

US and EU Mark "Adoption Day" of Iran Nuclear Agreement

While US and EU Mark Adoption Day of the Iran Nuclear Agreement, Current Sanctions Regime on Iran Will Remain in Effect Until Implementation Day

By Glen Kelley, Doug Jacobson and Michael Burton, Jacobson Burton Kelley PLLC

We continue to follow the gradual progress by the United States, the EU, Iran and other countries towards the implementation next year of sanctions relief under the July 2015 agreement with Iran, formally called the Joint Comprehensive Plan of Action (“JCPOA”).

Our most recent post on Iran sanctions compliance for US and non-US companies under the JCPOA can be found here. 

Adoption Day and Implementation Day

Yesterday, October 18, the United States and the EU marked “Adoption Day”, a milestone that follows several initial steps by the US, EU and Iran, pursuant to the phased timeline set out in the JCPOA.

Iran must now satisfy its extensive obligations to scale back its nuclear activities, and the US and EU have formally begun preparing to ease sanctions next year if Iran verifiably meets those commitments. To this end, on October 18 both the US and EU released a number of legal and guidance documents relating to the planned sanctions relief.

It is important to note that none of the sanctions relief will be effective until Iran has satisfied its nuclear-related commitments under the JCPOA.

Once Iran has satisfied its JCPOA conditions and this is verified by the IAEA, the next JCPOA milestone known as “Implementation Day” will be reached. While Iranian officials have ambitiously announced they intend to fulfill their commitments within a few months, this is not widely expected to occur until at least mid-2016.

As we noted in our previous alerts, even if the JCPOA is fully implemented, very little will change with respect to the broad US embargo of Iran. In practical terms, most transactions with Iran, its government, and many targeted Iranian companies will remain prohibited if US persons, US products or US dollar payments are involved.

If the JCPOA is implemented next year, the EU will lift the majority of its sanctions on Iran, and the US will lift the majority of its “secondary” (extraterritorial) sanctions that apply to non-US companies and banks. However, a number of EU sanctions and US secondary sanctions will remain, presenting compliance challenges for many otherwise-permissible transactions by non-US persons.


Key US and EU Documents
The principal legal instruments and guidance issued on October 18 in relation to the anticipated US and EU sanctions relief are as follows:
  • The US Treasury Department's Office of Foreign Assets Control (“OFAC”) issued guidance on frequently asked questions (“FAQ”) related to JCPOA implementation. These are available at http://1.usa.gov/1hM0zdj.
  • The US State Department issued “contingent waivers” of the US secondary sanctions covered by the JCPOA, which will not become effective until Implementation Day. These are available at http://1.usa.gov/1hMsFFo.
  • A Decision and two implementing Regulations issued by the Council of the European Union, setting out the precise parameters of the EU sanctions that will be lifted if Implementation Day is reached. These are available at http://bit.ly/1XdKvRy. 

Sanctions Compliance Issues Worth Noting

There is little that is new or unexpected in the documents released by the US on October 18, 2015. However, the following points are worth noting:
  • Until Implementation Day, non-US persons could be penalized by the US government for entering into certain types of contracts with Iran, its government or sanctioned Iranian persons. The OFAC FAQ guidance indicates that this could include contacts “that are contingent on the implementation of sanctions relief under the JCPOA”, meaning contracts that will not be performed until applicable sanctions are lifted.
  • If US sanctions relief occurs next year, many entities owned or controlled by the Iranian government will be removed from the primary US sanctions list (the list of Specially Designated Nationals, or “SDN List”). However, all Iranian government entities will remain “blocked”, and OFAC officials have publicly stated that those removed from the SDN List likely will be included in a special new list of blocked entities.
  • Many of these Iranian government entities play an important role in the Iranian economy, so it will be important to know whether they can be involved in transactions carried out pursuant to any JCPOA sanctions relief that is implemented next year. The new State Department guidance suggests that these entities could be involved in transactions that are authorized pursuant to the JCPOA, including any export from the US of commercial passenger aircraft or related equipment and services that is specifically licensed by OFAC.
  • On the other hand, it appears from the State Department guidance that the US secondary sanctions to be suspended on Implementation Day will remain in effect for transactions involving entities or individuals that remain on the SDN List. This could complicate US sanctions compliance for non-US persons after the JCPOA is implemented. It is possible non-US persons with no ties or connections to the United States could still be penalized under US secondary sanctions for engaging in certain activities relating to Iran, such as support for the Iranian oil and gas, shipping or shipbuilding sectors, or for providing insurance or reinsurance related to those activities, if any person on the shortened SDN List is involved.
  • The Joint Commission called for under the JCPOA, consisting of high-level representatives of the US, EU, Iran and the five other countries party to the JCPOA, has been formed and will have its first meetings this week. The commission may soon begin hearing complaints from both sides that actions are falling short of commitments, for example by Iran regarding the anticipated US sanctions relief, and by the other parties regarding Iranian action to dismantle its nuclear program and other Iranian actions. The US will be represented on the Joint Commission by, among others, Ambassador Stephen Mull, who heads up a new State Department office for JCPOA implementation.
Conclusion

OFAC has reiterated on numerous occasions that it intends to publish on its website detailed guidance on the implementation of US sanctions relief under the JCPOA. We expect this to be posted several weeks before Implementation Day occurs next year.

We will continue to monitor the sanctions relief under the JCPOA and will issue further updates when significant developments occur.

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Monday, October 19, 2015 |posted by Unknown| |

July 24, 2015 

Questions and Answers on the Iran Nuclear Agreement (JCPOA) and Impact on Iran Sanctions

By Doug Jacobson, Jacobson Burton PLLC

Here are answers to some of the frequently asked questions we have been receiving from US and non-US companies following the July 14, 2015 announcement of the Joint Comprehensive Plan of Action (JCPOA) between the P5+1 countries and Iran on Iran's nuclear program.

What would you advise companies now wanting to trade with Iran? 

Answer: The key piece of advice I have been providing to clients following the July 14, 2015 JCPOA announcement is to have realistic expectations, to understand the limited scope of the US sanctions relief contained in the JCPOA, the major hurdles in the way of its implementation, and to avoid media reports that contain general information only. We should not expect to see any US sanctions relief for several months, and most likely not until mid 2016. Sales and marketing staff should work very closely with their in-house and outside compliance resources to determine what is permissible and what is not. In the meantime, and for the next few months, the activity with Iran that was prohibited on July 13, 2015, the day before the announcement, remains prohibited today and until further notice from the Treasury Department's Office of Foreign Assets Control (OFAC). 

What misconceptions are out there that need to be corrected regarding sanctions on Iran? 

Answer: For most US-based companies, even if the JCPOA is approved by Congress and after several months is implemented in full, there will be little impact on US companies. The US agreed to lift only selected sanctions on Iran, such as secondary (extraterritorial) nuclear sanctions that restrict the activities of non-US persons with Iran. This means there will be relief only from sanctions on transactions outside the United States, not involving US persons or products sourced from the US. The US primary sanctions that prohibit most US goods from being exported to Iran and generally prohibit US persons from engaging in transactions with Iran will remain in effect until modified by the US Congress. In other words, once this agreement is implemented, which will not be until early 2016, US policy will be very similar to what it was in 2010, which is before the US secondary sanctions on Iran were first imposed. 

What mistakes do companies need to avoid in connection with potential business with Iran? 

Answer: Companies must avoid relying on rumors and unofficial information. They must make decisions based on specific guidance provided by the US Office of Foreign Assets Control, the Bureau of Industry and Security and other US regulatory agencies. Just because a competitor may be undertaking an activity in Iran or involving Iranian entities does not mean that it is compliant with US laws or the laws of other countries. The broad sanctions imposed on Iran by the EU and many other countries will also remain unchanged for the next several months and some countries, such as Canada, have indicated that they may choose to maintain the existing sanctions. 

On what sectors of the Iranian economy will the sanctions be lifted first and what sectors will take longer? 

Answer: For US based companies, the only significant changes to the current primary sanctions on Iran, once implemented in 2016, will be to allow for the sale and lease of commercial passenger aircraft and related parts to Iran for civilian end-use, upon receipt of a license from OFAC. In addition, OFAC will license non-US entities that are owned or controlled by a US person, such as a non-US subsidiary of a US company, to engage in activities with Iran that are consistent with the JCPOA. It is not yet clear whether OFAC will issue a general license authorizing such transactions or if each company will need to obtain its own specific license. In addition, the US will again allow the importation into the US of Iranian-origin carpets and food, which were permitted from 2000 through 2010. The US secondary (extraterritorial) sanctions relief will affect the activities of non-US companies in many other sectors in Iran, including energy, metals, automotive and shipping, insurance and banking. 

Will the JCPOA impact the current US policy on exports of permitted medical and agricultural products to Iran?

Answer: No. As noted, there will be limited changes on the US primary sanctions on Iran. OFAC's licensing policy for food, medicine, medical devices and agricultural commodities will not change under the JCPOA. As a result, the exports of these items still require a general or specific license to be exported to Iran. It is possible, although not certain, that payments for authorized items through European or Asian banks may be easier as a result of the JCPOA but direct Iran-US banking transactions will remain prohibited. In addition, there are many ports in Iran that will remain off limits due to the port operators being on the SDN List. The sanctions relief in the JCPOA is not expected to change the current policy since those sanctions were imposed for non-nuclear reasons.

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Friday, July 24, 2015 |posted by Douglas N. Jacobson| |

December 18, 2011 

OFAC Issues General License Unblocking Most Remaining Blocked Libyan Government Property



Following Friday's decision by the United Nations Security Council to lift the sanctions on Libya's Central Bank, the Treasury Department's Office of Foreign Assets Control (OFAC) on Friday evening issued Libya GeneralLicense No. 11 (GL 11) unblocking all remaining blocked property and interests in property of the Government of Libya (including agencies, instrumentalities, and controlled entities) and the Central Bank of Libya, including the Libyan Arab Foreign Bank.

The only exception to OFAC's GL 11 is that all funds (including cash, securities, bank accounts, and investment accounts, and precious metals) of the Libyan Investment Authority (“LIA”) and entities owned or controlled by the LIA (including the Libyan Africa Investment Portfolio) remain blocked. 


While OFAC removed the LIA and Libyan Africa Investment Portfolio from the SDN List on November 18, 2011, OFAC did not unblock their assets because those entities still remain subject to United Nations sanctions. 

According to OFAC, GL 11 should lead to the unblocking of more than $30 billion in assets of the Government of Libya.  

Most Libyan Government funds and assets have now been unblocked by OFAC and few restrictions remain from the sanctions imposed by the U.S. on February 25, 2011. However, the assets of certain members of the previous Libyan regime and other persons added by OFAC to the SDN List under OFAC's Libya 2 sanctions program remain blocked. An updated list of the remaining Libya parties and entities that remain subject to the United Nations travel ban and assets freeze is provided below. 

Exports and reexports to Libya of U.S. origin products, software and technology are subject to the export controls administered by the Bureau of Industry and Security.


UN LIST OF LIBYA INDIVIDUALS AND ENTITIES (Dec. 16, 2011)

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Sunday, December 18, 2011 |posted by Douglas N. Jacobson| |

December 08, 2011 

OFAC Makes Significant Changes to Remaining U.S. Sanctions on South Sudan

Today OFAC issued a final rule (PDF) that made significant changes to the Sudanese Sanctions Regulations as they relate to transactions with the newly independent country of the Republic of South Sudan (“South Sudan”), including South Sudan’s oil and gas sector.

The changes made in the final rule are effective immediately. 

While OFAC lifted most sanctions on South Sudan after the country became independent in July of this year, OFAC still prohibited transactions that involved Northern Sudan’s oil and gas sector and the transshipment of items to or from South Sudan via North Sudan (since South Sudan is land-locked, South Sudan relies on Port Sudan, which is located in the North).

The change issued today with the broadest impact is a new general license contained in new section 538.536 of the Sudanese Sanctions Regulations that authorizes "all activities and transactions relating to the petroleum and petrochemical industries in" South Sudan that would otherwise be prohibited under the Sudan sanctions because they involve Sudan or Sudanese persons. As a result of this general license, the following activities are now authorized:

• The sale and export of equipment to South Sudan for use in South Sudan’s oil and gas sector;
• the transshipment of goods, technology and services to or from South Sudan through North Sudan;
• a broad range of activities in South Sudan’s oil and gas exploration and production sector, including exploration, development, production and oilfield services;
• downstream activities such as ... sale, and transport of petroleum from South Sudan; and
• financial transactions ordinarily incident to any such activities.

OFAC also issued a general license (section 538.537) that authorizes the “transit or transshipment" of any "goods, technology, and services through Sudan to or from" South Sudan, along with related financial transactions, regardless of whether these transactions involve South Sudan’s petroleum sector.

While the exportation of equipment and other items subject to U.S. jurisdiction may be exported to South Sudan, such items remain subject to the jurisdiction of the dual-use export controls administered by BIS.

All activities and transactions relating to the petroleum and petrochemical industries in Northern Sudan continue to be prohibited, unless otherwise authorized by a specific license.

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Thursday, December 08, 2011 |posted by Douglas N. Jacobson| |

November 14, 2011 

Lessons Learned from Flowserve's BIS and OFAC Voluntary Disclosures: December 6, 2011 in Dallas, TX

On December 6, 2011, a unique event in the Dallas, Texas area will be held on the lessons learned from Flowserve Corporation's export controls and sanctions voluntary-self disclosure (VSD) that led to a $3 million civil settlement with OFAC and BIS.

The event, which will take place from 9 am to 4:30 pm at the Center for American International Law's (CAIL) campus in Plano, Texas, will feature the "inside scoop" on Flowserve’s VSD from company and government speakers. The topics will include:

  • What Went Wrong?
  • How Did the Company Respond?
  • Effectively Planning and Executing a Global
  • Disclosure
  • Implementing Remedial Measures
  • Negotiating Settlements Across Multiple Agencies
  • The Government’s Perspective
  • Lessons Learned
The fee to attend is only $25, although attendance is limited. For further information see blow. To register for this event click here.
Flowserve VSD Event Flyer - December 6, 2011

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Monday, November 14, 2011 |posted by Douglas N. Jacobson| |

October 17, 2011 

OFAC Issues General Licenses to Export Food Products to Iran and Northern Sudan

The Treasury Department's Office of Foreign Assets Control (OFAC) recently made changes to the Iran and Sudan sanctions regulations that will have a favorable impact on U.S. exporters of food and nutritional products.

Specifically, OFAC issued a final rule amending the Iranian and Sudanese Transactions Regulations by adding a general license authorizing the exportation or reexportation of “food” products to the Governments of Iran or Northern Sudan, individuals or entities in Iran or Northern Sudan, or persons in third countries purchasing specifically for resale to any of the foregoing parties in Iran and Northern Sudan, and the conduct of related transactions. No military or law enforcement purchasers or importers are authorized.

A general license is preexisting legal authority to conduct a transaction and does not require the submission of any license application to OFAC in order to utilize the authority. As a result, U.S. exporters no longer need to obtain a specific license from OFAC to sell food products to authorized customers in Iran or Northern Sudan.

The term “food” is broadly defined in OFAC's regulations as “items that are intended to be consumed by and provide nutrition to humans or animals in Iran, including vitamins and minerals, food additives and supplements, and bottled drinking water, and seeds that germinate into items that are intended to be consumed by and provide nutrition to humans or animals in Iran.” The term “food” does not include alcoholic beverages, cigarettes, gum, or fertilizer. In addition, there are several types of food products that are specifically excluded from eligibility for this general license.

It is important to note that OFAC only authorizes the following payment options for exports made under these general licenses:

1. Payment of cash in advance (i.e., wire transfer);
2. Sales on open account, provided that the account receivable may not be transferred by the person extending the credit; or
3. Financing by third-country financial institutions that are neither U.S. persons nor Government of Iran entities. Such financing may be confirmed or advised by U.S. financial institutions.

Payments by letter of credit (L/C) issued by a bank in Iran or Northern Sudan still requires a specific license to be issued by OFAC. Therefore, if the only way to obtain payment for the products is a L/C issued by an Iranian bank the exporter/beneficiary will still have to apply to OFAC for a specific license.

As with all licensed transactions involving Iran or Northern Sudan, banks included on OFAC’s Specially Designated Nationals List (SDN List) may not be involved in the payment transaction, even if cash in advance or one of the three payment mechanisms listed above is used.

While these new general license will be a useful tool for U.S exporters, exports to Iran and Northern Sudan present a number of logistical and compliance issues. As a result, exporters must closely coordinate these transactions with their freight forwarders, banks and export compliance counsel in order to prevent delays.

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Monday, October 17, 2011 |posted by Douglas N. Jacobson| |

August 18, 2011 

Syria Update: President Obama Signs Executive Order Imposing Additional Sanctions on Syria

Updated to include OFAC general licenses 1-6

In response to the recent events in Syria, President Obama issued a statement this morning calling for Syrian President Bashar-Al Assad to "step aside".

In addition, the President today signed an Executive Order (EO 13582) imposing the following additional sanctions on Syria.

  • Requires the immediate blocking of all assets of the Government of Syria subject to U.S. jurisdiction.
  • Prohibits U.S. persons from exporting or reexporting services to Syria. 
  • Prohibits U.S. imports of Syrian-origin petroleum or petroleum products
  • Prohibits U.S. persons from having any dealings in or related to Syrian-origin petroleum or petroleum products.
  • Prohibits U.S. persons, wherever located, from operating or investing in Syria. 
  • Prohibits U.S. persons from approving, financing, facilitating or guaranteeing transactions by foreign person where the transaction by that foreign person would be prohibited if performed by a U.S. person or within the U.S. 
Today's sanctions, which are effective immediately, supplement the recent and past sanctions that have been imposed by the U.S. on Syria. As a result of the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003 (SAA), most exports and reexports of U.S. origin products to Syria have been prohibited since May 2004.

Today’s actions will not impact the export of humanitarian products to Syria, such as medicines, agricultural products and medical devices, which are authorized by the SAA either by general or specific licenses (authorized by OFAC General License No. 4 below).

In addition, the Treasury Department's Office of Foreign Assets Control (OFAC) added the following energy companies in Syria to the List of Specially Designated Nationals (SDN List):
  • The General Petroleum Corporation: The state-owned company that controls Syria’s oil and gas industry and is responsible for the exploration, development and investment of Syria’s oil and gas exploration activities.
  • Syrian Petroleum Company: Responsible for upstream oil production and development in Syria.
  • Syrian Company for Oil Transport: Manages Syria’s domestic pipeline system and is responsible for transporting all Syrian crude and petroleum products. Syrian Company for Oil Transport manages Syria’s three major oil export/import terminals: Baniyas, Tartous and Latakia.
  • Syrian Gas Company: Responsible for processing, transporting and marketing Syria’s natural gas.
  • SYTROL: Syria’s state oil marketing firm that is responsible for selling Syrian crude to foreign buyers.

As a result of these designations, all property of these companies subject to U.S. jurisdiction must be blocked and U.S. persons cannot engage in any transactions with these parties.

This afternoon, OFAC issued the following six general licenses relating to transactions with Syria:
  • General License 1 - Authorizing certain goods or services to Syrian Diplomatic Missions in the United States
  • General License 2 - Authorizing the provision of certain legal services with respect to Syria​ (however, payment of legal fees and related expenses must be specifically licensed)
  • General License 3 - Entries in certain accounts for normal service charges authorized with respect to Syria​ (authorizes financial institutions to normal service charges on blocked accounts)
  • ​General License 4 - Exportation or reexportation to Syria of items subject to the Export Administration Regulations; and exportation or reexportation of services ordinarily incident to exportations or reexportations of items licensed or otherwise authorized and related services​
  • ​General License 5 - Exportation of certain services incident to Internet-based communications authorized​ (authorizes services, such as instant messaging, social networking, web browsing and blogging, as long as they are no cost to the user, subject to certain conditions)
  • ​General License 6 - Noncommercial, personal remittances authorized​ (authorizes banks, money transmitters and brokerage firms to process fund transfers involving non commercial personal remittances only)
The full text of these general licenses can be found here.

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Thursday, August 18, 2011 |posted by Douglas N. Jacobson| |

April 29, 2011 

Syria Update: US Government Imposes Additional Sanctions Targeted at Syrian Government

As a result of the recent human rights abuses and repression in Syria, the U.S. Government today took the following additional steps to put further pressure on the Syrian Government:

Executive Order Blocking Property of Certain Persons with Respect to Human Rights Abuses in Syria

President Obama today signed an Executive Order (EO) expanding the scope of previous EOs on Syria by blocking the property of certain Syrian officials and others responsible for human rights abuses in Syria. The EO covers persons responsible for or involved in human rights abuses and repression; to be a senior official of an entity whose property is blocked pursuant to the EO; to have provided material or financial support to blocked persons; or to be owned or controlled by persons blocked under the EO.

Treasury’s Office of Foreign Assets Control (OFAC)

In order to implement the EO, OFAC today added several persons to the Specialty Designated Nationals List (SDN List), including Mahir al-Asad (aka al-Assad), the brother of Syrian President Bashar al-Asad; Atif Najib, President Asad’s cousin and Ali Mamluk, director of Syria’s General Intelligence Directorate (GID). In addition, Syria’s GID was designated under today’s EO. Iran’s Islamic Revolutionary Guard Corps was also designated under the Syria EO due to their support of Syria’s GID, although the IRGC has previously been designated by OFAC under other sanctions programs.

Commerce Department’s Bureau of Industry and Security

Today the Department of Commerce's Bureau of Industry and Security (BIS) revoked certain licenses for the export and reexport to Syria of items relating to VIP aircraft used to transport senior officials of the Syrian government. BIS took this action under the provision of the Export Administration Regulations that authorizes BIS to revise, suspend or revoke previously issued export or reexport licenses without notice.

Today’s actions will not impact any other licenses issued by BIS authorizing exports to Syria, such as for medical devices.

As a result of the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003, most exports and reexports of U.S. origin products to Syria have been prohibited since May 2004.

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Friday, April 29, 2011 |posted by Douglas N. Jacobson| |

February 27, 2011 

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.
2. Targeted sanctions on key regime figures
  • 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.
Secretary of State Clinton has already directed the State Department to revoke U.S. visas held by certain Libyan officials, others responsible for human rights violations in Libya, and their immediate family members. As a matter of policy, new visa applications for Libyan Government officials will be denied.

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.
Other Countries

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.

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    Sunday, February 27, 2011 |posted by Douglas N. Jacobson| |

    January 17, 2011 

    OFAC Adds Additional Entities Affiliated With Iran's Shipping Line and Aerospace Industry to SDN List

    Last week the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) announced the addition to the List of Specially Designated Nationals (SDN List) 24 shipping companies affiliated with the Islamic Republic of Iran Shipping Lines (IRISL) and two entities that are subordinates of Iran’s Aerospace Industries Organization (AIO) because of their alleged role in proliferation activities.

    The following entities were added to the SDN List pursuant to the authority of Executive Order 13382, which is aimed at freezing the assets of proliferators of weapons of mass destruction and their supporters:

    • Four Hong Kong based shipping companies – Starry Shine International Limited, Ideal Success Investments Limited, Top Glacier Company Limited, and Top Prestige Trading Limited – for being owned and managed by Ahmad Sarkandi and Ghasem Nabipour, two individuals designated by Treasury in October 2010 for acting for or on behalf of IRISL.
    • Sixteen shipping companies, each based at the same address in Hong Kong, for being owned or controlled by IRISL or affiliated entities. In late 2009, these sixteen companies became the owners of a series of vessels, each of which is already identified on OFAC's SDN List, that were previously owned by the four Hong Kong companies listed above.
    • Four shipping companies in the Isle of Man that that share the same address with eight previously-designated shipping companies wholly-owned by IRISL, for being owned or controlled by IRISL or IRISL front companies.
    • Shahid Ahmad Kazemi Industries Group, a subordinate to AIO that is responsible for the development and production of surface-to-air missiles. It is suspected of soliciting foreign technology for Iran’s missile programs and participating in North Korea's missile-related programs. North Korea has provided significant assistance to Iran in its development of ballistic missiles and missile technology.
    • M. Babaie Industries, also linked to Iran’s WMD proliferation efforts and suspected of soliciting foreign technology for Iran’s missile programs, was designated for being owned or controlled by, or acting for or on behalf of AIO.
    In September 2008 the U.S. added IRISL and its fleet of vessels to the SDN List because of its role in supplying Iran’s weapon programs. In an effort to evade these sanctions IRISL started renaming the vessels and changing their ownership. The Wisconsin Project on Nuclear Arms Control's Iran Watch program has issued a report describing IRISL's renaming efforts and containing a chart showing the old and new name and owner of IRISL's vessels.

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      Monday, January 17, 2011 |posted by Douglas N. Jacobson| |

       

      White House's Cuba Travel Announcement - What Does it Really Mean?

      As was widely reported, the White House announced on Friday revisions to the U.S. embargo on Cuba. Despite various reports referring this announcement as a further "easing" of the Cuban embargo, most of the changes returned U.S. policy on Cuba back to where it was during the Clinton Administration.

      As noted below, these policy changes only impact very limited categories of travel to Cuba and have no impact on commercial travel or sales to Cuba. In addition, these changes will only take effect when new regulations are issued in the coming weeks by the Treasury Department's Office of Foreign Assets Control (OFAC) and U.S. Customs and Border Protection (CBP). 

      The changes announced by the White House include the following:

      1. Changes Involving Travel to Cuba - OFAC's Cuban Assets Control Regulations governing travel to Cuba will be modified as follows:

      • In one of the most significant policy changes, religious organizations will be permitted to sponsor religious travel to Cuba under a general license. Currently, a paper license (known as a specific license) must be obtained in advance from OFAC for individuals associated with a religious organizations to travel to Cuba. A general license issued by OFAC authorizes activity to take place without having to submit a license application to OFAC. It is likely that OFAC's new regulations will require persons traveling to Cuba under the religious travel general license to submit pre- and/or post-travel reports to OFAC. 
      • Authorizing additional educational exchanges with Cuba by allowing accredited institutions of higher education to sponsor travel to Cuba for course work for academic credit under a general license; allowing students to participate through academic institutions other than their own; and facilitating instructor support to include support from adjunct and part-time staff. This change should increase the number of college students studying in Cuba.
      • Restore specific licensing of non-degree program educational exchanges under the auspices of an organization that sponsors and organizes people-to-people programs. Since this type of travel can only be done pursuant to a specific license, a license must be obtained from OFAC before this type of educational travel to Cuba can take place.
      • Allow specifically licensed academic institutions to sponsor or cosponsor academic seminars, conferences, and workshops related to Cuba and allow faculty, staff, and students to attend.
      • Allow specific licenses to organize or conduct non-academic clinics and workshops in Cuba for the Cuban people.
      • Allow specific licensing for a greater scope of journalistic activities. It remains to be seen what types of additional journalistic activities will be authorized, since free-lance journalists can currently obtain specific licenses and a general license exists for journalists regularly employed by news organizations. 

      2. Non-Family Remittances - OFAC will expand the scope of authorized payments to people and organizations in Cuba as follows:

      • Restore a general license for U.S. persons to send remittances up to $500 per quarter to non-family members in Cuba to support private economic activity. 
      • Create a general license authorizing payments to religious institutions in Cuba in support of religious activities.

      3. Increase in Number of U.S. Airports Supporting Licensed Charter Flights To and From Cuba - Regulations will be issued to permit all U.S. international airports to apply for authorization to handle licensed charter flights to and from Cuba, provided such airports have adequate customs and immigration capabilities. Currently, all charters flights to and from Havana, Cuba must take place from Miami, JFK in New York or Los Angeles International Airport. However, in practice virtually all flights to and from Cuba depart from Miami. Tampa International Airport has already indicated an interest in handling flights to and from Cuba and hopes to offer charter flights in the coming months.

      It is important to note that only OFAC-approved providers of air, travel and remittance forwarding services can handle travel and payments arrangements to and from Cuba. The current list of OFAC authorized Cuba providers can be found here (PDF).

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      Monday, January 17, 2011 |posted by Douglas N. Jacobson| |


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