International Trade Law News

Published by Jacobson Burton Kelley PLLC

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.

Labels: OFAC, Sanctions; 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.

Labels: OFAC, Sanctions; Iran, Sanctions; Sudan

Today the Treasury Department’s Office of Foreign Assets Control (OFAC) issued a final rule in the Federal Register amending the Sudanese Sanctions Regulations (31 CFR Part 538) by adding a general license authorizing the export and reexport of medical devices, medicine and agricultural commodities to the so-called “Specified Areas of Sudan” (the permissible areas in Sudan described below).

OFAC's general license is effective immediately.

As a result of the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) all exports and reexports of medical devices, medicine and agricultural commodities of U.S. or non-U.S.medical devices to Sudan currently require a one-year specific license to be issued by OFAC. U.S. companies have experienced significant delays in obtaining one-year licenses from OFAC. The issuance of the general license resolves the conflict between TSRA and the Darfur Peace and Accountability Act of 2006.

As a result of today’s amendments to the Sudanese Sanctions Regulations, U.S. companies and their affiliates may export and reexport medical devices, medicine and agricultural commodities to the following Specified Areas in Sudan:

Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur, and marginalized areas in and around Khartoum. The term “marginalized areas in and around Khartoum” means the following official camps for internally displaced persons: Mayo, El Salaam, Wad El Bashir and Soba.

It will still be necessary to obtain a one-year specific license from OFAC prior to making any sales of medical devices, medicine and agricultural commodities to the Government of Sudan, to any individual or entity in an area of Sudan other than the Specified Areas of Sudan, or to persons in third countries purchasing specifically for resale to the Specified Areas of Sudan.

There is a unique feature of this the new general license that must be taken into account with respect to future sales to Sudan under this general license. Because the TSRA only authorizes one-year licenses, this general license will cover exports shipped within the twelve-month period beginning on the date of the signing of the sales contract. Each year by the anniversary of the September 9, 2009 effective date, OFAC will determine whether to revoke the general license or not. Unless revoked, the general license will remain in effect.

In addition, note the following other compliance-related aspects associated with the use of OFAC’s Sudan general license:

• The general license authorizes the making of shipping and cargo inspection arrangements, the obtaining of insurance, the arrangement of financing and payment, the entry into executory contracts, and the provision of brokerage services for such sales and exports or reexports.
• The general license cannot be used for any transaction with any party on OFAC’s List of Specially Designated Nationals and Blocked Persons, including persons.
• The general license cannot be used to ship products to any parties associated with the petroleum or petrochemical industries in Sudan.
• The use of the general license is subject to OFAC’s standard recordkeeping requirements and all records relating to the transaction must be maintained for a period of not less than five years from the date of delivery.
• The transshipment or transit of permissible exports through areas of Sudan other than the Specified Areas of Sudan is still prohibited.

Labels: OFAC, Sanctions; Sudan

The Treasury Department's Office of Foreign Assets Control (OFAC) today issued its August 2009 monthly civil penalty report.

Given the very large civil penalties announced by OFAC earlier in August on ANZ Bank and DHL this penalty report is very short.

According to the report, Thermon Manufacturing Company, a San Marcos, Texas-based manufacturer of heat tracing equipment for the petrochemical, oil and gas, engineering and power industries remitted $14,613.24 to settle allegations of violations of the Sudanese Sanctions Regulations occurring in 2004 and 2005.

OFAC alleged that Thermon engaged in and facilitated the export and/or re-export of heat tracing equipment, directly or indirectly, to Sudan in three separate transactions.

Thermon voluntarily disclosed this matter to OFAC. Thermon also reported to OFAC corrective measures and improvements to its OFAC compliance procedures it had taken in response to its discovery of the alleged violations.

This matter was resolved according to OFAC's 2003 enforcement guidelines that set the maximum penalty at $11,000 per violation. The current maximum penalty for violating OFAC's Sudanese Sanctions Regulations is $250,000 per violation.

Labels: OFAC, Sanctions; Sudan

The Treasury Department's Office of Foreign Assets Control (OFAC) today announced that the Australia and New Zealand Banking Group, Ltd. of Melbourne, Australia (ANZ), remitted $5,750,000 to settle allegations that it violated the Sudanese Sanctions Regulations and the Cuban Assets Control Regulations related to the processing of transactions through U.S. correspondent accounts.

OFAC alleged that ANZ "actively manipulated the SWIFT messages related to the Sudanese transactions by removing references to Sudan or the names of entities subject to sanctions in the United States, thereby concealing the identities of the targets of U.S. sanctions and impeding the ability of U.S. banks to detect these violations." OFAC's announcement did not discuss the alleged violations of the Cuban Assets Control Regulations.

This settlement involved 16 transactions totaling $28 million involving alleged violations of the Sudanese Sanctions Regulations and 15 transactions worth $78 million involving alleged violations of the Cuban Assets Control Regulations. All of the transactions occurred between 2004 and 2006.

In its announcement, OFAC indicated that it mitigated the total potential penalty based on ANZ's cooperation and stated that:

Labels: Cuba, OFAC, Sanctions; Sudan

The Treasury Department's Office of Foreign Assets Control (OFAC) today issued its June 2009 (pdf) monthly report of civil penalties imposed for alleged violations of the sanctions regimes administered by OFAC.

OFAC announced the following four settlements with companies, none of which were resolved under OFAC's new enforcement guidelines implementing the enhanced maximum civil penalties of $250,000 for IEEPA-based violations:

• Oxbow Carbon and Minerals LLC of West Palm Beach, Florida agreed to remit $276,250.00 to settle allegations that if violated te Iranian Transactions Regulations in 2006 and 2007. OFAC alleged that Oxbow engaged in transactions in or related to services of Iranian origin and facilitated trade-related transactions by non-U.S. persons which involved the use of vessels owned and/or managed by the Islamic Republic of Iran Shipping Lines in Tehran, Iran, without an OFAC license. While Oxbow did not voluntarily disclose the alleged violations, OFAC noted that the company demonstrated cooperation during OFAC’s review of the matter and as a remedial measure has made revisions to its compliance program.
  

• National Marine Consultants, Inc. remitted $42,075.00 to settle allegations of violations of the Iranian Transactions Regulations that occurred between March 2005 and May 2007. OFAC alleged that NMCI outsourced to an Iranian entity inspection services it was contractually bound to perform for a third-party, without an OFAC license. NMCI did not voluntarily disclose the matter to OFAC but cooperated with OFAC’s investigation.

• Philips Electronics of North America Corporation (PENAC) remitted $128,750.00 to settle allegations that it violated the Cuban Assets Control Regulations between 2004 and 2006. OFAC alleged that PENAC acted without an OFAC license through an employee’s travel to Cuba in connection with the sale of medical equipment by a foreign affiliate of PENAC. PENAC voluntarily disclosed this matter to OFAC.
  

• Houston, Texas-based Willbros USA, Inc. paid $6,600 to settle an allegation of violation of the Sudanese Sanctions Regulations occurring in 2003 and 2004. OFAC alleged that Willbros, through a former Senior Vice President, willfully violated the Sudanese Sanctions Regulations (SSR) when it entered into a contract to bid on an oil development project in Sudan, despite its knowledge that such activities violated the Regulations, by facilitating the export of goods, technology or services to Sudan and evading the prohibitions set forth in the SSR. Willbros voluntarily disclosed this matter to OFAC.

Labels: Cuba, OFAC, Sanctions; Iran, Sanctions; Sudan

The leaders of the G8 nations agreed today at their Hokkaido Toyako, Japan Summit to seek additional sanctions against the Mugabe regime in Zimbabwe.

The statement released by the G8 leaders states that: "We will take further steps, inter alia introducing financial and other measures against those individuals responsible for violence."

Labels: Sanctions; Sudan, Zimbabwe

Reuters reports today that the Treasury Department's Office of Foreign Assets Control (OFAC) will soon bring a number of civil enforcement actions against companies that have violated U.S. sanctions on Sudan. The article quotes OFAC Director Adam Szubin as saying that:

"Agents had built up a 'queue' of enforcement actions against violators that will be rolled out in as early as a month's time" and that "Sudan is at the top of our list, among our most serious concerns. We are investigating a number of significant Sudanese violations."

Labels: Sanctions; Sudan

The Treasury Department's Office of Foreign Assets Control (OFAC) today published a final rule in the Federal Register revising the Sudanese Sanctions Regulations (31 CFR Part 538) to implement Executive Order 13412 issued by President Bush on October 13, 2006 to implement the Darfur Peace and Accountability Act of 2006 (DPAA). Among other things, the DPAA called for support of the regional government of Southern Sudan, assistance for the peace efforts in the Darfur region of Sudan and provision of economic assistance in specified areas of Sudan.

The final rule issued today exempts all trade and related transactions and humanitarian assistance in specified areas of Sudan, including Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur and four official camps for internally displaced persons (Mayo, El Salaam, Wad El Bashir, and Soba) from the sanctions imposed on Sudan in November 1997. All other areas of Sudan remain subject to the comprehensive sanctions regime.

Today's final rule also maintain two types of sanctions that apply countrywide throughout Sudan. First, all property and interests in property of the Government of Sudan remain blocked, wherever located; however, the regional government of Southern Sudan from the definition of the Government of Sudan. Second, all transactions relating to Sudan’s petroleum or petrochemical industries are prohibited, wherever in Sudan the transactions may occur.

In addition, the licensing requirements for exports of agricultural commodities, medicine, and medical devices remain in effect throughout Sudan, including for the exempt areas, because of the operation of the Trade Sanctions Reform Act of 2000 (TSRA).

Today's rule also clarifies that the prohibitions imposed by E.O. 13067 are territorial and apply to all shipments of goods, services, and technology that transit non-exempt areas of Sudan (“transshipments”) and to all financial transactions that involve, in any manner, depositary institutions either located in the non-exempt areas of Sudan or owned or controlled by the Government of Sudan.

Labels: OFAC, Sanctions; Sudan

The Treasury Department's Office of Foreign Assets Control (OFAC) today issued a final rule in the Federal Register expanding the scope of activities allowed under the general licenses for publishing activities contained in OFAC's Cuba, Sudan, Iran and Burma sanctions regulations.

As a result of today's final rule, the general licenses relating to publishing activities permit the export and inclusion of embedded software necessary for reading, browsing, navigating or searching "written publications". In order to be eligible for the general licenses for Iran and Sudan, however, the embedded software must be classified as EAR99 under the Export Administration Regulations. The general licenses for Cuba and Burma now permit the export of such software if "the exportation is licensed or otherwise authorized by the Department of Commerce under the provisions of the EAR".

The final rule also amends the various sanctions regulations by clarifying that the term "written publications'' used in the general licenses includes manuscripts, books, journals and newspapers even if they are published solely in electronic format.

OFAC's amendment of the Iran and Sudan general licenses relating to the export of embedded software for reading or browsing written publications does not appear to be a significant change in licensing policy. This is because even the most basic software products for reading or searching written publications are not classified as EAR99. For example, Adobe's on-line product matrix confirms that Acrobat eBook Reader and Adobe Reader are classified as ECCN 5D992, since they contain encryption algorithms. Similarly, Microsoft's Internet Explorer is also classified as ECCN 5D992. Even Mozilla's Firefox is classified as ECCN 5D002.

Labels: Burma/Myanmar, Cuba, OFAC, Sanctions; Iran, Sanctions; Sudan

The Council on Foreign Relations recently hosted an online debate on sanctions policy between Simon Cox, an economics correspondent for The Economist, and Jake Colvin of USA*Engage. To read the debate, start at the bottom of the site and work your way up.

Labels: Cuba, Sanctions, Sanctions; Iran, Sanctions; Sudan

The Securities and Exchange Commission (SEC) has "temporarily suspended" the controversial Web tool that was recently posted on the agency's Web site to permit investors to obtain information from company disclosure documents about their business interests in Cuba, Iran, Sudan, Syrian and North Korea, countries that have been designated by the U.S. as "State Sponsors of Terrorism".

In a press release, SEC Chairman Christopher Cox said:

To address these and related concerns, we are temporarily suspending the availability of the web tool while it undergoes reconstruction. We will work to improve the web tool so that it meets the various concerns that have been expressed. Alternatively, our staff is considering whether the use of interactive data tags applied by companies themselves could permit investors, analysts and others to easily discover this disclosure without need of an SEC-provided web tool at all. In the interim, the companies' disclosure regarding their business contacts in the five nations will continue to be available through the SEC's EDGAR database, and findable using our new full-text search capability.

Labels: Cuba, Sanctions; Iran, Sanctions; Sudan, SEC

Today the U.S. imposed additional sanctions on Sudan. Specifically, the Treasury Department's Office of Foreign Assets Control (OFAC) blocked the assets and added to the SDN List three Sudanese individuals, including two high-ranking government officials and a rebel leader, for their roles in the violence-plagued Darfur region of Sudan. In addition, OFAC added to SDN List the names of 30 Sudanese companies owned or controlled by the Government of Sudan, and one company that violated the arms embargo in Darfur.

Among the companies designated in today's action are GIAD Industrial City, which has supplied armored vehicles to the Sudanese government for military operations in Darfur; Sudatel, the national telecommunications company; and five firms in the petrochemical sector, including Advanced Petroleum Company, RAM Energy Company, Bashaier, Hi-Tech Petroleum Group, and Hi-Tech Chemicals.

As a result of OFAC's designations, any assets these individuals and entities may have that are within U.S. jurisdiction must be frozen, and U.S. persons are prohibited from transacting or doing business with them.

A complete list of the individuals and entities designated today is posted at the following link: www.treasury.gov/offices/enforcement/ofac/actions/20070529.shtml.

Labels: Sanctions; Sudan

Today President Bush visited the U.S. Holocaust Memorial Museum in Washington, DC. In a speech following his tour of the museum, President Bush announced that the U.S. will soon impose the following new sanctions on Sudan if the current diplomatic efforts of the Secretary General of the United Nations are unsuccessful:

First, the Department of the Treasury will tighten U.S. economic sanctions on Sudan. This new effort will allow the United States to enforce more aggressively existing sanctions against Sudan's government, by blocking any of its dollar transactions within the U.S. financial system. As part of this effort, the Treasury Department will add 29 companies owned or controlled by the government of Sudan to its list of Specially Designated Nationals. This designation will bar these companies from the U.S. financial system -- and make it a crime for U.S. -- American companies and individuals to willfully do business with them.

Second, we will also target sanctions against individuals responsible for the violence. These sanctions will isolate designated individuals by cutting them off from the U.S. financial system, preventing them from doing business with any American citizen or company, and calling the world's attention to their crimes.

Third, I will direct the Secretary of State to prepare a new United Nations Security Council resolution. This resolution will apply new sanctions against the government of Sudan -- and against individuals found to be violating human rights or obstructing the peace process. It will impose an expanded embargo on arms sales to the government of Sudan. It will prohibit Sudan's government from conducting any offensive military flights over Darfur. It will strengthen our ability to monitor and report any violations. And in the next days, we will begin consulting with other Security Council members on the terms of such a resolution.

Labels: Sanctions; Sudan

Reuters reports today that the U.S. has announced that it will delay the imposition of additional sanctions on Sudan "as a courtesy to the (U.N.) Secretary General." The article reports that the additional sanctions being contemplated are:

the addition of 29 Sudanese companies, most of them involved in oil revenues, to a current U.S. sanctions list of about 130 firms.

Washington also planned to further limit dollar transactions from Sudanese companies and to slap travel and banking bans on three individuals, including a rebel leader seen as "obstructionist."

Labels: Sanctions; Sudan