Today the president signed a new Executive Order (E.O.) announcing expanded primary and secondary sanctions on Iran, focused on the construction, mining, manufacturing, and textile industries. OFAC also sanctioned a significant segment of the Iranian metals industry today, targeting the largest iron, steel, aluminum, and copper producers in Iran under an existing sanctions authority focused
The United States lifts sanctions on Turkey for now
After an announcement from the President today, OFAC removed the Turkish Ministry of Energy and Natural Resources, the Ministry of National Defense, and the ministers of Defense, Energy and Natural Resources, and Interior from the SDN List. The move effectively lifts the sanctions imposed on Turkey two weeks ago for its incursion into Syria.
Companies
U.S. Extends General License No. 8, Authorizing Dealings with Certain U.S. JVs in Venezuela
Yesterday, the Office of Foreign Assets Control (OFAC) issued General License No. 8D, authorizing U.S. persons to engage in transactions and activities involving Petroleos de Venezuela, S.A. (PdVSA) that are ordinarily incident and necessary to the maintenance of operations, contracts, and other agreements involving Chevron, Halliburton, Schlumberger Limited, Baker Hughes, and Weatherford International in
BIS tightens Cuba restrictions, lowers de minimis threshold to 10 percent
Today, the U.S. Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to further tighten restrictions on Cuba. The changes, which are effective immediately, are part of a broader U.S. government effort to tighten the embargo on Cuba after a tentative easing of relations under the Obama Administration.
The amendment lowers the applicable de minimis threshold for non-U.S. items that contain U.S.-origin content; tightens rules regarding the leasing or chartering of aircraft or vessels; and limits license exception Support for the Cuban People (SCP), including by clarifying the scope of authorized telecommunications exports and reexports.
10 percent de minimis threshold
First, and most importantly for non-U.S. companies, BIS lowered the de minimis threshold for Cuba from 25 percent to 10 percent. During the Obama Administration, the de minimis level for Cuba was raised from 10 percent to 25 percent. This amendment reverses that change.
The amendment means that non-U.S. companies must now obtain a BIS license or use an EAR license exception before exporting any product (including goods, software, or technology) to Cuba if the product contains more 10 percent U.S.-origin content, by value. According to BIS, such license applications will face a presumption of denial unless the project supports U.S. policy, defined in Section 742.2(b) of the EAR. Non-U.S. companies should review pending and planned projects in Cuba to ensure compliance with the new rules. There is no grace or wind down period associated with the change.
The EAR’s de minimis provisions are an example of the extraterritorial application of U.S. export control laws – non-U.S. items located outside of the United States are subject to the EAR’s license requirements if the items contain more than a de minimis level of controlled U.S.-origin content.
Aircraft & vessel restrictions
Second, BIS is rescinding a favorable a licensing policy regarding the export or reexport of aircraft leased to Cuban state-owned airlines and is revoking licenses issued under the prior licensing policy within seven days. License requests related to such exports and reexports will now face a presumption of denial. The amendment also tightens the restrictions in license exception Aircraft, Vessels, and Space (AVS) when applied to aircraft or vessels leased to or chartered by a Cuban national or a state sponsor of terrorism.
New limits on license exception Support for the Cuban People
Finally, the amendment narrows license exception SCP with respect to certain donated items, clarifies the scope of the authorized telecommunications exports, and limits exports on
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U.S. Issues New Primary and Secondary Sanctions Targeting Turkey
Yesterday, the U.S. government issued an Executive Order (E.O.) imposing new primary and secondary sanctions that target the government of Turkey in response to the escalating conflict in northern Syria. Pursuant to the new sanctions, the Office of Foreign Assets Control (OFAC) also added the Turkish Ministry of Energy and Natural Resources, the Turkish Ministry of National Defense, and the Turkish ministers of Defense, Energy and Natural Resources, and Interior to the SDN List, formally blocking (freezing) those parties’ property and interests in property, subject to U.S. jurisdiction. Entities owned 50 percent or more, directly or indirectly, by these SDNs are also subject to blocking sanctions pursuant to OFAC’s “50 percent rule.”
While the sanctions are currently narrowly targeted, the E.O. authorizes a broad array of future possible sanctions against other parties connected to the Turkish government and companies operating in Turkey. Whether and to what extent sanctions are expanded on Turkey will depend on developments on the ground in Syria and U.S. domestic politics. Various groups, including prominent voices in Congress, are pushing the administration for more aggressive action against Turkey, which could portend an expansion of sanctions against the Ankara government.
Blocking sanctions
The October 14, 2019 E.O. authorizes the U.S. government to block any person (e.g., designate that person as a Specially Designated National (SDN)) that the Secretary of the Treasury determines to:
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U.S. Sanctions on Iran Have Been Fully Re-imposed
Today the U.S. Office of Foreign Assets Control (OFAC) amended the Iranian Transactions and Sanctions Regulations (ITSR, 31 C.F.R. Part 560) to fully re-impose U.S. sanctions on Iran following a wind down period that expired yesterday, November 4, 2018. OFAC also issued new FAQs for foreign affiliates of U.S. companies and non-U.S. companies.
Foreign
Preparing for the Worst: Licenses Needed for UK Export of Dual Use Items
It has always been a possibility that the United Kingdom would crash out of the European Union on 30 March 2019 but “no deal” preparation is now highly recommended by both sides. For organisations that export dual use items, the possibility of the UK becoming a “third country” vis-à-vis the EU without an exit agreement or transition period means an overnight need for export licenses where none are required today.
Seasoned international businesses understand that dual use items, which can be used for both civil and military purposes, include far more products than one might assume. In addition to the more obvious goods that may be used to produce or develop military items, such as machine tools and equipment used for chemical manufacturing, computers, drawings, technology, software, raw materials, and components also may be subject to dual use controls. Even seemingly mundane items such as protective clothing used in medical laboratories, certain commonly used chemicals, certain ball bearings, and a wide variety of other products are controlled for export and they need to be properly classified to determine if a license would be needed to ship to a UK that has left the EU. Many entities that have been operating exclusively within the EU could soon be confronted with dual use licensing requirements for the first time and global businesses may be faced with a potentially significant increase in the number of items that need be licensed.
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Exports of National Security Controlled Items to Russia Could Be Banned Under New Sanctions
Yesterday the U.S. government announced that it would implement new sanctions against Russia mandated under the Chemical and Biological Weapons Act of 1991 (the CBW Act) following the apparent deployment of a chemical weapon on British soil by Russia.
The first round of sanctions, which are expected to come into force on or around August 22, will prohibit many exports and reexports of goods, software, or technology to Russia controlled for national security reasons under the dual use Export Administration Regulations. Such items include gas turbine engines, encryption items, electronics components, optical equipment, lasers, sensors, electronic components, materials, and certain unmanned systems, among many others. National security controlled items currently require a license to be exported to Russia, but the new rules will require the Commerce Department to apply a ‘presumption of denial’ to future license requests in many instances. In a briefing announcing the new sanctions, the State Department indicated that certain exceptions will be made, including those related to joint space activities, aviation safety, and the activities of U.S. and other foreign companies in Russia. While the scope of the sanctions has yet to finalized, the State Department suggested that up to half of all licensed exports to Russia are controlled for national security reasons. If the sanctions are fully enforced, the impact could be substantial – based on 2016 figures over $1 billion in trade could be impacted.
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Exporting to India is Getting Easier
A set of changes to the U.S. dual use export control rules makes exporting sensitive goods, software, and technology to India less burdensome.
Over the last several years, India has joined three of the four major multilateral export control regimes – the Missile Technology Control Regime (MTCR), the Wassenaar Arrangement, and the Australia Group. In
First Set of U.S. Secondary Sanctions on Iran Snap Back on August 7, EU Blocking Statute Comes Into Force
Tomorrow the United States will re-impose a set of secondary sanctions on Iran as the newly amended EU blocking statute comes into force.
Following the U.S. withdrawal from the multilateral Iran nuclear deal (the Joint Comprehensive Plan of Action or JCPOA), the United States is set to re-impose a raft of secondary sanctions targeting Iran. The secondary sanctions are designed to penalize non-U.S. companies for conducting certain types of business involving Iran, even in cases where that activity occurs wholly outside of U.S. commerce. Pursuant to prior announcements and a new Executive Order, tomorrow the United States will have the authority to sanction non-U.S. companies that engage in the following types of activity with Iran:
- The purchase or acquisition of U.S. dollar bank notes by entities owned or controlled by the Government of Iran;
- Trade in gold or precious metals;
- The direct or indirect sale, supply, or transfer to or from Iran of certain materials, including graphite, raw and semi-finished metals (such as aluminum, steel, and coal), and certain software for integrating industrial processes;
- Significant transactions related to the Iranian rial;
- The purchase of, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
- The sale or supply of significant goods or services related to the Iranian automotive sector, including the manufacture and assembly of light and heavy vehicles, the manufacture of aftermarket parts, and the provision of auto kits or “knock-down kits.”