Export Controls and 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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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

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.”


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On June 7th, Secretary of Commerce Wilbur Ross announced that the U.S. government reached an agreement with ZTE Corporation (ZTE) to lift a denial order suspending the export privileges of ZTE for a period of seven years.  Under this new agreement, ZTE must pay $1 billion and place an additional $400 million in escrow in a U.S.-approved bank within 90 days of this superseding order.  The Bureau of Industry and Security (BIS) will lift the denial order after the payment has been received and notify the public that ZTE has been removed from the Denied Persons List.

In addition to the civil monetary penalty, ZTE must adhere to several other conditions under the new agreement, which collectively are the most severe penalty BIS has ever imposed on a company.  Most notably:
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Yesterday the Office of Foreign Assets Control (OFAC) formally rescinded General License H, requiring foreign subsidiaries of U.S. companies to wind down remaining business related to Iran by 11:59 pm EST on November 4, 2018.  After that date, foreign subsidiaries of U.S. companies and other owned or controlled entities will generally be prohibited from conducting any business related to Iran, including wind down activity.  This action was required following the President’s announcement on May 8 that the United States would withdraw from the multilateral Iran nuclear deal (the Joint Comprehensive Plan of Action or JCPOA).

OFAC issued amended FAQs and replaced General License H with a new Section 560.537 to the Iranian Transactions and Sanctions Regulations (ITSR, 31 C.F.R. Part 560) authorizing the following wind down activities related to foreign subsidiaries’ business with Iran:
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Yesterday, the President issued a new Executive Order (E.O.) prohibiting certain financial transactions involving the Venezuelan government, including Petroleos de Venezuela, S.A. (PdVSA), the state-owned oil company.  Under the new rules, persons subject to U.S. jurisdiction are prohibited from engaging in transactions related to:

(i) the purchase of any debt owed to the Government

As part of the ongoing Export Control Reform initiative, the Directorate of Defense Trade Controls (“DDTC”) and Bureau of Industry and Security (“BIS”) has issued proposed rules that would move certain items currently controlled on the International Traffic in Arms Regulations (“ITAR”) to the Export Administration Regulations (“EAR”).  The proposed rules would move some items

Today, the EC announced that it is moving forward with a package of measures to blunt the impact of renewed U.S. sanctions on Iran following the U.S. exit from the Joint Comprehensive Plan of Action (JCPOA).  Included in those measures is the planned activation of the EU blocking statute, which would bar EU companies from complying with the extraterritorial effects of U.S. sanctions requirements on Iran.  The statute is also intended to insulate EU companies from certain U.S. sanctions penalties.  Implementation of blocking statutes can create a situation in which companies must decide which country’s law they are going to violate – if they cannot find an approach that avoids the conflict.      
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