Export Controls and Sanctions

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Even as companies make rapid changes to respond to business challenges posed by the COVID-19 pandemic, executives and compliance team leaders must protect their company and employees by continuing to comply with critical U.S. international trade laws and regulations (including those addressing customs, anti-corruption, export controls, and economic sanctions).  Trade regulations are not suspended, and it is important to not make assumptions or conclude that the law does not apply during this difficult time with all of the issues competing for attention, not least family and employee health and company survival.  With the need to move so quickly, we have seen clients inadvertently come close to trade compliance violations that would not pose a problem for them in normal times.  The following suggestions are intended to help companies reduce the risk of certain significant federal international trade law violations and avoid inbound and outbound shipment delays – while continuing to operate.

Trade rules and surrounding circumstances are changing quickly.  For example, the Administration very recently appeared to be seriously considering suspending or lowering certain import tariffs, but backed away from that approach given the complexity of administering a revised system on short notice, among other problems.  You are likely also seeing reports about various countries’ restrictions on exports of medicine, medical equipment (including protective equipment and ventilators), and food, among other products.  How do you keep up with what is actually happening that may affect your company and what is just rumor that you do not need to react to?

One step companies are taking is to include key personnel from their trade compliance and legal teams in the decision processes related to changing international transactions.  You need to move quickly, but including a team member who knows trade rules can help keep things on track and help avoid clear compliance errors.

Here are four substantive areas of U.S. trade regulation that should continue to be part of international transaction diligence:  U.S. anti-corruption, export controls, and sanctions laws (that permit most exports of medicines, medical devices, and food to sanctioned locations), and U.S. Customs rules on personal protective equipment and medical devices (among other imported items). …
Continue Reading COVID-19 – Four Key International Trade Compliance Considerations

Elliott Abrams, the U.S. Special Representative for Venezuela, announced a plan to lift sanctions on Venezuela should the Maduro regime step aside to permit a transitional government to be elected until full elections can take place in late 2020.[1]   If there is transition of power, individual sanctions on dozens of Venezuelan government officials could…

On February 27, 2020, the Department of Treasury issued General License No. 8 (“GL 8”) “Authorizing Certain Humanitarian Trade Transactions Involving the Central Bank of Iran (“CBI”).”  GL 8 authorizes certain humanitarian-related transactions in food, medicine and agricultural products (and certain associated activities) involving the CBI that were prohibited under the Iranian sanctions regulations as a result of the CBI’s designation under E.O. 13224.  Specifically, this new GL authorizes the following transactions and activities involving the CBI:

  • The exportation or reexportation of agricultural commodities, medicine, and medical devices to the Government of Iran (“GoI”), to any individual or entity in Iran, or to persons in third countries purchasing these items specifically for resale to any of the foregoing only as authorized in a one-year specific license issued by OFAC.
    • This authorization does not cover the exportation or reexportation of medical devices on OFAC’s List of Medical Devices Requiring Specific Authorization, medicine, or medical devices to military, intelligence, or law enforcement purchasers or importers.
    • There are certain payment terms applicable to the above sales pursuant to 31 CFR § 560.532.  (Otherwise, a specific license may be issued on a case-by-case basis.  The authorization does not permit debits to blocked accounts or debits/credits to Iranian accounts with U.S. depository institutions).
  • The provision of training necessary and ordinarily incident to the safe and effective use of medicine and medical devices exported or reexported pursuant to the above section to the GoI, an Iranian individual or entity, or to third country nationals purchasing such goods specifically for resale to the foregoing provided that: 1) payment terms and financing are authorized by the regulations; 2) any released technology is EAR99; 3) and the training is not provided to the military, intelligence, law enforcement, or any official or agent thereof
  • The provision by U.S. persons of brokerage services on behalf of U.S. persons for the sale and exportation or reexportation by U.S. persons of agricultural commodities, medicine, and medical devices so long as the sale and exportation or reexportation is authorized by a one-year specific license as required.  The authorization also covers any specific license granted to a U.S. person to broker services on behalf of non-U.S., non-Iranian persons for the foregoing activities with to the GoI or Iranian persons.
    • Payment of a brokerage fee earned pursuant to the authorization may not involve debits/credits to an Iranian account, and there are also reporting requirements.
  • Transfers of funds involving Iran by U.S. depository institutions or by U.S. registered securities brokers or dealers for the benefit of the CBI if the transfer arises from and is ordinarily incident and necessary to give effect to a transaction that has been authorized by the GL or a specific license referenced above.  Again, debits or credits to an Iranian account are generally not permitted.
  • Other transactions ordinarily incident to a licensed transaction and necessary to give effect thereto, with certain limited exceptions.

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Continue Reading Treasury Issues General License No. 8 Regarding Certain Permitted Humanitarian Trade Transactions Involving the Central Bank of Iran

On February 24, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule announcing amendments to the Export Administration Regulations (EAR) that revise export licensing policy toward the Russian Federation and Yemen due to foreign policy and national security concerns, such as proliferation.  The amendment to the rule re-aligns the EAR’s “Country Group” designations for Russia and Yemen in light of these concerns.

The EAR “Country Group” designations establish export licensing requirements based on the country of destination for the export or re-export from the United States of an export-controlled item.  The final rule moves Russia from the more favorable export licensing treatment of Country Groups A:2 (Missile Technology Control Regime) and A:4 (Nuclear Suppliers Group) to the more restrictive Country Groups D:2 (Nuclear) and D:4 (Missile Technology).   Yemen has also been moved from Country Group B to Country Group D:1 (National Security).  These changes to the designations reflect the U.S. government’s concerns regarding diversion of U.S.-origin items in Russia and Yemen for unauthorized purposes, such as for prohibited end uses or prohibited end users.

BIS also notes that Russia has not been cooperative in permitting BIS to conduct pre-license checks or post-shipment verifications of U.S.-origin items.  As such, BIS also revised the licensing policy of exports to Russia to a “presumption of denial” when the items are controlled for export due to concerns of: (i) proliferation of chemical and biological weapons; (ii) nuclear nonproliferation; and (iii) missile technology under the EAR.…
Continue Reading Commerce Announces More Restrictive Licensing Policy for Exports to Russia and Yemen

Treasury Issues New Guidance Regarding June 21, 2019 Amendment to the Reporting, Procedures, and Penalties Regulations (“RPPR”)

In late February, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) published additional guidance regarding the June 21, 2019 amendment to OFAC’s Reporting, Procedures, and Penalties Regulations (“RPPR”).  That guidance caused a stir among manufacturing company compliance personnel and others because it appeared to imply that unsolicited sales inquiries and other contacts from Iranian companies or government entities might require submission of a report to OFAC whether those inquiries were formally rejected or not.

OFAC clarifies that as of June 21, 2019, when the changes to the RPPR took effect, they expected all U.S. persons and persons otherwise subject to U.S. jurisdiction, including entities that are not U.S. financial institutions, to comply fully with all requirements of the RPPR, including the requirement to report rejected transactions within 10 business days of the rejected transaction. (Note: Prior to June 21, 2019, only U.S. financial institutions were required to submit reports to OFAC for rejected funds transfers). Rejection reports must be submitted to OFAC using their Report of Rejected Transaction Form.

The June 21, 2019 changes incorporated new requirements for parties filing reports on blocked property, unblocked property, or rejected transactions. The rule requires more information in blocked property reports in order to prevent multiple requests from OFAC for additional information.  …
Continue Reading Do Manufacturers Have to Report All Iranian Sales Inquiries to OFAC or Only Those They Have Formally Rejected? 

Today, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on Rosneft Trading S.A., a Switzerland-based subsidiary of Russian state-controlled global energy company Rosneft Oil, and its president and board executive Didier Casimiro.  Specifically, OFAC designated the company as a specially designated national (SDN) pursuant to Executive Order (E.O.) 13850…

The United Kingdom will need a new most favored nation tariff regime as early as January 2021 when the current Brexit transition could come to an end and is calling on businesses, consumers, and others to advise which tariffs should be eliminated or reduced.

The EU’s Common External Tariff, which currently applies to all imports…

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…

Late last month, the Directorate of Defense Trade Controls issued a long-awaited interim final rule regarding what qualifies as the export, re-export, or transfer of technical data (a “controlled event”) under the International Traffic in Arms Regulations (“ITAR”). Specifically, in 2016, the Bureau of Industry and Security (“BIS”) issued a final rule clarifying that the…

On October 31, 2019, the World Trade Organization (WTO) ruled in favor of the United States in determining that Government of India provides prohibited export subsidies to Indian producers and exporters.  The WTO dispute panel determined that the: Merchandise Exports from India Scheme (MEIS); Export Oriented Units Scheme (EOU) and related sector-specific schemes; Special Economic…