Session 8: U.S. Economic Sanctions - Overview for Exporters

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1 U.S. Economic Sanctions: Overview for Exporters Misha M. Heller Office of Foreign Assets Control (OFAC) July 27, 2017 Seattle, WA 1 Agenda OFAC Basics OFAC Sanctions Resources Q&A 2 Page 1 of 15

2 OFAC Basics 3 OFAC Basics Office of Foreign Assets Control (OFAC) U.S. Department of the Treasury OFAC administers and enforces economic and trade sanctions against targeted: Foreign governments Individuals Entities Sanctions are either congressionally mandated or issued by the President through an Executive Order (EO) 4 Page 2 of 15

3 OFAC Basics: Jurisdiction Who and What Must Comply with OFAC Regulations? Individuals U.S. citizens and permanent residents located anywhere in the world All individuals regardless of citizenship located in the United States Entities U.S. incorporated entities located anywhere in the world (including foreign branches)* All entities located in the United States Transactions All transactions that involve directly or indirectly the United States or a U.S. person, US financial institution, or the US Dollar *Foreign entities owned or controlled by U.S. persons must also comply with Cuba and Iran sanctions 5 OFAC Basics: Sanctions Programs What Sanctions Programs are Currently Active? Crimea, Cuba, Iran, North Korea, Syria Targeted / List Based Sanctions Programs Balkans Related, Belarus, Burma, Burundi, Central African Republic, Ivory Coast, Counter Narcotics Trafficking, Counter Terrorism, Cyber Related, Democratic Republic of the Congo Related, Iraq Related, Lebanon Related, Former Liberian Regime of Charles Taylor, Libya, Magnitsky, Non Proliferation, Rough Diamond Trade Controls, Somalia, Transnational Criminal Organizations, Ukraine /Russia Related, Venezuela Related, Yemen Related, Zimbabwe 6 Page 3 of 15

4 OFAC Basics: Key Terminology Typically entail broad export/import prohibitions targeting a country or geographic region Programs often block a sanctioned country s government U.S. persons and transactions involving the United States must comply with prohibitions 7 OFAC Basics: Key Terminology Targeted / List Based Sanctions Programs Typically entail asset blocking measures targeting individuals and entities identified on OFAC s SDN List U.S. persons are prohibited from dealing with blocked persons: provision or receipt of funds/goods/services prohibited Do not typically involve export/import prohibitions on a country or region Do not typically involve many exemptions or general licenses 8 Page 4 of 15

5 OFAC Basics: Key Terminology OFAC s SDN List The List of Specially Designated Nationals (SDN) and Blocked Persons OFAC s prohibited parties list Identifies several thousand SDNs and blocked persons List includes individuals, entities, vessels, and banks all over the globe with whom or with which transactions are prohibited Some entities in the database are not SDNs, but certain transactions with those entities are controlled UPDATED FREQUENTLY 9 OFAC Basics: Key Terminology SDN list continued 10 Page 5 of 15

6 OFAC Basics: Key Terminology Exemption Exemptions and Licenses A category of transaction or activity exempt from prohibition General License (GL) A broad authorization related to a category of transactions or type of conduct no specific authorization required Specific License A specific authorization issued on a case by case basis Statement of Licensing Policy A public statement issued by OFAC regarding the agency s policy with 11 regard to a category of activity that requires a specific license OFAC Basics: What makes a good application? Disclosure: These are aspects of an application that will aid in the Licensing Officer in understanding the nature of your request. These do NOT guarantee a positive outcome (i.e., receiving a specific license). Use the online application portal wherever possible Apply well in advance of your proposed activities Provide complete and accurate contact information for all parties involved with the transaction (i.e. end users, ultimate consignees) Provide a succinct narrative of what you would like to do and where the sanctions nexus lies If requesting a license to export goods, provide export documents with the Export Control Classification Number(s) (ECCNs) 12 Page 6 of 15

7 Updates 13 Iran Cuba Crimea North Korea 14 Page 7 of 15

8 Iran Update: JCPOA Implementation Day Review extensive guidance issued on the OFAC website. Majority of changes affect non U.S. persons (secondary sanctions relief) Some entities were removed from SDN list Relevant EU sanctions were also lifted Changes affecting U.S. persons: GL H Statement of Licensing Policy GL I GL J 1 15 Cuba Update: Regulatory Changes Review OFAC website and BIS website for guidance Significant changes to travel and export restrictions Changes also affect the following industries/activities: telecommunications, physical presence in Cuba, civil aviation, educational activities, agriculture, travel related services industry (supporting changes to travel restrictions) 16 Page 8 of 15

9 Comprehensive and List Based Sanction Program Ukraine/Russia Related Sanctions EO (3/6/2014) EO (3/17/2014) EO (Dirs. amended on 9/12/2014) Directive 1 (Financial) Entities designated pursuant to this directive may not be issued new debt or new equity for more than 30 days. Directive 2 (Energy Sector) and Directive 3 (Defense Sector) Entities designated pursuant to this directive may not be issued new debt for more than 90 days. Directive 4 (Drilling) US persons are prohibited from providing goods, services, or technology in support of exploration or production for deep water, Arctic offshore, or shale projects that produce oil in Russia EO (12/19/2014) Regional Comprehensive Sanctions Fifty Percent Rule applies to both SDNs and SSI entities. 17 Comprehensive and List Based Sanction Program North Korea Sanctions A new EO, 13722, was issued on March 16, 2016, in reaction to ballistic missile and nuclear testing The new sanctions block both the government of North Korea as well as the Workers Party of Korea Licensing of exports of US origin is administrated by BIS, however non US origin goods shipped by US persons are administrated by OFAC 18 Page 9 of 15

10 So can I do business in sanctioned countries? Prohibited activities Exempt transactions General licenses Specific Licenses Permissible Activities 19 Major OFAC Export Related Exemptions/General Licenses 1 Sanctions Program Export of Info. Materials Export of Food Export of Agricultural Commodities Export of Medicine Export of Medical Devices 2 Export of Medical Supplies Crimea Cuba 2 Iran North Korea Syria Notes: 1: All OFAC issued general licenses are subject to certain conditions. 2: Medical devices must be classified as EAR99 by the Bureau of Industry and Security. 20 Page 10 of 15

11 Types of Specific Licenses Transactional Licenses Humanitarian assistance and related exports U.S. subsidiaries of foreign corporations Certain services (legal, educational, medical, research) and related exports Trade Sanctions Reform & Export Enhancement Act (TSRA) Specific Licenses Required for the export of agricultural or medical products or devices to: Iran and Sudan (issued by OFAC) Cuba & Syria (issued by BIS) 21 OFAC Basics Sanctions Compliance Strategies OFAC Enforcement Overview OFAC Sanctions Resources Q&A 22 Page 11 of 15

12 Sanctions Resources: OFAC Basics OFAC Website Links OFAC s Website Review Recent Actions (designations, new programs, etc.) Sign up for OFAC Recent Actions updates Read Frequently Asked Questions (FAQs) Search the SDN List via OFAC s Search Tool Review individual sanctions program prohibitions/authorizations Review recent enforcement actions Submit a specific license application via the licensing portal Find contact information 23 Sanctions Resources: OFAC s Web Resources OFAC Basics OFAC Website Guide Resources Tab See recent actions Search the SDN List Apply for a License Learn about programs by country Read through the FAQ 24 Page 12 of 15

13 Apply for a License 25 Sanctions Resources: OFAC s Web Resources OFAC Basics OFAC Website Guide Contacts Tab Find the OFAC Hotline Numbers Find OFAC s mailing address Access OFAC s hotline Subscribe for notifications 26 Page 13 of 15

14 Sanctions Resources: OFAC Basics Contact Information OFAC Compliance Division Call with: questions about applicability of sanctions OFAC_Feedback@treasury.gov OFAC Licensing Division Call with: questions about pending license applications center/sanctions/pages/licensing.aspx 27 Sanctions Resources: OFAC publishes web postings related to Civil Monetary Penalties, Findings of Violation, and Settlements on the Civil Penalties and Enforcement page of its website Companies can gain valuable insight and lessons learned from OFAC s web postings: What conduct led to the apparent violation(s)? Is your company engaging in the same type of conduct? Does your company share similar risk factors? What compliance controls did the company employ? What compliance deficiencies occurred? 28 Page 14 of 15

15 OFAC Basics OFAC Sanctions Resources Q&A 29 Page 15 of 15