OFAC Continues Belarus Sanctions Relief

On October 24, 2017, the US Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued a general license continuing the extension of certain sanctions relief toward Belarus. The general license, which is the fourth in a series of identical licenses, authorizes US persons to engage in certain transactions with nine Belarus-based entities that have previously been designated Specially Designated Nationals (“SDNs”), as well as entities in which the nine entities have a 50% or greater ownership interest. The general license authorizes such transactions for a renewable period of six months. The first general license in this series was issued on October 30, 2015, following President Lukashenko’s decision to welcome election monitors and free certain political prisoners (see our advisory here).

The nine entities include:

  • Belarusian Oil Trade House
  • Belneftekhim
  • Belneftekhim USA, Inc.
  • Belshina OAO
  • Grodno Azot OAO
  • Grodno Khimvolokno OAO
  • Lakokraska OAO
  • Naftan OAO
  • Polotsk Steklovolokno OAO

As with the earlier versions, the general license permits all transactions involving these entities otherwise prohibited by Executive Order (“EO”) 13405 (the authority under which the entities were designated), including (i) the provision of funds, goods, or services to the entities, (ii) the receipt of funds, goods or services from the entities, and (iii) dealings in securities that are registered in the name of, held for the benefit of, or issued by the entities. Transactions ordinarily incident to a licensed transaction are also authorized. Notably, the property of the above entities blocked pursuant to EO 13405 prior to October 30, 2015 remains blocked.

US persons engaging in a transaction or series of transactions in excess of $50,000 must file a report with the US Department of State’s Office of Eastern European Affairs. The report must include (1) an estimated or actual dollar value of the transaction, (2) the parties involved, (3) the type and scope of activities conducted, and (4) the dates or duration of the activities.

The general license will expire on April 30, 2018, unless extended or revoked. Therefore, all aspects of a transaction, including payment, must be concluded by that date.

President Trump Decertifies Iran Deal, Outlines New Approach

As a follow up to our recent blog post, Steptoe published a detailed advisory on President’s Trump’s October 13, 2017 announcement that his administration would take a new strategic approach with regard to Iran and that he “cannot and will not” continue to make at least one of the periodic certifications regarding the Joint Comprehensive Plan of Action (JCPOA, or Iranian nuclear deal) called for by US law.  The announcement, which was accompanied by a White House fact sheet, marked the culmination of a nine-month, comprehensive review designed to address several policy concerns regarding Iran, such as Iranian support for terror groups, human rights violations, and development of ballistic missiles, as well as the country’s nuclear program.  Although President Trump’s announcement and decision on JCPOA certification could have substantial ramifications in the future for the JCPOA (and US sanctions relief under the JCPOA), this action has little immediate effect on the existing US sanctions framework against Iran.

For more information, please see our advisory.

President Trump Outlines New Strategic Approach Regarding Iran

In a speech today, President Trump announced the result of his Administration’s strategic review of foreign policy towards Iran, including the Joint Comprehensive Plan of Action (“JCPOA”) implemented by the Obama administration in January 2016.  As set out in a White House fact sheet, the Trump Administration will seek to expand the focus of U.S. policy towards Iran to include a number of national security concerns, including Iran’s support of terrorist groups and the development of ballistic missiles.

President Trump took the immediate step of informing Congress that he was unable to certify that the suspension of sanctions pursuant to the JCPOA was appropriate and proportionate to the specific and verifiable measures taken by Iran to terminate its illicit nuclear program.  Section 2 of the Iran Nuclear Agreement Review Act of 2015 (INARA) requires that the President make such a certification, along with other certifications regarding Iran’s compliance with the deal, to Congress every 90 days.  By failing to make this certification , President Trump triggered a process under INARA that allows (but does not require) Congress to use expedited procedures to pass legislation re-imposing sanctions against Iran that are currently being waived by the United States.  See our previous post on this subject.

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Trump Administration Announces Permanent Rollback of Sudanese Sanctions Regulations

On October 6, the U.S. Government announced the termination of U.S. sanctions against Sudan, which had been in place since 1997.

While most of the recent developments regarding U.S. sanctions have involved increasing sanctions against countries such as North Korea and Venezuela, Sudan-related sanctions policy has been quietly moving in the opposite direction, with the Obama and Trump Administrations taking steps to significantly ease restrictions on Sudan. As we have previously written, this sanctions easing began in January 2017 when President Obama issued Executive Order (“EO”) 13761, which waived a number of statutory provisions mandating sanctions on Sudan and established a framework for the potential permanent revocation of key Sudan sanctions programs. Following the EO, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued a broad general license essentially suspending, on a temporary basis, the United States’ longstanding comprehensive sanctions against Sudan. The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) also amended the Export Administration Regulations to set out a favorable licensing policy for certain exports or reexports to Sudan of items intended to ensure the safety of civil aviation or the safe operation of fixed-wing, commercial passenger aircraft, along with certain items related to railroads.  (For additional details on the specific sanctions relief authorized under these actions see our previous advisory here). Continue Reading

Bank Warranties: The Other Sanctions Regulations

Imagine, for a moment, that your company has achieved a state of compliance nirvana. Through the diligent efforts of compliance personnel and counsel, the company has assessed its economic sanctions and export control risks, implemented policies and procedures to prevent unlawful activity, and provided compliance training to employees.  With those measures in place, the company has mitigated much of its legal risk, and has identified a subset of activity with sanctioned countries—such as Iran and Russia—that is perfectly lawful, and stands to be profitable.

Full speed ahead? Not quite.

Many companies looking to engage with sanctioned countries find that, even when the contemplated activity is lawful, representations and warranties set out in the company’s loan agreements restrict the activity. This can be particularly jarring for non-U.S. companies, which are authorized to engage in a broad range of activity with U.S. sanctioned countries such as Iran (subject to certain limitations), but risk running afoul of provisions in loan agreements that prohibit even lawful business with those countries.

In a sense, these representations and warranties are a set of regulations unto themselves that pose compliance challenges and can carry severe risk in the event of an infraction. Continue Reading

EU Raises Specter of Blocking Regulation as Trump Administration Ponders JCPOA

In a panel hosted by the Atlantic Council last week, the EU Ambassador to the United States, David O’Sullivan, stated that the European Union could block U.S. sanctions on Iran if the United States pulls out of the Joint Comprehensive Plan of Action (“JCPOA”).

The U.S. Congress built in a requirement under the Iran Nuclear Agreement Review Act (INARA) that the President certify every 90 days that Iran is in compliance with its nuclear-related obligations under the JCPOA.  President Trump (reluctantly) made a second certification of compliance on July 17, 2017.  However, after the July certification, officials in the Trump administration said that the President believes that the Iranians have not been fully compliant. The next certification is due October 15, 2017.

As previously summarized here, if President Trump certifies that Iran is in material breach of the JCPOA or if he declines to make the certification, then the ball would pass to the US Congress.  The INARA provides for expedited congressional consideration (i.e., within 60 calendar days) of any legislation re-imposing sanctions that may be introduced in Congress. Continue Reading

OFAC Shortens New Debt Maturity Periods under Russian Financial and Energy Sectoral Sanctions

OFAC today revised its Ukraine/Russia-related sectoral sanctions directives prohibiting US person dealings in new debt or new equity of listed Russian financial institutions and new debt of listed Russian energy companies (in both cases, these prohibitions continue to apply to the “interests in property” of the listed entities, meaning any entity 50% or more owned by them). OFAC took this step pursuant to a statutory mandate in the Countering Russian Influence in Europe and Eurasia Act of 2017 (CRIEEA).  See our advisory on CRIEEA.  The changes made today are as follows (and as expected based on the statutory mandate):

  • Directive 1 (financial sector): Prohibits all transactions in, provision of financing for, and other dealings in new debt of the covered persons of longer than 14 days maturity issued on or after November 28, 2017.
  • Directive 2 (energy sector): Prohibits all transactions in, provision of financing for, and other dealings in new debt of the covered persons of longer than 60 days maturity issued on or after November 28, 2017.

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OFAC Reaches Settlement Agreement with Richemont North America

On September 26, 2017, the US Office of Foreign Assets Control (OFAC) published information about a civil enforcement action against Richemont North America, d.b.a. Cartier, headquartered in New York.  Richemont agreed to settle charges and pay approximately $334,800 for allegedly selling jewelry to a Specially Designated National and Blocked Person designated under the Foreign Narcotics Kingpin Sanctions Regulations located in Hong Kong. The matter was not voluntarily disclosed.  OFAC determined that the circumstances were not egregious, but that a monetary penalty was warranted based on the circumstances.  In the final paragraph, OFAC seemed to provide a warning about the risks for U.S. companies with retail operations that engage in international transactions, particularly those that ship their products directly to customers outside the United States.  In this regard, OFAC recommended that companies adopt a risk-based compliance program to identify and mitigate potential sanctions liabilities, identifying factors for consideration as part of such a program.

UN and US Impose New Sanctions on North Korea Amidst Increasing Hostility

On September 26, 2017, Steptoe published an advisory on the newest UN and US sanctions on North Korea. As tensions between the United States and North Korea continue to escalate – and President Donald Trump and Kim Jong-Un trade increasingly harsh barbs – the United Nations, United States, and other countries continue to impose tough sanctions against North Korea. The advisory reviews UN Security Council Resolution 2375, which was adopted on September 11, and Executive Order 13810, which President Trump signed on September 20. As a result of these and other recent activities by the UN Security Council and the US, such as a complete suspension of immigrant and nonimmigrant entry into the US by North Korean nationals, North Korea is now subject to more stringent sanctions than any other country. Together, these actions have widespread impacts on global trade with North Korea. 

For more information, please see our advisory.

CFIUS Releases Long-Awaited 2015 Annual Report

The Trump administration is making significant changes to longstanding trade policies. Among the flashpoints is the Committee on Foreign Investment in the United States (“CFIUS”), responsible for national security reviews of certain inbound foreign investments.  Since President Trump assumed office, the Committee has taken an increasingly critical eye to many transactions, scuttling an increasing number of deals and recommending that the president take action to block the Lattice Semiconductor/Canyon Bridge deal.

Given this period of significant change in the CFIUS process, the Committee’s annual report has been much anticipated. While the report only offers data through the end of 2015, it nonetheless provides interesting insights on the trends and developments that led up to the present period.

Delayed Publication of the Report

This year’s annual report has been significantly delayed in its release. In years past, the report, which the Committee must submit to Congress on a yearly basis, has been released in February.  This year’s delay likely is due to a significant increase in cases occupying CFIUS’s resources and a significant lack of political appointees at the Department of Treasury and other relevant agencies.   Continue Reading