Transcript Document
U.S. Economic Sanctions:
Current Landscape, Recent Activity, and
New Developments
Speaker
Meredith Rathbone
Associate
Steptoe & Johnson LLP, Lex Mundi
member firm for Washington D.C.
[email protected]
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Overview of U.S. Economic Sanctions
OFAC (Office of Foreign Assets Control – Treasury Department)
administers U.S. sanctions programs
Regulations: 31 C.F.R. Parts 500-598
Website: http://www.ustreas.gov/offices/enforcement/ofac/
Sanctioned countries:
Cuba, Iran, Sudan - almost complete prohibition
North Korea, Syria – broad export restrictions (BIS)
Burma (Myanmar) – financial services and new investment
restrictions, among others
Also: Balkans, Belarus, Cote d’Ivoire (Ivory Coast), Democratic
Republic of the Congo, Iraq, Lebanon, Liberia, Somalia, Zimbabwe
List-based sanctions (SDNs, foreign policy, national security,
terrorists, narcotics traffickers)
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U.S. Economic Sanctions - Prohibitions
Sanctions programs vary significantly. They can prohibit, among other
things:
Exports, reexports, and transshipments of U.S.-origin goods,
technology, know-how, and services to sanctioned countries or
persons
Investment in sanctioned countries or persons
“Dealing in” goods, technology, or services destined for sanctioned
countries (regardless of origin) or blocked property (asset freezes)
owned/controlled by sanctioned persons
“Facilitating” or “approving” a foreign (non-U.S.) person in its
business dealings with sanctioned countries or persons
Evading or avoiding the restrictions in OFAC’s regulations
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Who Must Abide By U.S. Sanctions?
All persons in the United States are covered, regardless of nationality
U.S. companies, U.S. citizens, and lawful permanent residents are covered, wherever
located
Non-U.S. subsidiaries of U.S. companies are prohibited from engaging in any business
transactions with Cuba
U.S. companies and persons cannot facilitate or approve any sanctioned country
activities of non-U.S. subs
Exports by non-U.S. companies of U.S.-origin products to sanctioned countries can be
prohibited
Exports by non-U.S. companies of non-U.S. products that contain greater than de
minimis levels of U.S.-origin content can be unlawful
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Prohibited Facilitation or Approval Examples
U.S. persons and companies cannot:
Refer sanctioned country business to a non-U.S. subsidiary
Assist a foreign sub in structuring a transaction involving business with
OFAC sanctioned country or person
Provide advice, consulting, business, legal or other support for a
transaction relating to OFAC sanctioned country or person
Provide financing, guarantee, warranty, transportation, logistical, or
indemnity support to a foreign sub for a transaction involving an OFAC
sanctioned country or person
Provide management oversight, direction or approval to a foreign sub
relating to specific activities in an OFAC sanctioned country
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Iran Sanctions Act & Related
Developments
Iran Sanctions Act (formerly ILSA) in place since 1996
Targeted persons determined to have (1) invested $20
million or more in a project in Iran that contributed to the
development of Iran’s petroleum resources, or (2) sold
WMDs or certain conventional weapons to Iran
Focused on the activities of non-U.S. companies
President to choose 2 of 6 possible sanctions
Never enforced
Limited UN sanctions against Iran have been in place since
2006
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Iran Sanctions Act &
Related Developments (Cont.)
Tougher Sanctions Passed:
UN Security Council - Resolution 1929 (June 9, 2010)
United States – Comprehensive Iran Sanctions
Accountability and Divestment Act (CISADA) (June
24, 2010)
European Union (July 26, 2010)
Canada (July 26, 2010)
Japan (August 3, 2010)
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U.S. Sanctions – CISADA (Refined
Petroleum)
CISADA expands petroleum-related restrictions of ISA by prohibiting:
Providing refined petroleum products to Iran valued at $1 m or
more ($5 m in a 12-month period)
Providing of goods, services or other support to Iran valued at $1
m or more ($5 m in a 12-month period) that could directly and
significantly facilitate the maintenance or expansion of Iran’s
domestic production of refined petroleum products
Providing goods, services, technology, information or support
valued at $1 m or more ($5 m in a 12-month period) that could
directly and significantly contribute to Iran’s ability to import
refined petroleum products
Insurance/reinsurance/underwriting
Financing/brokering
Shipping services
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US Sanctions – CISADA (Refined
Petroleum)
CISADA makes it more difficult for the President to avoid
conducting an investigation or making a determination of
sanctionable activity
Requires the President to impose 3 out of an expanded menu of
9 sanctions
New sanctions include: (1) prohibition on transactions in
foreign exchange; (2) prohibition on transfers of credit or
payments through/to U.S. financial institutions if sanctioned
person has an interest; (3) prohibition on dealing in property
in which sanctioned person has an interest
Sanctions can be imposed on parent companies and affiliates
Delay and waiver provisions still available, but more difficult to
use
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CISADA – Financial Institutions
Targets non-U.S. financial institutions that:
facilitate Iran’s ability to acquire WMDs or provide support
for terrorism
facilitate activities of persons subject to UN sanctions
provide significant facilitation/support of blocked IRGC
entities or blocked Iranian financial institutions
Prohibits U.S. financial institutions from dealing with non-U.S.
financial institutions that violate sanctions
Regulations to be implemented that will establish certain
audit, reporting, due diligence, or certification requirements
Goal: Force foreign financial institutions to choose – us or them
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CISADA – Other Provisions
U.S. Government contracting restrictions
USG contractors must certify that they do not engage in
sanctionable activities
Enhanced import restrictions; codifies export restrictions
Permits divestment from companies that engage in
sanctionable activities
Requires DNI to submit reports identifying destinations of
diversion concern
Enhanced export licensing requirements for designated
countries
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Other Sanctions Developments
Somalia Sanctions Regulations – Property of persons contributing to
conflict in Somalia blocked (April 2010)
North Korea – U.S. to name entities and persons involved in arms
trading, counterfeiting, drug trafficking, and other illegal activities –
property under U.S. control will be blocked
Cuba:
Cash in advance requirement modified for agricultural products –
may now receive payment when products arrive in Cuba, before
transfer to Cuban buyers (2010)
Eased restrictions on family visits, remittances, and certain
telecommunications-related activities (2009)
Legislation introduced in Congress to lift travel ban and ease
financing restrictions for sale of agricultural products
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Thank you!
On behalf of Lex Mundi and Steptoe & Johnson
LLP, we would like to thank you for joining.
If you have any questions or comments, please feel free to contact
Meredith Rathbone at [email protected]
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