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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