Posted By Administration,
Thursday, October 19, 2017
Updated: Wednesday, October 18, 2017
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by Melissa Proctor, Miller Proctor Law PLLC
A significant development on the U.S. economic sanctions front took place this past week: effective as of October 12, 2017, the economic sanctions on Sudan under Executive Orders 13067 and 13412, as well as the Sudanese Sanctions Regulations ("SSR") in 31 C.F.R. Part 538 are officially revoked. The Treasury Department's Office of Foreign Assets Control ("OFAC") intends to remove the SSR altogether from the Foreign Assets Control Regulations in the near future. So, what does this mean for U.S. companies?
First, as background, the sanctions on Sudan were temporarily waived by President Obama just a few days before he left office back in January 2017. The decision to temporarily waive the sanctions was due in large part to Sudan's cessation of hostilities in the region, its improvement in humanitarian access throughout the country, and its cooperation with the United States in addressing regional conflicts and threats of terrorism. OFAC implemented this temporary waiver by issuing a General License that suspended the SSR. Thus, under that General License, U.S. companies, beginning in January 2017, were allowed to: (1) import Sudanese origin goods and services into the United States; (2) export and reexport EAR99 goods, technology and services to Sudan (with certain exceptions); and, (3) export and reexport non-EAR99 items per the requirements of the Export Administration Regulations ("EAR"). Thus, while many companies have been importing from and exporting to Sudan since the beginning of the year, many others chose to stay away because of the fear that the waiver and the General License could be upended at any time. The formal revocation of the sanctions this week will therefore give more certainty to businesses that have in interest in exploring sourcing and marketing opportunities in Sudan.
That's not to say that all dealings with Sudan are now lawful and authorized under U.S. law. For example –
Sudan is still designated as a State Sponsor of Terrorism by the U.S. Department of State. Because of this, exports and reexports of certain agricultural commodities, medicines or medical devices to Sudan are still subject to the licensing requirements of the Trade Sanctions Reform Act of 2000 ("TSRA"), and will remain so until the legislation is superseded or repealed by Congress. To address this, OFAC issued new General License A on October 12, 2017, which authorizes all exports and reexports of these items to Sudan without the need for a one-year TSRA authorization. In addition, because Sudan is still a State Sponsor of Terrorism, U.S. persons are prohibited from engaging in transfers from the Government of Sudan that would be considered a donation to a U.S. person or where there is knowledge or reason to know that such transactions pose a risk of furthering terrorist acts in the United States; however, this prohibition chiefly applies to financial institutions.
Products, software and technology may still require licenses for export or reexport to Sudan under the EAR and the International Traffic in Arms Regulations ("ITAR"). Under the EAR, a license is required for exports and reexports of most non-EAR99 items to the Sudan; however, there are favorable licensing policies in place for many items, and there are several license exceptions available for transactions involving Sudan in Part 740 of the EAR. The ITAR, on the other hand, implements an arms embargo against Sudan, which is considered a Section 126.1 proscribed country; therefore, U.S. persons are prohibited from engaging in dealings with Sudan involving defense articles and services designated on the U.S. Munitions List, and license applications for such transactions are subject to a policy of denial by the State Department's Directorate of Defense Trade Controls ("DDTC").
OFAC's sanctions associated with the ongoing conflict in Darfur remain firmly in place. U.S. persons are still prohibited from dealing with any individuals or entities that are identified on OFAC's Specially Designated National List ("SDN List") under the [DARFUR] flag – this includes entities that are owned 50% or more by restricted parties.
OFAC's sanctions against certain Sudanese individuals and entities for activities related to South Sudan and terrorism-related activities are still in effect as well. Again, U.S. persons are prohibited from dealing with individual or entities designated under those sanctions programs, as well as with any entity that is owned 50% or more by those SDNs.
Absent further Presidential action, U.S. state and local governments are likely to continue divesting from companies that are directly invested in Sudan.
Finally, federal contractors are still required to certify that they are not engaging in certain business activities involving Sudan.
The formal revocation of this sanctions program will undoubtedly give a surer footing to businesses that have in interest in exploring sourcing and marketing opportunities in Sudan. But of course, nothing in the realm of embargoes or economic sanctions is truly permanent or issued in stone – after all, embargoes and sanctions are not like death or taxes. We could again see the snap-back of sanctions down the road. Given that Sudan is still a State Sponsor of Terrorism, and the fact that certain export controls and restricted parties list prohibitions remain in place, U.S. companies and their foreign affiliates will need to remain vigilant and approach any new opportunities with Sudan with continued due diligence.
Melissa Proctor is the founder of Miller Proctor Law PLLC, an international trade law firm located in Scottsdale, Arizona. For more than twenty years, she has advised companies on the full of array of international trade issues, including export controls, embargoes and economic sanctions, customs laws, anti-corruption compliance, and other agency requirements that impact the cross-border movement of goods, information and services. She may be reached at 480-447-8986 or firstname.lastname@example.org.
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