Archive for the ‘Sanctions’ Category

Executive Order Revokes Iran Sanctions…but Iran Isn’t out of The Woods Yet

Wednesday, February 3rd, 2016 by Danielle McClellan

By: Danielle McClellan

On January 16, 2016, President Obama signed an executive order revoking the 20-year system of sanctions against Iran for pursing a nuclear weapons program in the past. The new Executive Order revokes the following Executive Orders: 13574, 13590, 13622, and 13645 with regards to Iran. An amendment to Executive Order 13628 was also made.

These changes come about after it was found that Iran has continued to comply with an international nuclear agreement that required them to abstain from obtaining nuclear weapons. Part of this agreement included that the US would lift sections on Iran as long as it refrained from building a nuclear program for a decade or more.

Most of the sanctions relief will apply to non-US citizens doing business with Iran; US citizens will still be unable to do business with Iran (this has not changed). The following has occurred due to the executive order:

  • Iranian assets will also be freed up and no longer held in the internarial financial system.
  • OFAC has also removed nearly 400 Iranians from its blocked persons list
  • OFAC will grant waivers for Americans to import food, carpets and other floor coverings from Iran.
  • A presidential memorandum was signed that will allow the export of a commercial passenger aircraft to Iran on a case by case basis.

Although these changes sound nice, it’s important to remember that all other US sanctions against Iran are still in place and will continue to be in place as long as Iran’s support for terrorism, regional destabilization, human rights abuses, and ballistic missile development occur.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-01-21/pdf/2016-01325.pdf

US Relaxes Sanctions on Iran: Put on Your Party Hat, because You Can’t Export It to Iran

Wednesday, February 3rd, 2016 by Danielle McClellan

By: John Black

Implementation Day has arrived.  Iran reached a nuclear non-proliferation milestone and the US relaxed some of its sanctions on Iran.  As reported in the media, President Obama has removed strict US trade controls on sanctions on Iran.  As reported in other media sources, the US has capitulated and freed Iran to have an unfettered path to development of nuclear weapons.

So, US exporters, you can put on your “US hearts Iran” party hat if you want, but you may not export that party hat to Iran because it is classified as EAR99 which still requires an export license for Iran, as does nearly every other product known to man other than medicine, medical devices and agricultural products.

The Obama Administration did remove the requirement that foreign parties that are owned or controlled by US parties obtain a US Government approval  before they do business with Iran, such as sending EAR99 “US hearts Iran” party hats to Iran.  No doubt, those cone shaped paper hats with the rubber bands that always get stuck in your hair are going directly to the Iranian nuclear scientist and engineers who, upon wearing the cone hats, will be able to work faster, smarter and more effectively in developing nukes.

In the final analysis, the actual scope of the changes to US export and reexport controls is very narrow, and typically tricky.

More specifically, to make the changes President Obama issued an executive order revoking sanctions imposed under other executive orders.  Since no new regulations have been published to do this, to figure out what happened, you have to read the new executive order and see what it eliminated in the previous executive orders and subtract those from OFAC’s Iran regulations.  Before you do that, I can give you a key overview of what happened that is most important to most US parties and foreign entities owned or controlled by US parties.

To implement the executive order, the Office of Foreign Assets Control (OFAC) created a new General License H to cancel existing rules.  Here are the key aspects of the General License H for foreign entities owned or controlled by US entities, and for US entities:

General License H Authorizes Foreign Entities Owned or Controlled by US Entities To:

  • Transfer to Iran foreign made items not subject to US jurisdiction—this includes purely foreign made items and foreign made items with US content that are exempt from US jurisdiction under the EAR de minimis rules; or
  • Transfer to Iran certain US made items (mainly EAR99 items, see exclusion 6 below) as long as the transfer is not a direct or indirect export from the United States.

Excluded from those two authorizations are:

  1. Direct or indirect exports from the United States to Iran;
  2. Movement of funds involving US financial institutions
  3. Activities involving parties on the SDN or activities prohibited non-Iran OFAC rules;
  4. Activities involving any entity on the FSE list;
  5. Activities for which the Export Administration Regulations (EAR) require a license—for example, most items with an EAR classification other than EAR99;
  6. Any military, paramilitary, intelligence or law enforcement entity of the Government of Iran;
  7. Activities otherwise prohibited or sanctionable by executive orders (EO):
    1.  12938 or 13382: Proliferation of weapons of mass destruction and their delivery systems;
    2. 13224:  International terrorism;
    3. 13572 or 13582:  Syria;
    4. 13611: Yemen; or
    5. 13553, 13606 or section 2 or 3 of 13628:  Iran’s human rights abuses
  8. Certain nuclear activities

 

General License H Authorizes Parties in the US to Be Involved In:

  • Activities Related to the establishment or alteration of corporate policies and procedures to the extent necessary to allow US owned or controlled foreign entities to engage in activities that General License H authorizes for the foreign entities; or
  • Activities to make available to US owned or controlled foreign entities automated and globally integrated computer, accounting, email, telecommunications or other business support systems, platform, database application, or server necessary to store, collect, transmit, generate, or other process documents of information related to activities that General License H authorizes for the foreign entities.

In addition, to the General License H, OFAC also announced a more formal safety of flight licensing policy for Iran.  Specifically, there is a good chance OFAC will approve licenses:

  • To export, reexport, sell, lease or transfer to Iran commercial passenger aircraft for exclusively civil aviation end-use
  • To export, reexport, sell, lease or transfer to Iran spare parts and components for commercial passenger aircraft
  • Provide associated services, including warranty, maintenance, and repair services and safety inspections for the above, as long as licensed items and services are used exclusively for commercial passenger aviation.

OFAC has stated that if it approves such licenses, it will require that the licensed activities do not involve SDN listed parties.

Before you have an export control party, including “I heart Iran” party hats, remember that the US can revoke General License H and all of the changes it made at the drop of a hat for any reason whenever it wants to do so.

Secondary Sanctions:  A big part of the OFAC relaxation does not apply to export or reexport controls, but comes in the area of secondary sanctions.   For example, OFAC has the authority to penalize a foreign entity with no ties to the US who is involved in the petroleum business in Iran, even if that purely foreign party is not transferring any items subject to US jurisdiction.   For non-US parties who are not owned or controlled by US parties and are not dealing in products subject to US jurisdiction, OFAC announced that it will no longer enforce its secondary sanctions on these sectors:

  • Financial and bank
  • Petrochemical and energy
  • Gold and precious metals
  • Automotive
  • Shipping, shipbuilding and ports

For companies outside of the scope of US export and reexport controls, the OFAC secondary sanctions are important.  For example, under US secondary sanctions, a French company with no US ties, could have a French export license to send 100% French machines to an Iranian oil site and still get penalized by US secondary sanctions.  So, if the US did not lift its secondary sanctions, it could have largely cancelled out the relaxations other countries made in their trade controls on Iran.

And, before anybody in France, or anywhere else in the world, dons their foreign-made made “I heart Iran” berets, remember OFAC can re-impose any or all of its secondary sanctions at the drop of a hat for any reason whenever its wants to do so.

These dramatic, yet limited, changes have created new business opportunities, but I recommend that everybody proceed with caution.  The US Government made it clear it will continue to enforce the existing rules.  The US Government does not want to be seen as being too lax regarding Iran, and a big, new enforcement case would give the US Government the publicity it needs to continue to convince Congress and companies everywhere that it remains tough on Iran and violations carry with them huge business risks.

For further guidance from OFAC, there is a lot of information at: https://www.treasury.gov/resource-center/sanctions/Programs/Pages/iran.aspx

For the OFAC safety of flight guidance go to:  https://www.treasury.gov/resource-center/sanctions/Programs/Documents/lic_pol_statement_aircraft_jcpoa.pdf

Company Fined $38,930 for Selling Internet Security Products to Iran, Sudan and Syria

Tuesday, January 19th, 2016 by Danielle McClellan

By: Danielle McClellan

Barracuda Networks, Inc. of California and its United Kingdom subsidiary, Barracuda Networks Ltd. voluntarily disclosed violations to the Office of Foreign Assets Controls (OFAC) related to the sale of various internet security products.

Between August 2009 and April 2012 Barracuda UK sold web filtering products that are used to block or censor Internet activity along with internet security products and the related software subscriptions to entities in Iran, Sudan and entities on the Specially Designated Nationals and Blocked Persons List (SDNs). During the same time period Barracuda US provided firmware and software updates to the illegal software subscriptions. The total transaction value for these sales was $123,586.

Both companies were charged with a total of 37 violations and fined a total of $38,930. OFAC released the following factors and considerations related to the fine:

  1. Barracuda acted with reckless disregard for sanctions requirements by (a) permitting distributors and resellers to sell its products and updates to SDNs and to customers in sanctioned countries when it knew or had reason to know that the products were located in sanctioned countries or with SDNs, in potential violation of U.S. sanctions requirements, and (b) distributing its products and technology to more than 17,000 resellers and distributors worldwide without implementing any written sanctions compliance policies or procedures, and failing to provide training to its employees regarding export controls and sanctions;
  2. Barracuda knew or had reason to know that it was exporting goods, technology, and services to Iran and Sudan because IP addresses associated with those countries were used to contact the company; further, Barracuda knew or had reason to know that it was exporting technology to Syrian SDNs because the SDNs were listed on sales invoices;
  3. The exportation of the Web filtering software and hardware to Iran, Sudan, and SDNs in Syria could potentially have caused significant harm to U.S. sanctions program objectives because the technology could have been used to block or censor Internet activity;
  4. Barracuda did not screen IP addresses used to contact Barracuda’s servers because it had no OFAC compliance program in place at the time of the transactions;
  5. Barracuda has no prior OFAC sanctions history, including no penalty notice or Finding of Violation in the five years preceding the earliest date of the transactions giving rise to the apparent violations, making it eligible for up to 25 percent “first offense” mitigation;
  6. Barracuda took significant remedial steps including developing a method to disable products in sanctioned countries, prioritizing U.S. sanctions and export controls compliance by establishing an Office of Trade Compliance and hiring a general counsel with subject matter expertise in these areas, issuing company-wide a statement from the CEO about sanctions-related policy, implementing a trade compliance manual, and enhancing its sales software to include red flags for orders that may require a license; and
  7. Barracuda substantially cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations for approximately 521 days.

OFAC Notice: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20151124_Barracuda.pdf

BIS Follows Suit with OFAC Changes and Adjusts EAR for the Cuba People

Thursday, October 1st, 2015 by Danielle McClellan

By: Danielle McClellan

Effective September 21, 2015 BIS amended the Export Administration Regulations (EAR) to expand the scope of License Exception Support for the Cuban People (SCP) and many other changes as noted below.  Although BIS made a wide range of changes, the changes did little to open up opportunities for most companies to do business in Cuba. See the full Federal Register Notice: http://www.gpo.gov/fdsys/pkg/FR-2015-09-21/pdf/2015-23495.pdf.

Expansion of License Exception Support for the Cuban People (SCP)

  • BIS revised EAR § 740.21(b) and (d)(1) to remove a requirement that items must be sold or donated when exported or reexported to authorized end-users in Cuba under License Exception Support for the Cuban People (SCP). Paragraph (b) authorizes certain exports and reexports to improve living conditions and support independent economic activity in Cuba. Paragraph (d)(1) authorizes certain exports and reexports to improve the free flow of information to, from, and among the Cuban people. When License Exception SCP was created in January 2015, BIS included text regarding sales or donations in paragraphs (b) and (d)(1) to clarify that the provisions were not limited to exports and reexports of donated items. However, the construction of the sentences addressing sales or donations inadvertently precluded other types of exports and reexports intended to be covered under the license exception, such as those involving leased or loaned items. Consequently, BIS is removing the portions of paragraphs (b) and (d)(1) of License Exception SCP that refer to sales or donations of items to eliminate those unintended restrictions.
  • BIS revised paragraph (c)(2) of License Exception SCP to authorize certain temporary reexports to Cuba. Paragraph (c)(2) previously authorized certain temporary exports of items to Cuba from the United States for use in scientific, archeological, cultural, ecological, educational, historic preservation, or sporting activities, or in the traveler’s professional research. This change authorizes travelers departing the United States or a foreign country to temporarily export or reexport authorized items to Cuba for eligible end-uses. Additionally, this rule adds professional meetings to the list of eligible end-uses in paragraph (c)(2). This rule also introduces a requirement that the items remain under the traveler’s ‘‘effective control.’’ The existing EAR definition of effective control in § 772.1 applies to this use of the term. Eligible items continue to be limited to items subject to the EAR but not specified in any Export Control Classification Number (ECCN), i.e., EAR99) or controlled on the Commerce Control List (CCL) only for anti- terrorism reasons.
  • BIS added a new paragraph (d)(4) to  SCP to authorize exports and reexports of commodities and software to individuals and private sector entities in Cuba that will be used to develop software that will improve the free flow of information or that will support the private sector activities described in paragraph (b) of License Exception SCP.  The Cuban Government and Communist Party and certain officials thereof are designated as ineligible end users for commodities and software exported under paragraph (d)(4). Existing text in paragraph (d) limits the commodities and software authorized for export or reexport under this new paragraph (d)(4) to those that are either EAR99 or controlled on the CCL for anti- terrorism reasons only. For example, to qualify for export or reexport under new paragraph (d)(4), a general purpose software development kit must be either EAR99 or controlled in an ECCN where the only reason for control that applies to that kit is anti-terrorism and the kit’s use in Cuba must be to develop software that will improve the free flow of communication and/or that will support the private sector activities described in paragraph (b) of License Exception SCP.
  • BIS added a new paragraph (e) to License Exception SCP. Paragraph (e)(1) authorizes the export and reexport to Cuba of certain items for use by United States Persons (as defined in § 772.1 of the EAR) to establish, maintain, or operate a physical presence in Cuba. Any resulting payments associated with such a physical presence, such as lease payments, are permitted only to the extent authorized by § 515.573 of the OFAC Cuban Assets Control Regulations (31 CFR 515.573). To be eligible for the exception under paragraph (e)(1), the end-users must be (1) entities organizing or conducting educational activities in Cuba authorized by OFAC pursuant to 31 CFR 515.565(a); (2) entities providing mail or parcel transmission services authorized by OFAC pursuant to 31 CFR 515.542(a) or providing cargo transportation services in connection with trade involving Cuba authorized by OFAC or exempt from the prohibitions of 31 CFR part 515 as specified in 31 CFR 515.206; (3) religious organizations engaging in religious activities in Cuba authorized by OFAC pursuant to 31 CFR 515.566; (4) persons engaged in transactions authorized by OFAC pursuant to 31 CFR 515.559(b); (5) persons that export or reexport items to Cuba that are exempt from the prohibitions of 31 CFR part 515 as specified in 31 CFR 515.206; (6) providers of travel services or carrier services authorized by OFAC pursuant to 31 CFR 515.572; or (7) persons that export or reexport to Cuba pursuant to a license issued by BIS or a license exception authorized by § 746.2(a)(1) of the EAR.
  • Items eligible for export and reexport to Cuba pursuant to paragraph (e)(1) of License Exception SCP are limited to those designated as EAR99 (i.e., items subject to the EAR but not specified in any ECCN) or controlled on the CCL only for anti-terrorism reasons.
  • Paragraph (e)(2) of License Exception SCP authorizes the export and reexport to Cuba of certain items for use by certain additional eligible end-users to establish, maintain, and operate a physical presence in Cuba. Any resulting payments associated with such a physical presence, such as lease payments, are permitted only to the extent authorized by § 515.573 of the Cuban Assets Control Regulations.  To be eligible for paragraph (e)(2), the end-users must be authorized by OFAC to provide telecommunications services and establish telecommunications facilities pursuant to 31 CFR 515.542(b)–(e) or to provide internet-based services pursuant to 31 CFR 515.578, including subsidiaries, branches, offices, joint ventures, franchises, and agency or other business relationships with any entity or individual who is a national of Cuba. The items authorized pursuant to paragraph (e)(2) are limited to those designated as EAR99 (i.e., items subject to the EAR but not specified in any ECCN) or controlled on the CCL only for anti-terrorism reasons.
  • Paragraph (e)(3) of SCP authorizes the export and reexport to Cuba of certain items to be given away for free as gifts for promotional purposes, such as pens, notepads, hats, and t-shirts. Items eligible for export or reexport to Cuba pursuant to paragraph (e)(3) are limited to those items of a type normally given away for free as gifts for promotional purposes that are designated as EAR99.
  • BIS is creating paragraph (e) of SCP to facilitate engagement between the U.S. and Cuban people; the free flow of information to, from, and among the Cuban people; and independent economic activity in Cuba generated by Cuba’s private sector.
  • This rule also creates new paragraph (f) to SCP to authorize certain temporary (not to exceed one year) exports and reexports to Cuba of EAR99 items and items controlled on the CCL only for anti- terrorism reasons. Paragraph (f) authorizes exports and reexports of the following:
  • Commodities and software as tools of trade for use by the exporters or employees of the exporters to install, service or repair items that are subject to the EAR and that have been exported or reexported to Cuba under a license or license exception, or foreign-origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities but not the Cuban Government, the Cuban Communist Party or certain officials thereof in Cuba;
  • Technology as tools of trade for use by certain persons for the installation, servicing or repair of items that are subject to the EAR and that have been exported or reexported to Cuba under a license or license exception, or foreign- origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities but not the Cuban Government, the Cuban Communist Party or certain officials thereof in Cuba;
  • Kits of replacement parts or components for items that have been exported or reexported to Cuba under a license or license exception, or foreign- origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities but not the Cuban Government, the Cuban Communist Party or certain officials thereof in Cuba;
  • Commodities and software for exhibition or demonstration at trade shows or to parties eligible to receive items under License Exception SCP; and
  • Containers that are necessary for shipment of commodities being exported or reexported to Cuba under a license or license exception; BIS is creating paragraph (f) of License Exception SCP to help support authorized travel and commerce.

Expansion of License Exception Consumer Communications Devices (CCD)

  • BIS revised EAR § 740.19(a) to remove references to sales or donations of eligible items authorized under License Exception CCD. License Exception CCD authorizes certain exports and reexports to improve the free flow of information to, from, and among the Cuban and Sudanese people. When BIS created CCD in September 2009 to authorize certain exports and reexports to Cuba, the license exception included a donation requirement. BIS revised License Exception CCD in January 2015 to authorize sales, in addition to donations, and to update the list of eligible items. (Sudan was added as an authorized destination in February 2015.) Instead of merely removing the word ‘‘donated’’ from paragraph (a) of License Exception CCD, the January 2015 revision added the phrase ‘‘either sold or’’ to that paragraph. That phrasing inadvertently precluded other types of exports and reexports intended to be authorized by the license exception, such as those involving leased or loaned items. Consequently, this rule removes phrase ‘‘either sold or donated’’ from paragraph (a) to eliminate that unintended restriction.

Availability of License Exception Aircraft, Vessels and Spacecraft (AVS)

  • BIS revised EAR § 746.2(a)(1)(x) to make paragraphs (b) and (d) of License Exception AVS available for Cuba.  BIS also amended EAR § 740.15(b) and (d) to add to License Exception AVS paragraphs (b)(4) and (d)(6) described below that apply only to Cuba.
  • Paragraph (b) of AVS authorizes certain exports and reexports of equipment and spare parts for permanent use on vessels and aircraft departing the United States. The paragraph also authorizes certain exports of ship and plane stores for use on board vessels and aircraft departing the United States. Paragraph (d) of AVS authorizes certain exports and reexports of vessels on temporary sojourn. Paragraph (a) of AVS, which authorizes certain exports and reexports of aircraft on temporary sojourn, was, prior to publication of this rule, available for Cuba.
  • BIS added a note to paragraph (a) prohibiting an aircraft exported or reexported to a country pursuant to that paragraph from remaining in that country for more than seven consecutive days before it departs for a country to which it may be exported without a license or the United States.
  • BIS added new paragraph (b)(4) to AVS to specify that the commodities eligible for export and reexport to Cuba pursuant to paragraph (b) are limited to those designated as EAR99 or controlled on the CCL only for anti-terrorism reasons.
  • Additionally, this rule adds new paragraph (d)(6) to License Exception AVS. Paragraph (d)(6) provides that only certain categories of vessels, when engaged in specified activities are eligible for the license exception when destined for Cuba. The types of vessels and activities eligible for temporary sojourn to Cuba are as follows.
  1. Cargo vessels for hire for use in the transportation of items.
  2. Passenger vessels for hire for use in the transportation of passengers and/ or items. Vessels used to transport both passengers and items to Cuba may transport automobiles only if the export or reexport of the automobiles has been authorized by a separate license issued by BIS (i.e., not authorized by license exception). The export or reexport to Cuba of personally owned vehicles is not normally necessary to support authorized travel. However, if the need arises, the exporter or reexporter may submit a license application to BIS for review pursuant to the licensing policy in § 746.2 of the EAR.
  3. Recreational vessels destined for Cuba that that are used in connection with travel authorized by the Department of the Treasury, Office of Foreign Assets Control (OFAC).
  • Finally, BIS added a note to paragraph (d) prohibiting a vessel exported or reexported to a country pursuant to that paragraph from remaining in that country for more than 14 consecutive days before it departs for a country to which it may be exported without a license or the United States.
  • BIS is making paragraphs (b) and (d) of AVS available for Cuba to help facilitate authorized travel and commerce. For clarity, BIS is adding notes to paragraphs (a) and (d) specifying the amount of time an aircraft or vessel exported or reexported to a country pursuant to the paragraphs may remain in that country. Previously, BIS interpreted paragraph (a) to authorize temporary sojourns consisting of only one overnight stay while in-country (see 57 FR 30899, July 13, 1992). BIS selected the time periods of seven days for aircraft and 14 days for vessels based on its experience in licensing aircraft and vessels for temporary sojourn to Cuba. The vast majority of such licenses were for stays of seven days or less for aircraft and 14 days or less for vessels.

New Licensing Policy for Civil Aviation Safety

  • BIS amended the licensing policy for Cuba in EAR § 746.2 to add a policy of case-by-case review of license applications for exports and reexports of items to ensure safety in civil aviation and safe operation of commercial passenger aircraft. Items that will be reviewed pursuant to this policy include aircraft parts and components related to safety of flight, weather observation stations, airport safety equipment, and commodities used for security screening of passengers. BIS is adding this licensing policy to support international aviation and passenger safety.

Scope of License Requirements for Deemed Exports and Reexports

  • This rule amends the license requirements for Cuba in § 746.2 of the EAR to specify that a license is required for the release of technology or source code on the CCL to Cuban nationals in the United States or a third country, but not for the deemed export or deemed reexport of technology or source code designated as EAR99.

Technical Corrections to License Exception Agricultural Commodities (AGR)

On July 22, 2015, BIS published a rule implementing the rescission of Cuba’s State Sponsor of Terrorism designation (80 FR 43314). Among other amendments, that rule removed Cuba from Country Group E:1, which changed the general de minimis level for Cuba from 10 to 25 percent. Although the rule made certain technical and conforming changes to the EAR, BIS overlooked references to the former 10 percent de minimis level in paragraph (b)(3) of License Exception Agricultural Commodities (AGR) in § 740.18 of the EAR. Consequently, this rule corrects the de minimis percentages referenced in paragraph (b)(3) of License

OFAC Makes Many Changes that Slightly Relax Some Restrictions on Cuba

Thursday, October 1st, 2015 by Danielle McClellan

The Office of Foreign Assets Controls (OFAC) has published a final rule, effective September 21, 2015, amending the current Cuban Assets Control Regulations to implement elements of the President’s policy to empower the Cuban people from December 17, 2014. Full Federal Register Notice: http://www.gpo.gov/fdsys/pkg/FR-2015-09-21/pdf/2015-23587.pdf.

Generally speaking, the changes are another measured, non-dramatic relaxation of US restrictions on Cuba.  For exporters, the main impact focuses on providing telecomm and internet services to Cuba and also importing Cuban mobile apps.  The changes also relax controls on establishing a physical presence in Cuba and exports and reexports related to EAR License Exceptions CCD and SCP.  OFAC also relaxed its rules related to travel to Cuba and related travel services.  The changes also relax the restrictions related to providing educational services to Cuba and Cuban nationals.

Some of the highlights of the OFAC changes:

Telecommunications and Internet- based Services

  • Subsidiaries, joint ventures, and other business relationships with Cuban individuals and entities. In order to further enhance the free flow of information to, from, and among the Cuban people and to better provide efficient and adequate telecommunications services between the United States and Cuba, OFAC is amending sections 515.542 and 515.578 to authorize persons subject to U.S. jurisdiction to establish and maintain a business presence in Cuba, including through subsidiaries, branches, offices, joint ventures, franchises, and agency or other business relationships with any Cuban individual or entity, to provide authorized telecommunications and internet-based services. OFAC is also authorizing persons subject to U.S. jurisdiction to enter into licensing agreements related to services authorized by section 515.542(b) through (d) and section 515.578(a), and to market such services. OFAC is amending section 515.505 to unblock any entity, office, or other sub-unit established pursuant to sections 515.542 and 515.578.
  • Mobile applications. To further enhance the free flow of information to, from, and among the Cuban people, OFAC is adding a provision in section 515.578 to authorize the importation into the United States of Cuban-origin mobile applications. In addition, OFAC is authorizing the employment of Cuban nationals by persons subject to U.S. jurisdiction to develop such mobile applications.
  • Additional internet-based services and services related to additional authorized exports. In the January 2015 amendments, OFAC authorized services beyond those authorized in section 515.533 related to items exported pursuant to the EAR License Exception Consumer Communications Devices (CCD), certain non-U.S.-origin items located outside the United States, and certain software not subject to the EAR. These services include software design, business consulting, information technology management, and other services to install, repair, and replace such items. OFAC amended 515.578 to expand the permitted services to include training related to the installation, repair, or replacement of such items. OFAC also expanded the authorization to extend to services related to exports of consumer communications devices not eligible for License Exception CCD but authorized pursuant to an individual license from the Department of Commerce and to services related to exports authorized pursuant to the EAR License Exception Support for the Cuban People (SCP) of certain commodities and software that will be used by individuals or private sector entities to develop software that will improve the free flow of information or that will support certain private sector activities. OFAC also amended 515.578 to authorize persons subject to U.S. jurisdiction to provide services related to all such items that were exported to Cuba from a third country. OFAC also removed a restriction on organizations administered or controlled by the Cuban Government or Communist Party with respect to certain internet-based services (such as instant messaging, chat and email, and social networking) authorized pursuant to section 515.578(a)(1), while maintaining this restriction on provision of these services to prohibited officials of the Government of Cuba and prohibited members of the Cuban Communist Party.

Physical Presence in Cuba

  • Physical presence in Cuba for certain persons. OFAC is amending section 515.573 to authorize certain persons subject to U.S. jurisdiction to establish a physical presence, such as an office or other facility, in Cuba, to facilitate authorized transactions. This authorization covers the following: news bureaus; exporters of goods authorized for export pursuant to sections 515.533 or 515.559; providers of authorized mail and parcel transmission services and cargo transportation services; providers of telecommunications or internet-based services; entities organizing or conducting certain educational activities; religious organizations; and providers of travel and carrier services. In addition, OFAC is authorizing these individuals and entities to open and maintain bank accounts at financial institutions in Cuba for use for authorized transactions, and to close such accounts. The prior provisions in this section authorizing certain transactions by news organizations have been fully incorporated into the revised section. OFAC is also amending section 515.505 to unblock any entity, office, or other sub-unit established pursuant to section 515.573, as well as to unblock any individual authorized to establish domicile in Cuba pursuant to section 515.573(a)(4).

Other Changes

  • Educational activities. OFAC is expanding the general license in section 515.565 to allow additional educational activities that are authorized in other sanctions programs administered by OFAC, including the provision of standardized testing services and internet-based courses to Cuban nationals, as well as to authorize U.S. and Cuban universities to engage in academic exchanges and joint non- commercial academic research. Ordinarily incident transactions. OFAC is issuing interpretive guidance in new section 515.421 to clarify that, with certain exceptions, transactions ordinarily incident to a licensed transaction and necessary to give effect thereto are also authorized. In response to public inquiries, OFAC is providing a specific example in this section to clarify that ordinarily incident transactions include payments made using online payment platforms for authorized transactions.
  • Commercial Transactions Provision of goods and services to Cuban nationals located in a third country. OFAC is amending section 515.585 to expand the existing authorization to allow all persons subject to U.S. jurisdiction to provide goods and services to Cuban national individuals located in a third country. In addition, OFAC is adding an authorization to allow banking institutions to open, maintain, and close bank accounts for such Cuban nationals.
  • Air ambulances and emergency medical services. OFAC has had a favorable specific licensing policy and has authorized on a case-by-case and expedited basis air ambulances to travel to and from Cuba and to evacuate individuals requiring medical care. In such exigent circumstances, OFAC has allowed U.S. medical and other essential personnel to provide services to individual travelers in need of medical attention, regardless of nationality or the purpose of the individual’s travel to Cuba. OFAC is amending section 515.548 to generally authorize such services. To clarify the availability of nonscheduled emergency medical services in the United States, OFAC also is adding a new general license in section 515.589.
  • Humanitarian projects. OFAC is amending section 515.575 to explicitly include disaster relief and historical preservation as authorized humanitarian projects. Cuban official missions. OFAC is amending section 515.586 to authorize funds transfers on behalf of official missions of the Government of Cuba in the United States.

If OFAC Denies Your License Application…Stop!

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

Great Plains Stainless Co. (GPS) of Tulsa, Oklahoma has agreed to pay $214,000 to settle allegations that it violated the Office of Foreign Assets Controls (OFAC) regulations in 2009. GPS sold goods that its Chinese vendor shipped from Shanghai to GPS’s customer in Dubai via MN Sahand, a vessel that is considered blocked property (EO 13382). GPS also created new bogus trade documents, with references to the blocked vessel to be removed and then transferred these altered documents to its Dubai customer to facilitate the release of the goods that were held at the port in Dubai.

GPS did not voluntarily disclose these violations to OFAC, the maximum penalty could have been $500,000. The settlement amount is reflective of the following:

  • GPS acted willfully since they altered the bill of lading
  • They disregarded verbal and written guidance from OFAC stating that the company should consult with OFAC’s Licensing Division before engaging in the transaction
  • GPS had submitted a license application to OFAC seeking authorization for this transaction and was denied but followed thru with the transaction
  • They did not have a compliance program in place at the time of the alleged violations.
  • The company has not received a penalty notice or Finding of Violation from OFAC in the past five years
  • GPS had no reason to know that the blocked vessel was to be used for the shipment until the vessel’s sailing date
  • They are a small company
  • GPS took remedial measures to prevent future violations

Read the full document at: http://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20150724_gps.pdf

Company to Pay an Extra $400k for Shipping Items on an Iranian Vessel

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

John Bean Technologies Corporation (JBT) of Chicago, IL has agreed to pay $391,950 to settle alleged violations of sanctions against weapons of mass destruction proliferators and their supporters that occurred between April 8-17, 2009. The company shipped items sold to a Chinese company by Islamic Republic of Iran Shipping Lines aboard a blocked vessel from Spain to China. JBT provided trade documents pursuant to a letter of credit for $2,897,936 related to the shipment to a US bank for payment but the US bank declined and advised that an OFAC license was required. JBT then presented the trade documents to a Spanish bank (Banco Santander) for the same amount to receive the payment. JBT reimbursed its foreign subsidiary, JBT AeroTech Spain, for charges paid to their freight forwarder along with the associated Spanish bank fees.

The base penalty for the violations was $670,000 but the following factors reflect OFAC’s considerations regarding the $391,950 penalty.

Aggravating Factors:

  • JBT did not voluntarily self-disclose
  • JBT Management knew of some of the conduct at hand
  • There was an economic benefit in dealing with the blocked entity
  • JBT is a sophisticated entity that conducts business around the world

Mitigating Factors:

  • JBT has not had any violations in the last 5 years
  • JBT implemented remedial measures
  • The company provided employee training and compliance program enhancements along with improved party screening
  • JBT cooperated with OFAC’s investigation
  • The company agreed to toll the statute of limitations for 514 days.

Read More: http://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20150619_jbt.pdf

Fiji or Bust!

Tuesday, July 14th, 2015 by Danielle McClellan

By: Danielle McClellan

On May 29, 2015, the Department of State revised the International Traffic in Arms Regulations (ITAR) to withdraw the previous policy of denying the export of defense articles and services to Fiji. Fiji’s acting government honored its longstanding pledge to hold democratic elections and the United States as well as 14 other countries have characterized these elections as being credible.

The Department of State has determined that it is in the best interest of US foreign policy, national security, and human rights concerns to lift the denial of exports of defense articles and services to Fiji.

FOR FURTHER INFORMATION CONTACT: Mr. C. Edward Peartree, Director, Office of Defense Trade Controls Policy, Department of State, telephone (202) 663-2792; email DDTCPublicComments@state.gov. ATTN: Regulatory Change, Exports to Fiji.

$232 Million Penalty? Soit Cacahuètes! French Bank Agrees to Pay $8.9 Billion for Violating US Sanctions

Tuesday, June 2nd, 2015 by Danielle McClellan

By: Danielle McClellan

BNP Paribas SA, a French bank, has been fined $8.9 billion and sentenced to five years of probation for violating sanctions against Sudan, Cuba and Iran. This case marks the first time a global bank has plead guilty to violations of US economic sanctions, BNP’s general counsel explained that the bank accepted “full responsibility for its conduct” and is currently improving its policies as we speak.

Records indicated that BNP was a central bank for the government of Sudan and concealed its tracks and initially failed to cooperate with law enforcement. The bank also evaded sanctions against Iran and Cuba by stripping information from wire transfers so that they could pass through US systems without raising red flags.

The US Justice Department announced that some of the $8.9 billion could go to a new program to assist people who have been harmed by the regimes of the three sanctioned countries.

Information: http://www.reuters.com/article/2015/05/01/us-bnp-paribas-settlement-sentencing-idUSKBN0NM41K20150501

$232+ Million Fine for Lack of US Sanctions Training

Tuesday, June 2nd, 2015 by Danielle McClellan

By: Danielle McClellan

The highest fine in the history of US Sanctions violations has been handed to Schlumberger Oilfield Holdings Ltd. (Schlumberger). The company entered into a plea agreement forcing them to pay a $232,708,356 penalty for willfully facilitating transactions with Iran and Sudan.

Court documents explain that in early 2004, through June 2010, Drilling & Measurements (a US-based Schlumberger business) provided oilfield services to customers in Iran and Sudan through non-US subsidiaries of Schlumberger.  These documents also indicate that the company failed to properly train employees located in the US (US persons and non-US citizens residing in the US) on how to comply with Schlumberger’s sanction and compliance procedures. Schlumberger employees residing in the US violated the US sanctions against Iran and Sudan by:

  • Approving and disguising the company’s capital expenditure requests from Iran and Sudan for drilling tools etc.;
  • Making and implementing business decisions concerning Iran and Sudan;
  • Providing technical services and expertise in order to troubleshoot mechanical failures and to sustain tools and equipment in Iran and Sudan.

Schlumberger is now the poster child for US sanctions violations. In addition to the massive monetary penalty they have submitted to a three-year period of corporate probation and must continue to cooperate with the government and NOT commit any additional felony violations of US federal law. Schlumberger must also hire an outside consultant to review their parent company’s internal sanctions policies and procedures as well as their internal audits focusing on sanctions compliance. This is a great example on the importance of training…the cost of the initial training probably will never be near the cost of not training, and breaking the law.

Information: http://www.justice.gov/opa/pr/federal-court-issues-written-judgment-accepting-guilty-plea-schlumberger-oilfield-holdings