US ECONOMIC SANCTIONS & EMBARGOES

Transcription

1 US ECONOMIC SANCTIONS & EMBARGOES Margaret M. Gatti, Esq. Louis K. Rothberg, Esq. March, Morgan, Lewis & Bockius LLP

2 Information is accurate as of March 25, 2014 Information is subject to change without prior notice due to ongoing diplomatic and political developments. 2

3 US Sanction Regimes 19 countries sanctioned by OFAC across the board or selectively Cuba Syria Iraq Libya Iran Burma/Myanmar Ivory Coast Somalia North Korea Belarus Lebanon Western Balkans Sudan D.R. Congo Liberia Zimbabwe Yemen Russia /Ukraine 3

4 US Sanction Regimes Comprehensive sanctions on 5 countries Cuba Iran North Korea Sudan Syria 4

5 US Sanction Regimes Selective sanctions on 2 countries: Burma Libya 5

6 US Sanction Regimes SDN List Based Sanctions on 12 countries: Western Balkans Belarus DR Congo Iraq Ivory Coast Lebanon Liberia Somalia Zimbabwe Yemen Russia Ukraine 6

7 Sanctions Consider Who Is Subject? US PERSON must comply with OFAC Sanctions US PERSONS includes foreign subsidiaries for OFAC s CUBA SANCTIONS PROGRAM (TWEA) and OFAC IRAN SANCTIONS (Iran Threat Reduction Act of 2012, P.L , Sec. 218 and 31 CFR ) FOREIGN SUBSIDIARIES ARE NOT US PERSONS UNDER OTHER OFAC SANCTION PROGRAMS (IEEPA) BUT SPECIAL RULES RE IRAN (e.g., energy, etc.) 7

8 Cuba: Who? What? 8

9 Cuba: Who 1. US citizens and permanent resident aliens, wherever located 2. Foreign nationals present in US 3. Corporations/entities organized under any US laws including their foreign branches and foreign subs 4. US-based Branches & subsidiaries of foreign companies 9

10 Cuba: General Prohibition On All Transactions Cuba and Iran are Strictest US Embargoes Prohibit all financial transactions and all financial dealings with Cuba or with a Cuban national without an OFAC license Prohibit US Persons from approving, guaranteeing and / or brokering any transaction involving Cuba or a Cuban national without an OFAC license. 10

11 Prohibitions re: SDNS US Persons prohibited from transferring, paying, exporting, withdrawing or otherwise dealing in property and interests in property of any person or entity that is blocked. Certain property of Cuba and Cuban nationals are blocked as required by Executive Orders. Such transactions are declared null and void and have no legal effect in US 11

12 Imports From Cuba No goods or services of Cuban origin may be imported into US either directly or thru third country Only exception for information or informational materials or certain artwork 12 12

13 Exports To Cuba GENERAL PROHIBITION ON EXPORTS No products, technology or services may be exported to Cuba from the US or from third countries by US person without an OFAC license 13

14 Transfers To Cuba From Outside of US: Who? All transfers outside US are prohibited when a US Person is involved (unless licensed) 1. US citizens and permanent resident aliens [US Green Card holders], wherever located 2. Foreign nationals present in US 3. Corporations/entities organized under any US laws including their foreign branches and foreign subs [TWEA based] 4. US-based Branches & subsidiaries of foreign companies 14

15 Transfers To Cuba From Outside of US: What? All transfers outside US are prohibited when goods involved are subject to US jurisdiction (unless licensed) Goods exported from US or Re-exports from third countries of goods originally exported from the US Foreign-made products that contain no US content or exclusively EAR99 content are not subject to US jurisdiction on basis of What Jurisdiction but will be prohibited from export to Cuba if export is made by a US Person, which is defined to include foreign subsidiaries. 15

16 Iran: Who? What? 16

17 Iran: Who 1. US citizens and permanent resident aliens, wherever located 2. Foreign nationals present in US 3. Corporations/entities organized under any US laws 4. including their foreign branches and foreign subsidiaries [Mandated by Congress in Sec. 218 of Iran Threat Reduction Act of 2012, P.L (Aug. 10, 2012), implemented by 31 CFR (Dec. 26, 2012)] Cuba and Iran regulations now both exert US jurisdiction over foreign subsidiary of a US parent 17

18 Foreign Subs Now Fully Subject To Iran Sanctions Regulations 31 CFR provides (Dec. 26, 2012): An entity that is owned or controlled by a United States person and established or maintained outside the United States is prohibited from knowingly engaging in any transaction, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran that would be prohibited pursuant to this part if engaged in by a United States person or in the United States 18

19 Foreign Subs Now Fully Subject To Iran Sanctions Regulations an entity is owned or controlled by a United States person if the United States person: (i) Holds a 50 percent or greater equity interest by vote or value in the entity; or (ii) Holds a majority of seats on the board of directors of the entity; or (iii) Otherwise controls the actions, policies, or personnel decisions of the entity 19

20 Foreign Subs Now Fully Subject To Iran Sanctions Regulations knowingly means that the person engages in the transaction with actual knowledge or reason to know. A person is subject to the jurisdiction of the Government of Iran if the person is organized under the laws of Iran or any jurisdiction within Iran, ordinarily resident in Iran, or in Iran, or owned or controlled by any of the foregoing. 20

21 Grace Period For Certain Transactions By Foreign Subs 31 CFR (Dec. 26, 2012) provides a limited grace period via General License for foreign subs and affiliates to wind down transactions begun before October 9, 2012 : Certain transactions ordinarily incident and necessary to the winding-down of transactions prohibited by 31 CFR are authorized from October 9, 2012, through March 8, 2013, provided that those ordinarily incident and necessary transactions do not involve a U.S. person or occur in the United States 21

22 Foreign Subs May Use General Licenses Otherwise Available to US Persons 31 CFR A U.S.-owned or -controlled foreign entity is authorized to engage in a transaction otherwise prohibited by that would be authorized by a general license set forth in or issued pursuant to 31 CFR Part 560 if engaged in by a U.S. person or in the US, provided the U.S.-owned or - controlled foreign entity is authorized to engage in the transaction only to the same extent as the U.S. person is authorized to engage in the transaction and subject to all the conditions and requirements set forth in the general license for the U.S. person. 22

23 Sanctions Imposable Directly On US Parent For Violations Of Foreign Sub Section 218 of the Iran Threat Reduction Act (Pub. L ), states a civil may be directly imposed on a United States person if an entity owned or controlled by the United States person and established or maintained outside the United States violates, attempts to violate, conspires to violate, or causes a violation of the prohibition set forth in 31 CFR [See also 31 CFR (a)(3)] The penalties do not apply with respect to a transaction described in if the US person divests or terminates its business with the FOREIGN entity not later than February 6, 2013, such that the U.S. person no longer owns or controls the FOREIGN entity 23

24 Securities Exchange Commission Mandatory Disclosure For Certain Iran Violations Section 219 of the Iran Threat Reduction Act requires that an "issuer" disclose certain information in either its annual or quarterly report required to be filed with the Securities and Exchange Commission (SEC) if the issuer or any "affiliate" of the issuer ( affiliate as defined for purposes of the Securities Exchange Act of 1934 and Exchange Act Rule 12b-2) has knowingly conducted or engaged in certain Iran-related activity In guidance posted Dec. 4, 2012, the SEC issued guidance on reporting under Sec

25 Securities Exchange Commission Mandatory Disclosure For Certain Iran Violations Reports required to be filed mean any periodic report with a due date to SEC after February 6, 2013 An issuer is required to disclose activities that occurred during the period covered by the report, which, for a Form 10-K, is the entire fiscal year. An issuer that files an annual report for the fiscal year ending December 31, 2012 is required to disclose any Iran-related activities that took place between January 1, 2012 and December 31, 2012 even though the ITRA containing Sections 218 and 219 was enacted Aug. 10,

26 Securities Exchange Commission Mandatory Disclosure For Certain Iran Violations Disclosure is required only if the issuer or any of its affiliates engaged in any of the particular Iran-related activities specified in Section 219 during the period covered by the report. All periodic reports filed with the Commission under Section 219 will be made public and will be referred for investigation 26

27 Iran: General prohibition on all transactions Prohibit all financial transactions and all financial dealings with Iran or with a Iranian national without an OFAC license Prohibit US Persons from approving, guaranteeing and / or brokering any transaction involving Iran or an Iranian national without an OFAC license. 27

28 Prohibitions re: SDNS US Persons prohibited from transferring, paying, exporting, withdrawing or otherwise dealing in property and interests in property of any person or entity that is blocked. Certain property of Iran and Iranian nationals are blocked as required by Executive Orders. Such transactions are declared null and void and have no legal effect in US 28

29 No Facilitation No US Person may facilitate any transaction by a foreign person that a US person is prohibited from doing. 29

30 No Imports From Iran No goods or services of Iranian origin may be imported into US either directly or through third country Import of foodstuffs and carpets of Iranian origin was revoked pursuant to section 103 of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of Exception for information or informational materials or certain artwork 30

31 No Exports To Iran GENERAL PROHIBITION ON EXPORTS No products, technology or services may be exported to Iran from the US or from third countries by US person without an OFAC license 31

32 Transfers To Iran From Outside Of US: Who? All transfers outside US prohibited when a US Person is involved (unless licensed) 1. US citizens and permanent resident aliens [US Green Card holders], wherever located 2. Foreign nationals present in US 3. Corporations/entities organized under any US laws including their foreign branches & subsidiaries 4. US-based Branches & subsidiaries of foreign companies 32

33 Transfers To Iran From Outside US: What? All transfers outside US are prohibited when goods involved are subject to US jurisdiction (unless licensed) Goods exported from US or Re-exports from third countries of goods originally exported from the US Foreign-made products that contain no US content or exclusively EAR99 content are not subject to US jurisdiction unless a US Person is involved or unless the foreign-made products are intended for Petroleum, Gas or Petrochemical Sectors in Iran and trigger certain $ threshold. 33

34 TRANSFERS OUTSIDE US TO IRAN S PETROLEUM OR PETROCHEMICAL SECTORS CISADA and E.O prohibit transfers outside US to Iran s petroleum, gas or petrochemical sectors. Applicable to: Persons not otherwise subject to US Jurisdiction Foreign companies with no US parent or US nexus Goods not otherwise subject to US Jurisdiction Foreign-made products, technology, services that contain no US content (or < 10% US origin content) when >$1,000,000 / $250,000 per transaction or > $5,000,000 / $1,000,000 p.a. 34

35 Sudan: Who? What? 35

36 Republic Of South Sudan New Republic of South Sudan is NOT subject to OFAC Sudan sanction Regulations because it is now a separate country. Regulations apply to remainder of old Sudan 36

37 Sudan: Who 1. US citizens and permanent resident aliens, wherever located 2. Foreign nationals present in US 3. Corporations/entities organized under any US laws including their foreign branches 4. US-based Branches & subsidiaries of foreign companies Does not include foreign subsidiaries of US Corporations 37

38 Sudan: General Prohibition On All Transactions Prohibit all financial transactions and all financial dealings with Sudan or with a Sudanese national without an OFAC license Prohibit US Persons from approving, guaranteeing and / or brokering any transaction involving Sudan or a Sudanese national without an OFAC license. 38

39 Prohibitions re: SDNS US Persons prohibited from transferring, paying, exporting, withdrawing or otherwise dealing in property and interests in property of any person or entity that is blocked. Certain property of Sudan and Sudanese nationals are blocked as required by Executive Orders. Such transactions are declared null and void and have no legal effect in US 39

40 No Facilitation No US Person may facilitate any transaction by a foreign person that a US person is prohibited from doing. 40

41 No Imports From Sudan No goods or services of Sudanese origin may be imported into US either directly or through third country Exception for information or informational materials or certain artwork 41

42 No Exports To Sudan GENERAL PROHIBITION ON EXPORTS No products, technology or services may be exported to Sudan from the US or from third countries by US person without an OFAC license 42

43 Transfers To Sudan From Outside US: Who? All transfers outside US prohibited when a US Person is involved (unless licensed) 1. US citizens and permanent resident aliens [US Green Card holders], wherever located 2. Foreign nationals present in US 3. Corporations/entities organized under any US laws including their foreign branches [IEEPA based] 4. US-based Branches & subsidiaries of foreign companies 43

44 Transfers To Sudan From Outside US: What? All transfers outside US are prohibited when goods involved are subject to US jurisdiction (unless licensed) Goods exported from US or Re-exports from third countries of goods originally exported from the US Foreign-made products that contain no US content or exclusively EAR99 content are not subject to US jurisdiction unless a US Person is involved. 44

45 General License Relating To Republic of South Sudan Transit or transshipment of goods, technology & services thru Sudan, to or from Republic of South Sudan are authorized, as well as all related financial transactions ordinarily incident thereto. 45

46 Syria: Who? What? 46

47 SYRIA: Who 1. US citizens and permanent resident aliens, wherever located 2. Foreign nationals present in US 3. Corporations/entities organized under any US laws including their foreign branches 4. US-based Branches & subsidiaries of foreign companies 47

48 Executive Order of May 1, 2012 Authorizes imposition of sanctions on a foreign person upon determining that the foreign person: has violated, attempted to violate, conspired to violate, or caused a violation of any OFAC license, order, regulation, or prohibition contained in or issued pursuant to certain Executive Orders or has facilitated deceptive transactions for or on behalf of any person subject to US sanctions concerning Iran or Syria 48

49 Syria : Prohibitions re: SDNS US Persons prohibited from transferring, paying, exporting, withdrawing or otherwise dealing in property and interests in property of any person or entity that is blocked. Certain property of Syrian nationals are blocked by Executive Order for human rights abuses. US persons cannot contribute or provide funds, goods, or services to, or for the benefit of, any person whose property is blocked. US person cannot receive any contribution or provision of funds, goods or services from a person who is blocked 49

50 Syria: Prohibition re: Imports US persons prohibited under Executive Order [effective 8/18/11] from importing into the United States petroleum or petroleum products of Syrian origin 50

51 Syria: Prohibition re: Services Executive Order effective 8/18/11 prohibits the exportation, sale or supply from the United States, or by a United States person, of any services to Syria. 51

52 No Exports To Syria GENERAL PROHIBITION ON EXPORTS No products, technology or services may be exported to Syria from the US without an Export license 52

53 Transfers To Syria From Outside US: Who? All transfers outside US prohibited when a US Person is involved (unless licensed) 1. US citizens and permanent resident aliens [US Green Card holders], wherever located 2. Foreign nationals present in US 3. Corporations/entities organized under any US laws including their foreign branches [IEEPA based] 4. US-based Branches & subsidiaries of foreign companies 53

54 TRANSFERS TO SYRIA FROM OUTSIDE US: What? All transfers outside US are prohibited when goods involved are subject to US jurisdiction (unless licensed) Goods exported from US or Re-exports from third countries of goods originally exported from the US Foreign-made products that contain no US content or exclusively EAR99 content are not subject to US jurisdiction unless a US Person is involved. 54

55 Syria: General Licenses OFAC has issued 16 Syria General Licenses to implement Syria sanctions, available on OFAC website General Licenses must be carefully reviewed to see if all the facts of a particular situation would allow the export, reexport or provision of goods or services to Syria. 55

56 North Korea: Who? What? 56

57 North Korea: Who 1. US citizens and permanent resident aliens, wherever located 2. Foreign nationals present in US 3. Corporations/entities organized under any US laws including their foreign branches 4. US-based Branches & subsidiaries of foreign companies 57

58 North Korea: Prohibitions re: SDNS US Persons prohibited from transferring, paying, exporting, withdrawing or otherwise dealing in property and interests in property of any person or entity that is blocked. Certain property of North Korea and North Korean nationals are blocked as required by Executive Orders. Such transactions are declared null and void and have no legal effect in US 58

59 North Korea: Prohibitions On Imports US Persons prohibited from: directly or indirectly importing goods, services or technology of North Korean Origin into US without OFAC license; and registering, using or leasing North Korea flagged vessel 59

60 North Korea: Restrictions On Exports & Re-Exports What? License is required to export or reexport any items subject to the EAR, including EAR99 goods Except food or medicine classified EAR 99 Items requiring BIS license subject to case-by-case Review Luxury goods = general policy of denial UN designated items = general policy of denial 60

61 Burma [Myanmar]: Who? 61

62 Burma / Myanmar: Who 1. US citizens and permanent resident aliens, wherever located 2. Foreign nationals present in US 3. Corporations/entities organized under any US laws including their foreign branches 4. US-based Branches & subsidiaries of foreign companies Does not include foreign subsidiaries of US Corporations 62

63 Burma [Myanmar]: Prohibitions Eased OFAC General License # 16 for Burma/Myanmar authorizes the exportation or reexportation of financial services effective July 11, 2012, effectively revoking the prior ban on financial services. No SDN involvement GL # 16 authorizes exportation or reexportation of financial services to Burma, directly or indirectly, from the US or by a US person wherever located for any purpose, with only a few restrictions involving Burmese Ministry of Defense, its procurement office, or of any state/non-state armed group or any entity in which any of the foregoing own a 50% or greater interest. 63

64 Burma [Myanmar]: Prohibitions Eased OFAC General License # 17 for Burma/Myanmar authorizes new investment effective July 11, 2012, effectively revoking the prior ban on new investment in Burma. No SDN involvement Restrictions involving Burmese Ministry of Defense, including the Office of Procurement, or any state or nonstate armed group, or any entity in which any of the foregoing own a 50% or greater interest New Investment shall be reported to Department of State as set forth in GL #

65 Exports To Burma [Myanmar] Are NOT Prohibited No general prohibition on exports or re-exports of goods Standard export license analysis Burma is in EAR Country Group D:1 EAR imposes license requirements for exports and reexports for items subject to EAR 65

66 Imports From Burma Imports from Burma were authorized under OFAC General License # 18, effective Nov. 16, No SDN involvement Exception in GL 18 does not allow import of jadeite or rubies mined or extracted in Burma, or items containing jadeite or rubies, mined or extracted in Burma or imports from SDN. 66

67 RUSSIA/UKRAINE March 6, 2014 Executive Order sanctions persons and entities that have undermined peace and sovreignty of Ukraine SDNs may be in Russia or Ukraine 67

68 SDN List Based Sanction Regimes There are no general prohibitions on imports of goods or services. There is no general prohibitions on exports of goods or services. Standard export license analysis US Persons are prohibited from engaging in any transaction with certain designated persons / entities who are owned by, controlled by or acting on behalf of governments or groups whose interests are adverse to the list-based sanctioned countries or to the interests of democracy in the list-based sanctioned countries. These persons / entities: May be subject to asset freezes or asset blocks by USG; May or may not be domiciled in list-based sanctioned country; Are listed by USG on the SDN List; Constitute prohibited parties with whom US Persons may not have any dealings. 68

69 Summary Sanction Regimes US Person Imports Prohibited 5 countries: Cuba: Yes Syria: Yes Iraq: No Libya: No Iran: Yes Burma: No [minor exceptions] Ivory Coast: No Somalia: No Lebanon: No Western Balkans: No North Korea: Yes Belarus: No Sudan: Yes D.R. Congo: No Liberia: No Yemen: NO Russia: No Ukraine: No 69 Zimbabwe: No

70 Summary Sanction Regimes US Person EAR Exports Prohibited 5 countries: Cuba: Yes Syria: Yes Iraq: No Libya: No Iran: Yes Burma: No Ivory Coast: No Somalia: No Lebanon: No Western Balkans: No North Korea: Yes Belarus: No Sudan: Yes D.R. Congo: No Liberia: No Yemen: No Russia: No Zimbabwe: No Ukraine: No Where No, apply standard export license analysis. 70

71 Summary Sanction Regimes Foreign Subsidiary Exports Prohibited Cuba: Yes Syria: No unless subject to EAR Iraq: No Libya: No Iran: Yes Burma: No Ivory Coast: No Somalia: No North Korea: No unless subject to EAR Belarus: No Lebanon: No Western Balkans: No Sudan: No unless subject to EAR D.R. Congo: No Liberia: No Yemen: No Russia: No 71 Ukraine: No Zimbabwe: No

72 Penalties Civil monetary fines - up to the greater of $250,000, or twice the dollar value amount of the transaction at issue, per violation [strict liability] and/or Statute of Limitations is 5 years from date of violation; Denial of Export Privileges [Denial Order] For willful or knowing violations - criminal prosecution Criminal monetary penalties -up to $1,000,000 per violation, Imprisonment - up to 20 years in Federal prison, per violation 72

73 Recent Cases Expansion Of Jurisdiction OFAC has expanded assertion of extraterritorial jurisdiction against foreign persons apparently via International Emergency Economic Powers Act IEEPA language penalizes any person that violates, attempts to violate or causes a violation of U.S. export control or OFAC based regulations that rely on IEEPA OFAC appears no longer limited to U.S. persons only OFAC will enforce extraterritorially for conduct occurring outside the U.S., if such activity causes others to violate OFAC regulations in the US. See 50 USC

74 COUNTRY SANCTIONS QUESTIONS? COMMENTS? 74 74

75 CONTACT INFO Margaret Gatti or Louis Rothberg