Client Alert
OFAC Takes Steps to Conditionally Lift 20-Year Embargo Against Sudan
January 13, 2017
By Scott M. Flicker, Lauren Kelly D. Greenbacker & Ashley J. Pyon
In a move not anticipated by the sanctions compliance community, and as a result of ongoing bilateral engagement and sustained progress between the United States and the Government of Sudan, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has announced the conditional lifting of U.S. sanctions against Sudan.
Specifically, OFAC has issued a new “general license” effective January 17, 2017, authorizing all transactions currently prohibited by the Sudanese Sanctions Regulations (“SSR”),[1] as well as by Executive Orders 13067 and 13412 (“2017 Sudan Rule”). As a result, U.S. persons will generally be able to transact with individuals and entities in Sudan, and the property of the Government of Sudan subject to U.S. jurisdiction will be unblocked.
OFAC’s announcement was made in conjunction with the issuance by the White House of an Executive Order “Recognizing Positive Actions by the Government of Sudan and Providing the Revocation of Certain Sudan-Related Sanctions.”[2] The E.O. provides for a six-month review period ending on July 12, 2017, after which the sanctions provisions in E.O.s 13067 and 13412 will be revoked if the Government of Sudan sustains positive actions it has taken over the past 6 months. The delayed effective date of certain provisions of the E.O. leaves open the possibility that the comprehensive embargo could be reinstated in the event “positive actions that gave rise to [the] order” are not sustained.[3]
As described by Adam J. Szubin, Acting Under Secretary for Terrorism and Financial Intelligence, “[t]he Executive Order issued by President Obama and the amendment to the Sudanese Sanctions Regulations announced today recognize the positive steps taken by the Government of Sudan over the past several months and aim to further incentivize the Government of Sudan to continue to improve its conduct.”[4]
Scope of 2017 Sudan Rule
As a result of the 2017 Sudan Rule:
All property and interests in property blocked pursuant to the SSR will be unblocked.
All trade between the United States and Sudan that was previously prohibited by the SSR will be authorized.
All transactions by U.S. persons relating to the petroleum or petrochemical industries in Sudan that were previously prohibited by the SSR will be authorized, including oilfield services and oil and gas pipelines.
U.S. persons will no longer be prohibited from facilitating transactions between Sudan and third countries, to the extent previously prohibited by the SSR.
NGOs are no longer required to obtain an NGO registration number to operate in or transact with Sudan.
The new general license, however, does not:
affect past, present, or future enforcement actions or investigations with respect to any violations, including apparent or alleged violations, of the Regulations that occurred prior to the effective date of this final rule;
eliminate the need to comply with other applicable provisions of law, including the Export Administration Regulations[5] administered by the Bureau of Industry and Security of the Department of Commerce; or
authorize transactions that are prohibited under any other OFAC sanctions program, including transactions that are prohibited under the Darfur Sanctions Regulations,[6] the South Sudan Sanctions Regulations,[7] or E.O.s 13400 or 13664.
In addition, the 2017 Sudan Rule does not alter the requirement that the export of agricultural commodities, medicine and medical devices remains subject to a one-year licensing requirement pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000, as amended. However, so long as those shipments take place within 12 months of executing a contract for sale, a specific license from OFAC will not be required.[8]
Reporting Procedures
OFAC’s general recordkeeping and reporting obligations continue to apply. As such, under the new general license, all U.S. persons must maintain records of authorized transactions for a period of not less than five years and OFAC may obtain these records at any time to monitor activities conducted pursuant to the general license.[9]
General Licenses
The 2017 Sudan Rule is broader than and supersedes other general licenses in the SSR. As such, U.S. persons may rely on the broader authorization in the 2017 Sudan Rule and do not need to abide by the narrower requirements of other general licensees under the SSR.
Specific Licenses
Effective January 17, 2017, because the 2017 Sudan Rule authorizes all transactions prohibited by the SSR, U.S. persons are not required to renew or obtain a new specific license from OFAC to engage in activities prohibited by the SSR. Further, OFAC will not grant applications for specific licenses authorizing transactions to which the provisions of an outstanding general license is applicable.[10]
The firm’s attorneys are helping clients comply with U.S. sanctions, including analyzing the implications of the 2017 Sudan Rule.
[1] 31 C.F.R. Part 538.
[2] Executive Order, “Recognizing Positive Actions by the Government of Sudan and Providing the Revocation of Certain Sudan-Related Sanctions,” available at https://www.whitehouse.gov/the-press-office/2017/01/13/executive-order-recognizing-positive-actions-government-sudan-and.
[3] Id.
[4] See U.S. Department of Treasury, Press Release, “Treasury to Issue General License to Authorize Transactions with Sudan” (Jan. 13, 2017), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0707.aspx?src=ilaw.
[5] 15 C.F.R. §730-774.
[6] 30 C.F.R. §546.
[7] 31 C.F.R. §558.
[8] 22 U.S.C. § 7201 et seq.
[9] 31 C.F.R. § 501.601.
[10] See 31 C.F.R. § 501.801.
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