On 18 August 2011, President Obama issued an Executive Order expanding substantially the U.S. sanctions against Syria, effective immediately. Specifically, the new measures include a requirement for "U.S. persons" to block (freeze) the property and property interests of the Government of Syria (and any entities owned/controlled by it), and impose new restrictions on a wider range of transactions with or involving Syria. Previously, the U.S. government maintained a broad ban on exports and reexports to Syria of commodities, software, and technology subject to U.S. law, as well as more limited sanctions that targeted only persons and entities named as Specially Designated Nationals (SDN) of Syria. Until yesterday, the entire Government of Syria was not subject to sanctions, and the provision of a wide range of services to Syria generally was permissible unless an SDN was involved. The new Executive Order broadens the Syria restrictions and essentially imposes a comprehensive embargo, which will have a significant impact on the ability of U.S. companies to engage in transactions involving Syria. See the full text of the Executive Order.
Overview of new measures Specifically, effective 18 August 2011, all property and interests in property that are in the United States, that come within the United States, or that come within the possession or control of any "U.S. person" (which includes U.S. citizens and U.S. permanent residents, wherever located, as well as U.S. companies and their overseas branches) of the Government of Syria must be frozen, and may not be transferred, paid, exported, withdrawn, or otherwise dealt in. The Government of Syria is defined as "the Government of the Syrian Arab Republic, its agencies, instrumentalities, and controlled entities." Property and interests in property are broad concepts that can include goods, contracts, insurance policies, money, checks, accounts, stocks, bonds, bills of lading, letters of credit, and other interests. The Executive Order also prohibits the following activities:
- New investment in Syria by a U.S. person, wherever located;
- The exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a U.S. person, wherever located, of any services to Syria;
- The importation into the United States of petroleum or petroleum products of Syrian origin;
- Any transaction or dealing by a U.S. person, wherever located, including purchasing, selling, transporting, swapping, brokering, approving, financing, facilitating, or guaranteeing, in or related to petroleum or petroleum products of Syrian origin; and
- Any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by the Executive Order if performed by a U.S. person or within the United States. Transactions by U.S. persons or within the United States that evade or avoid the provisions of the order are also prohibited, as are conspiracies to violate the prohibitions of the order.
Transactions for the official business of the U.S. federal government, including by employees, grantees, or contractors thereof, are not prohibited by the scope of the Executive Order. The Executive Order also provides for certain exemptions that are available under the statute, which would include exemptions for travel to/from Syria and the exportation/importation of information and informational materials. These exemptions will be identified in the implementing regulations but you should seek legal advice before relying on any of these exemptions prior to the issuance of the implementing regulations.
The Executive Order leaves the possibility for further designation of persons and entities that must be frozen if the U.S. government finds that they (a) have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the Government of Syria, or (b) if they are found to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, the Government of Syria.
The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) administers U.S. economic sanctions programs and may issue regulations to implement the provisions of the Executive Order.
The new restrictions could impact many companies that were previously engaging in lawful transactions with Syria that are now restricted by the scope of the Executive Order. For example, due to the broad restrictions on the provision by U.S. persons of "any services" to Syria and broad restrictions on facilitation of activities in which U.S. persons could not engage, U.S. companies should seek legal advice before engaging in any exports of non-U.S. origin goods, software, or technology to Syria. Also, U.S. insurers generally will not be able to provide insurance for shipments of goods to Syria or other types of insurance that involves provision of coverage to persons or entities in Syria. Similarly, even non-U.S. companies may be affected if they attempt to send or receive U.S.-dollar denominated payments to/from Syria that would have to be processed through the U.S. financial system.
OFAC did, however, issue several general licenses on 18 August 2011, including one that will allow certain transactions with Syria pursuant to U.S. Commerce Department licenses. Specifically, OFAC's General License No. 4 allows exportation or reexportation of items subject to the Export Administration Regulations (EAR) to Syria, including to the Government of Syria, and all transactions ordinarily incident thereto, as well as services to install, repair, or replace such items, provided that the export or reexport of the items to Syria has been licensed by the Commerce Department. For example, exports and reexports of medical devices subject to the EAR, which have been licensed by the Commerce Department, would be authorized under General License No. 4 even though the end-user hospitals may be owned by the Government of Syria. Similarly, U.S. insurers would be able to rely on the same general license to provide marine cargo coverage for such licensed shipments to Syria. See the full text of the general licenses issued.
The other general licenses authorize certain transactions related to Syrian diplomatic missions in the United States, provision of certain legal services, entries in certain accounts for certain normal service charges, exportation of certain services incident to Internet-based communications, and non-commercial personal remittances. The text of the various general licenses are subject to certain parameters and conditions and should be read carefully before relying upon them.