In response to continued violence and ongoing human rights abuses against the people of Syria, the United States reacted by expanding pre-existing sanctions programs and calling for the resignation of Syrian President Bashar Al-Assad. The United States has imposed trade sanctions on Syria since 2004. Earlier this month, President Obama signed Executive Order 13582, which freezes all assets of the government of Syria in the United States, bans U.S. persons from new investments in Syria, prohibits U.S. persons from exporting services to Syria and bans U.S. imports and other transactions in petroleum and petroleum products of Syrian origin.
Effective August 18, 2011, these sanctions represent the strongest financial action the United States has ever taken against Syria. The new sanctions regime affects U.S. persons (including U.S. citizens, U.S. residents, U.S. businesses and their overseas branches) and their dealings with the Syrian government, financial institutions, suppliers and customers. Foreign persons dealing in U.S.-origin goods (or foreign-origin goods with more than 10 percent U.S.-origin content by value) destined for Syria would remain subject to existing U.S. reexport controls. Pursuant to Executive Order 13582, the United States has imposed the following specific measures:
- freezing of all assets of the government of Syria (or its agencies, instrumentalities and controlled entities) and other designated entities that are subject to U.S. jurisdiction;
- prohibiting new investment in Syria by a U.S. person;
- prohibiting the export, reexport, sale or supply, directly or indirectly, of any services from the United States or by a U.S. person (wherever located) to Syria (supplementing an existing export ban on most U.S. products to Syria);
- prohibiting the importation into the United States of petroleum or petroleum products;
- prohibiting U.S. persons from engaging in transactions related to Syrian-origin petroleum or petroleum products, including purchasing, selling, transporting, swapping, brokering, approving, financing, facilitating or guaranteeing such transactions;
- prohibiting U.S. persons from making any contribution or provision of funds, goods or services by, to or for the benefit of the government of Syria or any designated persons, or receiving such funds, goods or services from the same; and
- prohibiting U.S. persons from approving, financing, facilitating or guaranteeing a transaction by foreign persons that could not be undertaken by a U.S. person (i.e., no “facilitation”).
In conjunction with these new sanctions, the Office of Foreign Assets Control (OFAC) simultaneously issued six general licenses summarized as follows:
- General License 1 permits the provision of goods or services in the United States to the diplomatic missions of the government of Syria;
- General License 2 permits the provision of certain legal and compliance counseling to Syria;
- General License 3 permits the reimbursement for normal bank service charges owed it by the owner of a blocked account;
- General License 4 permits the exportation or reexportation to Syria of items subject to the Export Administration Regulations (EAR), all transactions and services ordinarily incident thereto, provided such exportation or reexportation are authorized by the Department of Commerce;
- General License 5 permits the exportation of certain services incident to the exchange of personal communications over the Internet, such as instant messaging, email, sharing of photos and blogging;
- General License 6 permits the transfer of funds to or from Syria or on behalf of a resident of Syria, provided that the transfer is a noncommercial and personal remittance and does not involve the government of Syria or a blocked entity.
Prior U.S. Syrian Sanctions
Syria has been designated as a State Sponsor of Terrorism since 1979. As a result of this designation, the United States has long restricted the export of certain products—i.e., dual-use and military—to Syria. Prior to the announcement of new sanctions earlier this month, the most comprehensive Syrian sanctions program was pursuant to the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003 (SAA), which is enforced by the Department of Commerce’s Bureau of Industry and Security (BIS). Under the SAA, exports of all U.S.-origin goods to Syria, other than EAR99 food or medicine, as well as foreign-produced goods containing more than 10 percent U.S.-manufactured components, are prohibited, although there is a caseby- case licensing authority for medical devices.
In addition to the SAA, the Obama administration has recently issued several Executive Orders imposing sanctions on the Syrian government and individuals. These include blocking assets of over 30 Syrian and Iranian individuals and entities, designating the Commercial Bank of Syria and its subsidiary, Syrian-Lebanese Commercial Bank, and targeting the President of Syria and senior government officials.
The new sanctions significantly expand the scope of the existing sanctions program against Syria. As a result of this recent action, the administration has effectively prohibited all trade between the United States and Syria, although it appears that based on General License 4, the existing exemption for the export or re-export of EAR99 food and medicine to Syria will continue. However, because neither the Executive Order nor any of the General Licenses authorize banks in the United States to export services in connection with such transactions, U.S. banks have in many instances taken the position that they cannot finance or otherwise effect payment for such transactions. OFAC staff members have assured us that is not the intent, and it may be that clarification from OFAC will be necessary.
As the primary enforcement agency for these new sanctions, OFAC will be responsible for issuing new regulations implementing E.O. 13582. In the meantime, U.S. businesses and their overseas branches should review their current transactions to ensure compliance with the new sanctions regime.