- Virtually all U.S. sanctions on Sudan lifted effective January 17, 2017
- Sanctions could be permanently lifted in six months
- There continue to be practical challenges to doing business in Sudan
In an unexpected development, on Friday, January 13, 2017, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced changes to lift U.S. sanctions on Sudan and thereby pave the way for trade with the North African country. The U.S. government is authorizing virtually “all prohibited transactions [involving Sudan], including transactions involving property in which the Government of Sudan has an interest.” Moreover, the United States is dangling the possibility that sanctions could be permanently lifted after six months. The amendments, announced by Executive Order, became effective on Tuesday, January 17.
Details. OFAC’s mechanism of choice for changing the Sudanese regulations was to issue a General License – akin to the approach OFAC has recently taken when initially easing sanctions on Burma (Myanmar) and Libya.
The Sudan General License is being added as section 538.540 to the Sudanese Regulations. Inspired by “ongoing U.S.-Sudan bilateral engagement,” the new section paves the way for exporting goods, services and technology to Sudan, and importing goods and services from Sudan. For parties acting under a previously-issued specific OFAC license, it will not be necessary to obtain a renewal or a new specific license. In addition, unlike several recent actions by OFAC (such as, a previous General License issued with respect to the Panamanian Mall and Associated Complex), there is no specific reporting requirement for parties that conduct business with Sudan.
OFAC did not act alone: also on January 17, 2017, the U.S. Commerce Department issued revisions to the Export Administration Regulations to ease certain export licensing requirements for Sudan. As a result, exporters should now be able to obtain licenses to export / re-export to Sudan certain U.S.-origin items intended to ensure the safety of civil aviation, and items to support the construction and operation of railroads in Sudan.
While these announcements set the stage for more U.S. business with Sudan, exporters and importers are still subject to some restrictions. Sudanese parties designated under U.S. sanctions because of their role in the conflict in Darfur are still off limits for U.S. businesses. (This includes a prohibition on dealing in those parties’ property interests, which remain blocked.)
In addition, as is the case with any international business, U.S. companies and individuals still have to comply with U.S. measures that impose sanctions on specially designated entities and individuals banned by OFAC because of their role in terrorism, weapons proliferation, narcotics trafficking, or other prohibited activities.
It is also important to recognize that the new regulations are prospective, so any violations that took place prior to January 17 are still subject to enforcement. Moreover, while the amendment “unblocks” property and other previously prohibited transactions, OFAC retains authority to reinstate property blocking and/or other prior prohibitions.
This action appears to be something of a final – albeit surprising – hurrah for President Obama. According to a statement from Adam J. Szubin, the Acting U.S. Under Secretary for Terrorism and Financial Intelligence, this U.S. action is an effort to reward Sudan’s good behavior and encourage continued reform. Among other things, the United States commended Sudan for its support in military operations against the Lord’s Resistance Army and regional terrorist groups. And as noted above, if Sudan continues its reforms, sanctions may be permanently removed six months from now.
As with other recent developments, it is important to be mindful that Obama’s swift implementation is susceptible to equally hasty revocation (although press reports suggest President-elect Trump may have been aware of and condoned this action). Given President-elect Trump’s criticism of many U.S. sanctions programs, his response – once in office – to the amendment may likewise be adversarial. A special State Department briefing on the amendment, which was delivered on the same day as the amendment was published, suggests the amendment gives leverage to the new administration. That remains to be seen.
Practical impact. There may be opportunities in Sudan, and they may even be significant. Enterprising companies and individuals are sure to explore such opportunities. But as has been the case when the United States eased trade restrictions on Cuba and Iran, even when transactions have been permitted, there can be immense practical challenges of doing business in a long-off-limits country. Which banks will be willing to handle Sudanese financial transactions? How is the rule of law applied? Is corruption manageable? Who and where are reliable local business partners?
It is indeed a brave business that will pursue Sudan business in these first days after sanctions have been eased. Fortune may favor the brave, but – when it comes to operating in a novel environment – only the fittest will survive. Even with sanctions and export controls eased, careful planning and analysis will be required to meet compliance challenges that Sudan presents.
We would like to thank Lidiya Kurin, a Bass, Berry & Sims law clerk based in our Washington, D.C. office, for her assistance in drafting this alert.