During President Obama’s last week in office, on January 13, 2017, he issued an executive order providing for the contingent revocation of sanctions against Sudan in recognition of important developments within Sudan. U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) also amended the Sudanese Sanctions Regulations (SSR) to generally authorize transactions with Sudan effective immediately. This development is an important shift in U.S. policy towards Sudan, which was reportedly undertaken with the consent of President-Elect Trump. Accordingly, U.S. persons may now engage in activities in or with Sudan, although export license requirements remain for the export or reexport of U.S.-origin goods to Sudan.
We summarize below the important provisions of the new rules and key takeaways from these policy developments.
Transactions with Sudan Now Authorized
President Obama’s executive order suspends most sanctions against Sudan until July 12, 2017. Before July 12, 2017, several executive branch agencies are charged with preparing a report to the President on whether the Sudanese government has sustained the positive actions cited by the executive order. If these actions are confirmed, the long-standing comprehensive economic sanctions program against Sudan will be terminated via the formal revocation of the executive orders authorizing that program.
At the same time, OFAC has issued a new general license authorizing all transactions prohibited by the SSR and executive orders that impose sanctions on Sudan. Broadly, this means that U.S. persons and entities will be free to transact business with Sudanese persons and entities. As a result of the amendments to the SSR:
- 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.
Notably, the 1993 designation of Sudan as a state sponsor of terrorism was not revoked. Accordingly, separate export controls will remain in place with respect to Sudan.
Pursuant to the Export Administration Regulations (EAR), a license is required for the export or reexport to Sudan of nearly all items subject to the EAR that are listed on the Commerce Control List (CCL). In conjunction with President Obama’s executive order and OFAC’s amendment to the SSR, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published revisions to its Sudan licensing policy. BIS will now review license applications for export of reexport of two certain classes of items to Sudan with a general policy of approval:
1) parts, components, materials, equipment, and technology that are controlled on the CCL only for anti-terrorism reasons and that are intended to ensure the safety of civil aviation or the safe operation of fixed-wing commercial passenger aircraft, and
2) items that are controlled on the CCL only for anti-terrorism reasons that will be used to inspect, design, construct, operate, improve, maintain, repair, overhaul, or refurbish railroads in Sudan.
This policy change applies only to exports and reexports to Sudan for civil uses by non-sensitive endusers within Sudan – this does not include or authorize exports or reexports to the Sudanese police, military, or intelligence services. All other license requirements under the EAR with respect to exports to Sudan will remain in place.
The actions taken by President Obama, OFAC, and BIS are in recognition of positive developments within Sudan and positive actions taken by the Sudanese government over the past six months. These include a reduction in offensive military activity, a pledge to cease hostilities in conflict-ridden areas of Sudan, taking steps to improve humanitarian access throughout Sudan, and cooperation with the United States on addressing regional conflicts and terrorism.
Businesses that wish to take advantage of the new OFAC general license to transact business with Sudan should remain vigilant. Certain economic sanctions remain in place, including designations of individuals and entities as Specially Designated Nationals (SDNs), pursuant to the Darfur and South Sudan sanctions programs. Before conducting any business with Sudan, all contacts should be screened against OFAC’s list of SDNs and blocked persons. Additionally, businesses should remain aware that many restrictions on the export or reexport of U.S.-origin goods remain in place against Sudan.
The final weeks of the Obama administration have been marked by significant developments in the sanctions area. For the first time since the early Clinton administration, U.S. persons and businesses are free to transact with Sudanese companies and operate in Sudan. However, high levels of uncertainty persist, as the permanent end of the embargo against Sudan must be implemented by the Trump administration by July 2017. The next few months remain crucial to watch for businesses that operate in jurisdictions that may be affected by the various U.S. sanctions programs.