The Trump Administration has been active on the sanctions front as a means of asserting United States foreign policy and national security interests. Congress has also taken an increasingly active and direct role of late, beyond its typical deference to the executive branch.
BakerHostetler’s International Trade team has been closely monitoring all U.S. sanctions developments, and is pleased to provide the following report on recent new and modified sanctions on Cuba, Iran, North Korea, Russia, Sudan and Venezuela.
In July 2017, the Trump Administration announced the reinstatement of certain restrictions on U.S. travel and financial transactions with Cuba. Financial transactions involving Cuban military, intelligence and security service entities are prohibited. The Trump Administration also imposed a ban on individual people-to-people and educational travel to Cuba. The definition of the term “prohibited officials of the Government of Cuba” is being amended to include certain additional individuals. However, regulations enacted during the Obama Administration related to group travel, diplomatic relations, family visits and remittances remain in effect. On November 8, various U.S. federal agencies, including the Treasury Department’s Office of Foreign Assets Control (“OFAC”), the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”), and the State Department, took steps to implement these regulatory changes, which formally took effect on November 9.
During the summer of 2017, the U.S. Congress took its own action to direct the Trump Administration to impose specific sanctions on Iran, North Korea and Syria by passing the Countering America’s Adversaries through Sanctions Act (commonly referred to as “the CAATS Act”), which President Trump signed into law on August 2. With respect to Iran, the CAATS Act directs the President to impose sanctions against (1) Iran’s ballistic missile or weapons of mass destruction programs; (2) the sale or transfer to Iran of military equipment or the provision of related technical or financial assistance; and (3) Iran’s Islamic Revolutionary Guard Corps and affiliated foreign persons. In addition, the President is authorized to impose sanctions against persons responsible for gross human rights violations against any individuals supporting internationally recognized human rights and freedoms or any persons exposing illegal activities of the Iranian Government. The President may temporarily waive the imposition or continuation of sanctions under specified circumstances.
The CAATS Act, first noted above in connection with Iran sanctions, modifies and increases the President’s authority to impose sanctions on persons in violation of certain United Nations Security Council resolutions regarding North Korea. It prohibits U.S. financial institutions from establishing or maintaining correspondent accounts used by foreign financial institutions to provide indirect financial services to North Korea. A foreign government that provides to or receives from North Korea a defense article or service is prohibited from receiving certain types of U.S. foreign assistance. In addition, the Act provides sanctions against (1) North Korean cargo and shipping; (2) goods produced in whole or part by North Korean convict or forced labor; and (3) foreign persons that employ North Korean forced laborers.
Subsequently, on September 11, 2017, the U.N. Security Council unanimously adopted a U.S.-sponsored resolution imposing new, tougher sanctions on North Korea that extend current U.N. sanctions and ban the sale of natural gas liquids to North Korea, exports of North Korean textile products and use of North Korea’s overseas laborers. The measure also places caps on crude and refined oil exports to North Korea.
More recently, on September 20, President Trump issued Executive Order 13810, which establishes several new designation criteria for additional sanctions, including against persons who (1) operate in the North Korean construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles or transportation industries; (2) have engaged in a significant importation from or exportation to North Korea; (3) are a North Korean person; or (4) have materially assisted, sponsored or supported (including financially or technologically) any person whose property is blocked pursuant to the Executive Order. The Executive Order also (a) prohibits vessels and aircraft that have called or landed at a port or place in North Korea in the previous 180 days, and vessels that engaged in ship-to-ship transfer with such a vessel in the previous 180 days, from entering the United States; (b) provides authority to block any funds transiting accounts linked to North Korea that come within the United States or possession of a U.S. person; and (c) provides authority to impose sanctions on a foreign financial institution that knowingly conducted or facilitated, on or after the date of the Order, any significant transaction on behalf of certain blocked persons or any transaction in connection with trade with North Korea. OFAC issued General License 10 to provide for limited exceptions to the above prohibitions. Subsequently, on September 26, October 26 and November 21, OFAC issued sanctions against a variety of North Korean banks and individuals.
On September 29, 2017, in order to implement the CAATS Act first noted above in connection with Iran sanctions, OFAC amended Directives 1 and 2 of the U.S. sectoral sanctions against Russia, effective November 28, to bar U.S. persons from transacting in debt of over 14 days’ maturity of designated Russian financial services firms or over 60 days’ maturity of designated Russian energy firms, respectively. Similarly, on October 31, OFAC expanded the scope of Directive 4 of the U.S. sectoral sanctions against Russia so that the provision, export or reexport, by a U.S. person or within the United States, directly or indirectly, of goods, services (except for financial services) or technology in support of exploration or production for deepwater, Arctic offshore or shale projects is prohibited for projects initiated on or after January 29, 2018, that have the potential to produce oil in any location in which any person designated under Directive 4 has a 33 percent or greater ownership interest or ownership of a majority of the voting interests. In addition, the CAATS Act provides for potential sanctions against persons determined to meet specified criteria, including those operating in the railway or metals/mining sector in Russia, those engaging in activities undermining cybersecurity efforts, and those investing in Russian crude oil or energy export pipelines. The imposition of such sanctions will require additional action by OFAC.
Effective October 12, 2017, OFAC lifted its remaining economic sanctions against Sudan in response to Sudan’s human rights improvements and progress related to counterterrorism. Although this action effectively suspends the U.S. trade embargo against Sudan, unfreezes Sudanese assets, and removes all financial restrictions against Sudan, it does not terminate the national emergency with respect to Sudan and does not affect any sanctions related to the conflict in Darfur. OFAC designations of Sudanese persons on the Specially Designated Nationals and Blocked Persons (“SDN”) List are also unaffected. U.S. and non-U.S. persons are required to obtain licenses from BIS in order to export or reexport U.S.-origin items identified on the U.S. Commerce Control List, but may use newly-issued General License A to export and reexport agricultural commodities, medicine, and medical devices to Sudan.
In August 2017, President Trump signed Executive Order 13808, which imposes sanctions on Venezuela in response to Venezuela President Nicolas Maduro’s increasingly authoritarian regime. The new sanctions are aimed at restricting the Maduro regime’s access to financial markets and capital, subject to certain limitations intended to reduce the impact on U.S. businesses and the Venezuelan people. The Executive Order prohibits dealings in new debt and equity issued by the Venezuelan government and its state-run oil company, Petroleos de Venezuela, S.A., as well as in some existing bonds owned by the public sector. The order also bans the payment of dividends and other distribution of profits to the Venezuelan government by entities owned or controlled by the Venezuelan government. OFAC published new general licenses that authorize certain transactions that would otherwise be prohibited under the President’s Executive Order. These general licenses authorize (1) certain transactions that are ordinarily incident and necessary to wind down contracts or other agreements in effect prior to August 25; (2) certain transactions involving CITGO Holdings, Inc., the Venezuelan-owned U.S. petroleum company; (3) dealings in certain bonds; and (4) new debt transactions related to the export or reexport from the U.S. or by a U.S. person, wherever located, of agricultural commodities, medicine and medical devices, or replacement parts and components for medical devices.