President Obama issued an executive order on January 13, 2017 that will effectively lift all U.S. economic sanctions on Sudan1 in recognition of significant progress in relations between the countries. Once the order is implemented next week, U.S. persons will be able to engage in almost all financial and other transactions involving Sudan, though prohibitions on certain items subject to U.S. export control laws remain in place. While this action represents a significant shift in U.S. policy in President Obama’s final days in office, President-elect Trump will have the authority to reimpose sanctions – though it is unclear whether his administration will seek to do so.
Overview of Changes to U.S. Sanctions
The United States has maintained a comprehensive embargo since 1997 prohibiting most transactions with Sudan. These controls are administered under a combination of export control regulations (primarily administered by the U.S. Commerce and State Departments) and the Sudanese Sanctions Regulations (“SSR”) administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”).
The SSR generally prohibit U.S. persons from engaging in almost all financial transactions and other activities involving persons in Sudan or the Government of Sudan more broadly. Pursuant to the new executive order, OFAC now will be issuing a new general license authorizing all activities that previously were prohibited under the SSR and related executive orders – effectively lifting all prohibitions under the SSR. As a result:
- U.S. persons will be authorized to process financial transactions involving persons in Sudan;
- U.S. and non-U.S. persons will be authorized to engage in transactions related to exports to Sudan of items that are not subject to heightened controls under U.S. export control regulations (as discussed in more below);
- U.S. persons will be authorized to engage in transactions related to imports into the United States of Sudanese-origin items;
- U.S. persons will be authorized to engage in transactions involving property and interests in property that previously was blocked pursuant to the SSR, including that of the Government of Sudan; and
- U.S. persons will be authorized to facilitate transactions between Sudan and third countries, to the extent such activity previously was prohibited by the SSR.
In furtherance of these measures, a large number of Sudanese individuals and entities are expected to be removed from the U.S. List of Specially Designated Nationals (“SDN List”). However, certain Sudanese persons will remain on the SDN List under other authorities, and U.S. persons remain prohibited from engaging in practically all transactions involving such persons – including activities that otherwise would be authorized under the recent changes to the SSR.
These changes will become effective once the new general license is published in the U.S. Federal Register, which is expected to occur on January 17, 2017. Upon assuming office on January 20, President-elect Trump will have the ability to revoke the measures and reimpose sanctions on Sudan. Based on past statements from Mr. Trump and his nominees for key U.S. national security and foreign policy positions, it is unclear whether the incoming administration may seek to do. In comparison, Mr. Trump has weighed in on sanctions regarding Iran and Russia (as noted in prior OnPoints: Election 2016: President Trump’s Potential Impact on Business and U.S.-Russia Business Climate Likely to Change Under Trump Presidency).
U.S. Export Control Restrictions Remain in Place
The suspended sanctions do not affect existing license requirements under the Commerce Department’s Export Administration Regulations (“EAR”) or State Department’s International Traffic in Arms Regulations (“ITAR”) regarding the export or reexport of certain controlled goods, software or technology to Sudan. Under these laws:
- A license from the Commerce Department’s Bureau of Industry and Security is required to export or reexport any U.S.-origin items or other items subject to the EAR that are specifically controlled under any export control classification number (“ECCN”) on the Commerce Control List (“CCL”). The Commerce Department has not announced any amendments to the EAR that would ease this general licensing requirement.
- Companies seeking to export or reexport goods, software or technology subject to the EAR to Sudan therefore should be aware that such activities remain prohibited without authorization from BIS.
- The export or reexport of items that are not specifically controlled under an ECCN and instead are classified as “EAR99” (the lowest level of control), however, primarily are controlled by OFAC under the SSR and therefore will be authorized under the new changes.
- Exports or reexports of EAR99 items to Sudan will no longer require prior authorization from OFAC or any other U.S. agency (though controls under the EAR remain in place for exports of items to Sudan to certain prohibited end-users or for certain prohibited end-uses).
- U.S. persons also will be permitted to engage in almost all transactions related to exports or reexports of non-U.S. items that are not subject to U.S. export control laws.
- Sudan also remains subject to an arms embargo under the ITAR, which is administered by the U.S. State Department’s Directorate of Defense Trade Controls and controls the export or reexport of defense-related goods, software, technology and services.
- These controls remain in place, and exports or reexports of any ITAR-controlled items or services to Sudan continue to be prohibited.