On January 13, 2017 President Obama issued Executive Order 13761 (the new Executive Order), which provides for the revocation of the US sanctions on Sudan that had been authorized by Executive Orders 13067 of November 3, 1997 and 13412 of October 13, 2006. The new Executive Order will lift these sanctions on July 12, 2017, on the condition that Sudan maintain sustained improvement in cooperating with the United States and other nations, providing humanitarian access and resolving internal armed conflict. In connection with the new Executive Order, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued a new general license in the Sudanese Sanctions Regulations (SSR) that authorizes all activity that had been prohibited under the authority of Executive Orders 13067 and 13412 and the SSR. Below we summarize 10 important implications of these changes.
What has changed?
1. US activities that had been prohibited by the SSR are now authorized
Under the new general license, all activities by US persons prohibited by the SSR are authorized as of January 17, 2017. This change enables transactions by US persons or originating from the United States with individuals and entities in Sudan, permits trade with Sudan, unblocks property, opens access to the Sudanese oil and petrochemical industries, and authorizes US person participation in transactions between Sudan and third countries. Also as of January 17, 2017, payments to Sudan may be processed in US dollars (USD).
2. The new general license takes the place of existing general licenses
The new general license replaces all general licenses issued under the SSR prior to January 17, 2017, meaning that previously-permitted actions will remain lawful, but now under the authority of the new general license. The new general license is broader in scope than many of the older general licenses issued under the SSR, so this change eliminates any narrower requirements under the old general licenses.
3. The new general license replaces specific and TSRA licenses
The new general license also covers all transactions authorized under specific licenses issued under the SSR prior to January 17, 2017. This includes the export or re-export of agricultural commodities, medicine or medical devices, which previously required a specific license under the Trade Sanctions Reform and Export Enhancement Act (TSRA). The new, broader general license supersedes any narrower license requirements contained in previously-issued specific licenses, and current holders of specific licenses under the SSR need not renew or apply for a new specific license to continue to engage in activities prohibited by the pre-January 17, 2017 SSR. Under the new general license, however, exports or re-exports of agricultural commodities, medicine or medical devices must be shipped within 12 months of contracting to export or re-export such items to Sudan.
4. More favorable policy for US export control licensing of certain aircraft- and railroad-related items
In conjunction with the new Executive Order, the Commerce Department’s Bureau of Industry and Security (BIS) published a revision to the Export Administration Regulations (EAR) on January 17, 2017 to create a more favorable policy for licensing less-sensitive aircraft- and railroad-related items going to non-sensitive end-users in Sudan. The amended rule covers certain items (1) intended to ensure the safety of civil aviation or the safe operation of fixed-wing, commercial passenger aircraft, or (2) for use to inspect, design, construct, operate, improve, maintain, repair, overhaul or refurbish railroads in Sudan. BIS had subjected license applications for such items to a general policy of denial but will now apply a general policy of approval. The policy of denial related to exports of complete aircraft to Sudan or exports for Sudan’s military, police or intelligence services remains unchanged.
Other US export control rules will continue to apply to US exports to Sudan, including re exports of US-origin goods from other countries to Sudan.
What has not changed?
5. Darfur and South Sudan sanctions remain in force
The Darfur-related sanctions under Executive Order 13400 of April 27, 2006 and the Darfur Peace and Accountability Act of 2006 remain fully in place. The Darfur sanctions primarily concern blocking property of Specially Designated Nationals (SDNs). The Darfur sanctions authorize the designation of persons who contribute to the conflict in Darfur, including persons who contribute to the provision of arms, related materiel, assistance or training related to military activities to the Government of Sudan, persons in North, South, or West Darfur, or certain Sudanese military organizations. While the Darfur sanctions do not expressly prohibit such activity, any exports or sales to military purchasers anywhere in Sudan still present a risk. The US sanctions program on South Sudan also remains unaffected.
6. Statutory requirements remain unchanged, including TSRA record-keeping
Substantially all other statutory prohibitions remain in place. These include counterterrorism and antidrug trafficking sanctions and certain provisions under TSRA. Importantly, TSRA continues to require that US persons maintain records of authorized transactions for at least five years.
7. Enforcement and investigation of past SSR violations continue
The new general license does not affect the enforcement or ongoing investigation of any violation of the SSR that occurred prior to January 17, 2017. Since enforcement is based on the rules in place at the time of the conduct in question, any pre-January 17, 2017 sanctions violations remain violations, even if the conduct is now authorized under the new general license. This means, for example, that certifications or representations about sanctions compliance over the past five years may need to take into account the impact of the old rules on pre-January 17, 2017 activities.
8. Money laundering, corruption and bribery concerns persist
Sudan is still a US-designated State Sponsor of Terrorism and the US Government has warned that corruption in Sudan is widespread, which facilitates criminal activity and money laundering. US and EU laws and regulations against money laundering, corruption and bribery remain in effect and will continue to be vigorously enforced. These legal and regulatory requirements include the compliance program, training, monitoring and reporting requirements of the Bank Secrecy Act (BSA) and the due diligence, customer identification and cooperation requirements of the USA Patriot Act. The EU’s Fourth Anti-Money Laundering Directive, which takes effect in June 2017, requires enhanced customer due diligence and will impose rules for dealing with politically exposed persons. The Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act will also continue to apply and prohibit corrupt payments extraterritorially.
9. The suspended sanctions may terminate in six months, but not automatically
Whereas the broad new general license took effect on January 17, 2017, the new Executive Order does not formally terminate the relevant Sudan sanctions until July 12, 2017 and requires the Secretary of State to publish a notice in the Federal Register in advance of that date. For the time being, this means that the SSR’s prohibitions technically remain in place but activities formerly prohibited by it are now authorized.
10. The new general license may remain in place for more or less than six months
The terms of the new general license do not include an expiration date, so the general license will remain in effect until the United States formally lifts the Sudan sanctions or until it is deleted from the SSR or otherwise modified. It is possible that the general license could be revoked at any time via an amendment to the SSR, even before July 12, 2017, or that the general license could remain in place after July 12, 2017 if the United States does not formally lift sanctions.
Over the next six months, as we approach the possible formal termination of these sanctions against Sudan, companies and individuals should consider the impact of these changes on ongoing and new business activities, as well as on current and prospective contractual provisions.