Civil Aviation and Railroad Industry Exporters Benefit from Changes to Licensing Policy
On January 13, 2017, President Obama issued an executive order that largely lifts the comprehensive sanctions imposed against Sudan. Pursuant to the executive order, the Department of the Treasury's Office of Foreign Assets Control ("OFAC") has issued an amendment to the Sudanese Sanctions Regulations, 31 C.F.R. Part 538 ("SSR"), that authorizes all transactions prohibited by the SSR. In conjunction with the amendment of the SSR, the U.S. Department of Commerce, Bureau of Industry and Security ("BIS") has also amended license review standards for certain categories of goods. Both sets of amendments become effective today, January 17, 2017. Although certain restrictions remain in place regarding engaging in trade with Sudan, including, in particular, the Darfur Sanctions Regulations, 31 C.F.R. Part 546 ("DSR"), and restrictions on the export of goods controlled under the International Traffic in Arms Regulations ("ITAR") and Export Administration Regulations ("EAR"), today's amendments to the SSR and BIS's license review standards represent a significant policy change with relation to one of the comprehensively embargoed countries and regions. OFAC's amendment to the SSR has been implemented as a general license included at 31 C.F.R. § 538.540. This general license authorizes U.S. persons to engage in and facilitate virtually all previously prohibited transactions involving Sudan, including exporting and importing goods, technology, and services to and from Sudan (subject to continuing U.S. export control restrictions), processing transactions involving nondesignated individuals and entities in Sudan, and engaging in transactions involving property in which the Government of Sudan has an interest. In particular, U.S. financial institutions are authorized to process transactions involving Sudan that are not otherwise prohibited by other sanctions, such as restrictions on dealing with individuals or entities in Sudan who have been included on OFAC's Specially Designated Nationals and Blocked Persons ("SDN") List under the DSR and sanctions programs other than the SSR. Further, pursuant to this general license, property of the Government of Sudan that is subject to U.S. jurisdiction will be unblocked. In addition to the amendments to the SSR, President Obama's executive order revokes the sanctions provisions in two other executive orders relating to Sudan (Executive Order 13067 and Executive Order 13412) on July 12, 2017, provided that the incoming Trump Administration reports prior to that date that the Government of Sudan "has sustained the positive actions" it has taken over the last six months that led to this executive order. Despite the ease in OFAC's sanctions regulations, Sudan remains designated as a state sponsor of terrorism and is subject to significant licensing requirements for the export or reexport of items that are subject to the EAR and controlled for anti-terrorism purposes—essentially any sensitive dual-use commodities, software, or technology identified on the Commerce Control List. In coordination with OFAC's lifting of the SSR, BIS has amended certain license review standards in the Anti-Terrorism Control Policy applicable to Sudan. BIS will now review license applications for the export or reexport of certain items in the following categories under a general policy of approval rather than a policy of denial:
- Parts, components, materials, equipment, and technology that are intended to ensure the safety of civil aviation or the safe operation of fixed-wing commercial passenger aircraft; and
- Items used to inspect, design, construct, operate, improve, maintain, repair, overhaul, or refurbish railroads in Sudan.
Requests to export or reexport complete aircraft or aircraft-related items that are controlled for anti-terrorism and one or more additional reasons (e.g., national security or missile technology) will continue to be reviewed under a policy of denial for all end users. The new general policy of approval applies only for civil uses to "non-sensitive end-users" within Sudan. Sensitive end users include Sudan's military, police, and intelligence services and any persons that are owned, operated, or controlled by, or are a part of, these services. License applications that would substantially benefit sensitive end users will generally be denied. Finally, as a note of caution, companies now considering business opportunities in Sudan should bear in mind that these changes were made through the authority of the executive branch. As a result, President-elect Trump will have the authority to revoke them when he takes office. In that regard, these eased sanctions have come under criticism from various fronts. In fact, Congressman James McGovern (D-MA) issued a statement expressing his disappointment with the eased sanctions, adding "I ask that the in-coming Trump Administration make sure that the conditions have truly changed on-the-ground when making its determination in six months whether to make [the] temporary relief permanent, let alone expanded."
Although certain restrictions remain in place regarding engaging in trade with Sudan, including, in particular, the Darfur Sanctions Regulations and restrictions on the export of goods controlled under the International Traffic in Arms Regulations and Export Administration Regulations, today's amendments to the SSR and BIS's license review standards represent a significant policy change with relation to one of the comprehensively embargoed countries and regions.