On January 31, 2020, the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury removed sanctions on COSCO Shipping Tanker (Dalian). The delisting may have resulted from US-Chinese government-to-government discussions around “Phase 1” of the US-China trade deal, signed on January 15, 2020. Another COSCO entity—COSCO Shipping Tanker (Dalian) Seaman and Ship Management—remains designated, and US persons remain prohibited from transacting with it and with its direct or indirect subsidiaries.


On September 25, 2019, pursuant to Executive Order 13846, OFAC designated COSCO Shipping Tanker (Dalian) (COSCO Dalian) and COSCO Shipping Tanker (Dalian) Seaman and Ship Management on the Specially Designated Nationals and Blocked Persons List (SDN List) for transporting Iranian crude oil to China. COSCO is China’s largest and one of the world’s largest shipping companies, with more than a thousand vessels under its ownership.

These designations had an enormous and immediate impact on the oil and shipping industries, since a handful of COSCO subsidiaries and dozens of vessels were also considered sanctioned under OFAC’s “50% Rule”1 and were, for practical purposes, effectively removed from the petroleum shipping market.

General License K

The intervening months saw OFAC taking actions to try to ease the strain on the market and impacts on shipping prices. First, on October 24, 2019, OFAC issued General License K, authorizing transactions and activities incident to the maintenance or wind down of transactions involving COSCO Shipping Tanker (Dalian) through December 20, 2019. On December 19, 2019, OFAC renewed General License K (amended as General License K-1) through February 4, 2020.

Then, in November 2019, OFAC clarified in its FAQ 805 that non-US persons were not prohibited from transacting with the designated COSCO entities unless the transaction involves Iran or a US nexus. Nevertheless, global shipping prices continued to be elevated, with freight costs increasing by $1.78 per barrel of oil as a result of the sanctions.

What Does the Delisting Mean?

The delisting of COSCO Shipping Tanker (Dalian) means that US persons are no longer prohibited from engaging in business with COSCO Dalian, its subsidiaries2 and their vessels. Since there are no longer any trade restrictions involving the delisted entities, General License K-1 is no longer needed and is revoked. (Note that COSCO Shipping Tanker (Dalian) Seaman and Ship Management remains on the sanctions list.)

Basis for the Delisting

Shortly before General License K-1’s expiration date, on January 31, 2020, OFAC delisted COSCO Dalian. A couple of factors contributed to OFAC’s decision to delist it:

  • Cooperation of COSCO:

Following the designations, COSCO reportedly began cooperating with the US government in efforts to have its subsidiaries and their vessels delisted, including by agreeing to comply with US sanctions against Iran on a go-forward basis.

  • US-China Trade Deal:

On January 15, 2020, China and the United States signed Phase 1 of the US-China Trade Deal, under which China agreed to purchase $200 billion worth of US goods and services in 2020 and 2021, which eased tensions in the US-China trade war. At its current phase, the US-China trade deal does not lift or change China’s 25% and 5% tariff on imports of US LNG and US crude oil, respectively.

Lessons Learned and Obstacles Remaining

The COSCO designations are an example of the US government’s strategy to apply pressure on other foreign governments whose policies are at odds with US sanctions. The COSCO Dalian sanctions debacle is a lesson in the drastic consequences that can result when these policies collide, and the power that the US government has to compel compliance even when there is no US nexus.

As a result of the present easing of tensions between China and the United States, and COSCO’s commitment to comply with US sanctions, COSCO Dalian is now delisted, and US persons may once again transact with COSCO Dalian. The delisted COSCO vessels have resumed their operations. At the same time, a senior official has cautioned that the administrative delisting should not be misinterpreted as a change in the Administration’s policy of “maximum pressure against Iran.”

Again, COSCO Shipping Tanker (Dalian) Seaman and Ship Management, which provides crew and ship management for the COSCO Dalian vessels, remains a Specially Designated National, and US persons (including US financial institutions and insurers) continue to be strictly prohibited from transacting with it, its subsidiaries or their vessels, whether directly or indirectly. Meanwhile, four other Chinese companies continue to remain on the sanctions list under Iran sanctions, namely China Concord Petroleum, Kunlun Holding, Kunlun Shipping, and Pegasus 88.

Finally, the lifting of sanctions against COSCO Dalian has not resulted in the expected relief in the Chinese economy and increase of trade in the Chinese tanker industry due to emerging impacts of the novel coronavirus (2019‑nCoV), which has slowed down the Chinese economy across all industries. The shipping industry was especially hard-hit. 2019‑nCoV is estimated to have caused at least a 20% decrease in shipping volumes since the first cases of the disease were reported.