United States: U.S. Government Loosens Controls On Transactions Involving Sudan

Ronald Oleynik is a Partner for Holland & Knight's Washington, D.C. office.

Andrew McAllister is an Associate for Holland & Knight's Washington, D.C. office.

HIGHLIGHTS:

  • Before leaving office, former President Barack Obama signed Executive Order 13761, which establishes a basis for complete revocation of the sanctions against Sudan by July 12, 2017.
  • The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) amended the Sudanese Sanctions Regulations to authorize all transactions that had been otherwise prohibited.
  • In addition, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) amended the Export Administration Regulations to allow certain license applications for export or re-export to Sudan to be reviewed under a general policy of approval rather than a general policy of denial.

Before leaving office, former President Barack Obama signed Executive Order (E.O.) 13761 on Jan. 13, 2017, in response to "positive actions" by the Government of Sudan. 1 E.O. 13761 establishes a basis for complete revocation of the sanctions against Sudan by July 12, 2017.

More immediately, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) amended the Sudanese Sanctions Regulations (SSR) to authorize all transactions that had been otherwise prohibited. Also, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to create a licensing policy of approval for the export or re-export of certain items for specified civil aviation and railroad uses.2

New OFAC General License: Authorizes All Transactions Involving Sudan

Effective Jan. 17, 2017, OFAC broadly authorizes (by General License) U.S. persons to engage in all commercial, financial and other transactions with Sudan, its nationals and its government.

Specifically, the General License authorizes all transactions prohibited by the SSR and E.O. 13067 and E.O. 13412, including all transactions that involve property in which the Government of Sudan has an interest.

Newly authorized transactions include:

  • processing of financial transactions involving persons in Sudan
  • transactions involving property in which the Government of Sudan has an interest, including transactions associated with unblocking Government of Sudan property
  • exportation of goods or technology to Sudan (subject to complying with the EAR for U.S.-origin goods or technology)
  • exportation of services to Sudan
  • importation of goods and services from Sudan
  • exportation of certain agricultural commodities that had previous been excluded from the General License for agricultural commodities (e.g., furniture made from wood, agricultural equipment, pesticides, herbicides, etc.)

Additionally, despite this opening, violations that occurred prior to Jan. 17, 2017, remain subject to OFAC investigations and enforcement actions.

This amendment does not eliminate the need to comply with other sanctions laws, such as other provisions of 31 C.F.R. Chapter V (e.g., terrorism, proliferation of weapons of mass destruction, and narcotics trafficking), the Darfur-related sanctions and South Sudan-related sanctions.

U.S. persons do not need to hold a current Specific License or apply for a Specific License renewal if their current license expires. OFAC's general recordkeeping and reporting obligations will continue to apply.

BIS Licensing Policy Change: Policy of Approval for Civil Aviation and Railroad Uses

Additionally, BIS amended the EAR effective Jan. 17, 2017, to allow certain license applications for export or re-export to Sudan to be reviewed under a general policy of approval rather than a general policy of denial. The amendments do not create any new license requirements or remove any existing license requirements.

License applications for the export or re-export to Sudan of certain items (controlled only for anti-terrorism reasons) will be reviewed under a general policy of approval if the items are:

  • intended to ensure the safety of civil aviation or the safe operation of fixed-wing commercial passenger aircraft, or
  • to be used to inspect, design, construct, operate, improve, maintain, repair, overhaul or refurbish railroads in Sudan

This new licensing policy more broadly applies to Sudanese civil aircraft supporting intra-country commercial flights, even those aircraft being flown by state-owned airlines.

However, a general policy of denial still applies to:

  • exports or re-exports to, or for the benefit of, Sudan's military, policy and intelligence services, and persons owned by, part of, or operated or controlled by those services
  • more strictly controlled items (controlled for anti-terrorism reasons and one or more additional reasons –e.g., missile technology) for civil aviation and railroad uses
  • military end-use

Long-Term Outlook for Sudan

While the General License authorizes all transactions involving Sudan, the underlying sanctions under E.O. 13067 and E.O. 13412 have not been eliminated in their entirety. These sanctions still exist but are superseded by the General License.

E.O. 13761 states that such sanctions will be revoked effective July 12, 2017, as long as the Government of Sudan has sustained the positive actions that gave rise to E.O. 13761. The U.S. Secretary of State will provide a report to the President regarding whether the Government of Sudan has met this standard for the next six months.   

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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