United States: Trump Administration Lifts U.S. Sanctions On Sudan; Important Limitations Remain

Key Points

  • Based on certain State Department findings, effective October 12, 2017, long-standing U.S. sanctions on the Republic of Sudan administered by OFAC under the Sudan Sanctions Regulations will be terminated, and U.S. persons will no longer be generally prohibited from engaging in transactions involving Sudan or the government of Sudan. This action reverses nearly 20 years of comprehensive U.S. sanctions on Sudan.
  • Despite this point, important U.S. trade restrictions affecting Sudan remain, including restrictions on activities prohibited under related sanctions programs, including Darfur-related, human-rights-based sanctions. Sudan also remains on the U.S. list of State Sponsors of Terrorism, so that heightened U.S. export control and other trade restrictions remain in place for the country. Moreover, OFAC retains authority to designate persons and entities associated with Sudan on the SDN List pursuant to other sanctions authorities as it deems appropriate.
  • Finally, even legally permissible activities involving Sudan may still pose challenges for U.S. and non-U.S. companies in connection with loan facilities and other contracts containing restrictive covenants applicable to business with Sudan, as well as U.S. state-level sanctions in more than 30 U.S. states that target companies engaging in Sudan-related business for divestment, exclusion from government contracts eligibility and other punitive actions.

Introduction

On October 6, 2017, the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) announced that it will revoke the core U.S. sanctions regime against Sudan. Under Executive Order 13761 (as amended by Executive Order 13804) issued by former President Obama on January 13, 2017, this action follows published confirmation by the State Department that Sudan has "sustained the positive actions" that gave rise to Executive Order 13761, including "carrying out its pledge to maintain a cessation of hostilities in conflict areas in Sudan; continuing improvement of humanitarian access through Sudan; and maintaining its coordination with the United States on addressing regional conflicts and the threat of terrorism."

Based on this action, effective October 12, 2017, U.S. persons are no longer generally prohibited from engaging in transactions involving Sudan or the government of Sudan under the SSR. Furthermore, consistent with the revocation of sanctions, OFAC will remove the SSR from the U.S. Code of Federal Regulations.

Despite this action, important U.S. trade restrictions affecting Sudan remain in place. These include U.S. export control restrictions in connection with Sudan's continuing U.S. designation as a State Sponsor of Terrorism, additional restrictions imposed by provisions of the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), and continuation of Darfur-related U.S. sanctions. Additionally, OFAC retains legal authority to make additional Specially Designated Nationals and Blocked Persons (SDN) designations of persons associated with Sudan, and more than 30 U.S. states have sanctions measures in place that provide for potential divestment, government contracts disqualification and other punitive measures against companies that engage in business activities involving Sudan. Accordingly, U.S. and non-U.S. companies considering commercial opportunities involving Sudan should include careful evaluation and assessment of these issues in business planning and management of related activities.

Background

For nearly two decades, the U.S. government has maintained comprehensive economic sanctions on Sudan pursuant to Executive Order 13067 (November 3, 1997) and Executive Order 13412 (October 13, 2006). These executive orders blocked the property of the government of Sudan and generally prohibited U.S. persons from engaging in Sudan-related transactions. Sudan was targeted with these sanctions based on stated U.S. concerns regarding human rights abuses and support for international terrorism.

On January 13, 2017, after months of intensive bilateral discussions and negotiation, the Obama administration issued Executive Order 13761 (see previous alert). This executive order authorized the termination of U.S. sanctions on Sudan on condition that the Secretary of State in the incoming new U.S. administration issue a report finding that Sudan had sustained positive action in the following five key areas of engagement: (1) maintaining a cessation of hostilities in conflict areas; (2) improving humanitarian access throughout Sudan; (3) assisting to resolve the conflict in South Sudan; (4) countering the Lord's Resistance Army; and (5) cooperating with the United States in addressing the threat of terrorism. In conjunction with this executive order, OFAC issued a general license at 31 C.F.R. § 538.540 authorizing all transactions otherwise prohibited by the SSR.

On July 11, 2017, the Trump administration issued Executive Order 13804, extending the deadline for the State Department to issue its report by an additional three months (see previous alert). On October 6, 2017, the State Department issued a statement and report finding that Sudan has sustained positive action in the aforementioned areas of engagement, authorizing the lifting of sanctions pursuant to Executive Order 13761. The report also stated that the U.S. government secured cooperation from the government of Sudan in additional policy areas, including the implementation and enforcement of U.N. Security Council obligations related to North Korea.

Summary of Changes

Effective October 12, 2017, OFAC revoked Sections 1 and 2 of Executive Orders 13067 and 13412, which blocked the property of the government of Sudan and prohibited U.S. persons from engaging in transactions with Sudan or the government of Sudan. Consequently, U.S. persons may engage in transactions previously prohibited under the SSR, and the Sudan General License issued in January (31 C.F.R. § 538.540) is superseded and no longer in effect.

OFAC has also issued General License A authorizing exports and re-exports to Sudan of agricultural commodities, medicine and medical devices otherwise barred due to Sudan's continued U.S. listing as a State Sponsor of Terrorism. General License A authorizes exports and re-exports of such items to Sudan, provided that the conditions of this general license are met, including adherence to a 12-month shipment restriction under TSRA.

In addition, OFAC has issued a new set of FAQs that provide further explanation regarding implications of the changes to the Sudan sanctions programs and ongoing restrictions applicable to Sudan-related transactions, discussed below.

Continuing Trade Restrictions

Notwithstanding these substantial changes, important U.S. trade restrictions on business with Sudan and the government of Sudan remain.

  • List-Based Sanctions: OFAC's revocation of sanctions unblocks property of individuals and entities designated on the SDN List under the SSR. However, this action does not affect other U.S. sanctions programs that intersect with activities involving Sudan or Sudanese nationals, including the South Sudan and Darfur-related sanctions programs. OFAC also retains other sanctions authorities to designate Sudanese persons on the SDN List. Companies should therefore continue to screen parties (whether associated with Sudan-related transactions or otherwise) against the SDN List notwithstanding the recent changes.
  • State Sponsor of Terrorism: Sudan remains on the U.S. list of State Sponsors of Terrorism. This designation imposes restrictions on exports of defense articles, dual-use items and other commodities. It also includes imposition of miscellaneous restrictions, such as limitations on economic assistance and a ban on U.S. Department of Defense contracts above $100,000 with companies controlled by the government of Sudan.
  • Exports of Agricultural Commodities, Medicine and Medical Devices: Sudan's continued designation as a State Sponsor of Terrorism means that trade restrictions under TSRA related to exports of agricultural commodities (including foods), medicine and medical devices remain in place. Pursuant to 22 U.S.C. § 7205, exports of these items to the government of Sudan or any entity in Sudan require a license from OFAC, which OFAC has provided under new General License A. Moreover, OFAC does not require a license for financing transactions related to these exports or re-exports. The key limitation to General License A is that the items must be shipped within the 12-month period following the date of the signing of the contract for export or re-export. This is a statutory requirement under TSRA, and, as such, Congressional action is necessary to lift this requirement.
  • Export Controls: Items subject to U.S. export controls continue to be subject to restrictions for transfer to Sudan. Both U.S. and non-U.S. persons require authorization from the Department of Commerce's Bureau of Industry and Security (BIS) to export or reexport items that are listed on the Commerce Control List (CCL) (i.e., items subject to U.S. export controls, except for low-level items designated as EAR991). Notably, because Sudan is not subject to embargoes or other special controls under the Export Administration Regulations (EAR), certain EAR license exceptions may be available to authorize transactions of items listed on the CCL to Sudan.
  • Financial Institutions: Financial institutions are no longer prohibited from processing transactions involving Sudan that are denominated in U.S. dollars, as either a correspondent institution or on behalf of their own customers. However, despite the changes in U.S. law, it is important to anticipate that some financial institutions may still be unwilling to process such transactions or take on related business based on pure business risk, anticorruption and money laundering risk considerations.
  • Financing and Contractual Limitations: Given that Sudan has long been a target of comprehensive sanctions by the U.S. government, it is not uncommon to find broad limitations on Sudan-related transactions in business contracts, particularly loan facility agreements issued by financial institutions. Companies seeking to take advantage of new opportunities in Sudan should review existing agreements to ensure that legally permissible, Sudan-related business does not result in a breach of covenants under commercial agreements.
  • State Divestment Policies: Many U.S. states (more than 30) continue to maintain Sudan-related sanctions laws that prohibit investments and require divestment of public funds from companies that engage in certain types of business activities involving Sudan. These laws will continue to pose business and reputational risks for companies that engage in business activities associated with Sudan, despite the lifting of sanctions under the SSR. Moreover, public and private investors that apply Socially Responsible Investment principles and policies may continue to restrict investments in companies that engage in business in Sudan.
  • European Union Restrictive Measures: The European Union continues to maintain limited sanctions on Sudan, including an arms embargo, a ban on the provision of related assistance and services, and a restriction on the admission of designated individuals into the European Union. In addition, there is an asset freeze, as well as a prohibition to provide funds and economic resources to designated individuals.
  • OFAC Enforcement: The OFAC FAQs expressly state that the revocation of sanctions on Sudan and the government of Sudan do not impact "past, present, or future OFAC enforcement investigations or actions" against individuals or entities for apparent violations of the SSR that occurred prior to October 12, 2017. Accordingly, companies should be mindful of the long-standing OFAC policy to review a transaction in light of the laws in existence at the time, and consider voluntary self-disclosures where appropriate.

Conclusion

The decision to revoke sanctions on Sudan and the government of Sudan relieves much of the uncertainty that followed the issuance of Executive Order 13761 in the final days of the Obama administration. This decision will result in expanded commercial opportunities for U.S. and non-U.S. companies seeking to explore a market that has been subject to severe economic restrictions for nearly two decades. Consideration of such opportunities should include careful evaluation of remaining limitations and associated sanctions and export control risks.

Footnote

1. EAR99 items are those items that are subject to the EAR, but not listed on the CCL, and are not subject to the International Traffic in Arms Regulations. In some cases, EAR99 items may also require a BIS license to export or re-export regardless of destination if the transaction implicates certain end-use or end-user concerns.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Hughes Hubbard & Reed LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Hughes Hubbard & Reed LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions