OFAC Amends and Reissues Syrian Sanctions Regulations

Transcription

1 Edward Krauland, Meredith Rathbone, Andy Irwin, Jack Hayes, Henry Smith May 7, On May 2, 2014, the Department of the Treasury s Office of Foreign Assets Controls (OFAC) published and made effective a final rule amending the Syrian Sanctions Regulations (SSR) and reissuing them in their entirety, so as to incorporate and further define the following previously imposed executive orders: Executive Order of April 25, 2006 Executive Order of February 13, 2008 Executive Order of April 29, 2011 Executive Order of May 18, 2011 (discussed here) Executive Order of August 17, 2011 (discussed here) Executive Order of April 22, 2012 (discussed here) The final rule amends and reissues the SSR to (1) incorporate the blocking prohibitions imposed by the above executive orders, (2) add transaction-related restrictions for US persons imposed by Executive Order 13582, and (3) add general licenses previously posted on OFAC s website. Blocking Prohibitions Section of the SSR is revised to include the blocking prohibitions previously imposed in the above executive orders. Specifically, all property and interests in property of the Government of Syria (GOS) (defined in as the state and the Government of the Syrian Arab Republic, as well as any political subdivision, agency, or instrumentality thereof) located in the United States, or under the control of US persons, are blocked. US persons are thus prohibited from engaging in the transfer, export, withdrawal, or other dealings involving blocked property or interests in property of the GOS. Furthermore, Note 3 of prohibits US persons from making, contributing, or providing funds, goods, or services by, to, or for, or receiving any funds, goods, or services from, the GOS. These same blocking and transaction restrictions also apply to Specially Designated Nationals (SDNs). Section blocks the property and interests in property of persons (i.e. individuals and entities) that are determined by the Secretary of the Treasury, in coordination with the Secretary of State, to have undertaken any of the activities specified in in the above executive orders and now incorporated in the SSR s blocking prohibitions. New interpretative clarifies that a person whose property and interests in property are blocked pursuant to has an interest in all property and interests in property of an entity in which it owns, directly or indirectly, a 50 percent or greater interest. The property and interests in property of such an entity, therefore, are thus also blocked even if not itself an SDN. Transaction-Related Restrictions for US Persons

2 New through are added to the SSR to include previously imposed restrictions found in Executive Order Specifically, US persons, whether inside or outside the United States, are prohibited from taking any of the following actions: Making new investments in Syria ( ): The term new investment is now defined in as a transaction that constitutes: (a) a commitment or contribution of funds or other assets; or (b) a loan or other extension of credit as defined in This definition of new investment is the same as that in the Iranian Transaction Regulations (ITR), 31 C.F.R , but is broader than the definition in the Burmese Sanctions Regulations (BSR), 31 C.F.R , which requires that the new investment activities be undertaken pursuant to an agreement or pursuant to the exercise of rights under such an agreement. Exporting, reexporting, selling, or supplying, directly or indirectly, any services to Syria ( ): New interpretive clarifies that services include any services performed on behalf of a person in Syria or the GOS or where the benefit of the services is otherwise received in Syria, but only if such services are performed either in the United States or outside the United States by a US person (including by a foreign branch of an entity located in the United States). Notably, the SSR only prohibit the export or reexport of services to Syria. Of course, the export or reexport of goods to Syria could involve incidental services. Also, the Export Administration Regulations (EAR), administered by the US Department of Commerce, Bureau of Industry and Security (BIS), restrict the export or reexport to Syria of all items that are subject to the EAR, other than food or medicine. Purchasing, selling, transporting, swapping, brokering, approving, financing, facilitating, or guaranteeing any transaction or dealing, in or related to petroleum or petroleum products of Syrian origin, OR importing petroleum or petroleum products of Syrian origin into the United States ( , ): The term petroleum or petroleum products of Syrian origin is now defined in as petroleum or petroleum products of Syrian origin pursuant to US Customs and Border Protection (CBP) Country of Origin definitions. Furthermore, new interpretative clarifies that petroleum or petroleum products of Syrian origin that have been incorporated into manufactured products or substantially transformed in a third country by a person other than a US person are not restricted. Nevertheless, petroleum or petroleum products of Syrian origin that have been only transshipped through a third country are still restricted. Notably, it remains unclear whether petroleum products are defined to include only refined petroleum products such a gasoline, or would also include products based on any petroleum constituent parts, such as petrochemicals or plastics. In comparison, the Iran Financial Transaction Regulations (ITSR), 31 C.F.R , , specifically distinguish between petroleum products, which are defined as including gasoline, and petrochemical products, which are defined as any aromatic, olefin, and synthesis gas, and any of their derivatives, including ethylene, propylene, butadiene, benzene, toluene, xylene, ammonia, methanol, and urea. Unless OFAC issues a general authorization or specific license, caution is warranted before any US person conducts a transaction or dealing in, or import into the United States of, any Syrian origin, petroleum-based product.

3 Approving, financing, facilitating, or guaranteeing any transaction, undertaken by a foreign person, where such a transaction would be prohibited by any actions set forth above if performed by a US person or within the United States ( ): This prohibition mirrors US person facilitation and approval prohibitions in other OFAC sanctions regimes, including those found in the ITSR and BSR, by which a transaction or dealing involving a foreign person and Syria could be restricted due to the involvement of a US person. According to new interpretive , a prohibited facilitation or approval of a transaction occurs when, among other examples, a US person: Alters its operating policies or procedures, or those of a foreign affiliate, to permit a foreign affiliate to accept or perform a specific transaction involving Syria or the GOS, where such a transaction was previously required to be approved by a US person Refers to a foreign person purchase orders, requests for bids, or similar business opportunities involving Syria or the GOS, or Changes the operating policies and procedures of a particular affiliate with the specific purpose of facilitating transactions that would be prohibited by the SSR General Licenses Finally, new through and are added to the SSR to include general licenses previously posted on OFAC s website. Section authorizes the provision of, and payment for,goods or services in the United States to the diplomatic missions, and employees of the diplomatic missions, of the GOS to the United States, as well as to international organizations in the United States. Section authorizes the exportation or reexportation of items subject to the EAR to the GOS, or any other person whose property and interests in property are blocked, and all transactions ordinarily incident thereto, and also authorizes services to install, repair, or replace such items subject to the EAR, provided that the exportation or reexportation of such items is licensed or otherwise authorized by BIS. In this regard, we note that under General Order No. 2 to Supplement No. 1 of Part 736 of the EAR, a license from BIS is required for export or reexport to Syria of all items subject to the EAR, including items designated as EAR99, except for food and medicine. Section authorizes the exportation from the United States or by US Persons, wherever located, to persons in Syria of services incident to the exchange of personal communications over the Internet, such as instant messaging, chat and , social networking, sharing of photos and movies, web browsing, and blogging, provided that such services are publicly available at no cost to the user. Note that this general license relates to services and does not permit the export or reexport of tangible items or technical data.

4 Section authorizes US persons to send and receive, and US depository institutions, US registered brokers or dealers in securities, and US registered money transmitters to process transfers of, funds to or from Syria or for or on behalf of an individual ordinarily resident in Syria in cases where the transfer involves a noncommercial, personal remittance, provided that the transfer is not by, to, or through the GOS or any other person whose property and interests in property are blocked. Notably, noncommercial, personal remittances do not include charitable donations of funds to or for the benefit of an entity or funds transfers for use in supporting or operating a business, including a family-owned business. Section authorizes all transactions and activities (other than those involving persons whose property and interests in property are blocked) that are for the conduct of the official business of the United Nations, its specialized agencies, programs, funds, and related organizations by employees, contractors, or grantees thereof. Section authorizes US persons residing in Syria to pay their personal living expenses in Syria and to engage in other transactions, including with the GOS, that are ordinarily incident and necessary to their personal maintenance within Syria, including, but not limited to, payment of housing expenses, acquisition of goods or services for personal use, payment of taxes or fees to the GOS, and purchases or receipt of permits, licenses, or public utility services from the GOS. Transactions or services ordinarily incident to operating or supporting a business in Syria, employment in Syria, or any new investment in Syria are, however, still prohibited. Section authorizes the operation of an account in a US financial institution for an individual in Syria, other than an individual whose property and interests in property are blocked, provided that the transactions processed through the account are of a personal nature and not for use in supporting or operating a business. Section authorizes nongovernmental organizations (NGOs) to export or reexport services to Syria in support of the following not-for-profit activities: Activities to support humanitarian projects to meet basic human needs in Syria Activities to support democracy building in Syria Activities to support education in Syria Activities to support non-commercial development projects directly benefiting the Syrian people Activities to support the preservation and protection of cultural heritage sites in Syria Note, however, that the exportation or reexportation of services to, charitable donations to or for the benefit of, or any other transactions involving, the GOS (except as necessary for the activities described above) or any other person whose property and interests in property are blocked are not authorized. Section authorizes US depository institutions, US registered brokers or dealers in securities, and US registered money transmitters to process funds transfers for the operating expenses or other official business of third-country diplomatic or consular missions in Syria. Section authorizes payments to Syria of charges for services rendered by the GOS in connection with the overflight of Syria or emergency landing in Syria of aircraft owned or operated by a US person or registered in the United States.

5 Section authorizes all transactions with respect to the receipt and transmission of telecommunications involving Syria. However, the provision, sales, or lease of telecommunications equipment or technology, or the provision, sales, or lease of capacity on telecommunications transmission facilities (such as satellite or terrestrial network connectivity) are not authorized. This section also authorizes all transactions of common carriers incident to the receipt or transmission of mail and packages between the United States and Syria, provided that the importation or exportation of such mail and packages is authorized. Section authorizes certain transactions in connection with patent, trademark, copyright, or other intellectual property protection in the United States or Syria, including exportation of services to Syria, payment for such services, and payment to persons in Syria directly connected to such intellectual property protection. Section authorizes US persons to export, reexport, sell, or supply, directly or indirectly, services to the National Coalition of Syrian Revolutionary and Opposition Forces. Note, however that this section does not authorize any services in support of the exportation or reexportation to Syria of any item that is listed on the United States Munitions List (USML). We will continue to monitor developments relating to US economic sanctions against Syria. If you have questions about these developments, please contact Ed Krauland at , Meredith Rathbone at , Jack Hayes at , or Henry Smith at in our Washington office or Andy Irwin at in our Washington office or in our Century City Office at