What’s Up With Iraq? The New US Trade Controls
May 2003
Do your sales reps keep bugging you with Iraq opportunities? Are you confused by the multiple Iraq Federal Register Notices in May talking about this General License or that? Well, so are many, including those answering the Q&A phone bank at the Office of Foreign Assets Control (OFAC). Here’s the current deal on Iraq: the embargo has been lifted. Items classified as EAR99, as well as those classified in most AT controlled Export Control Classification Numbers (ECCNs) no longer require export or reexport licenses to Iraq.
How did this happen? When the Iraq war began to wind down, the administration began feverishly trying to undo the embargo. But years of layered laws and rules are difficult to unravel, and so the process is occurring in steps. The UN also had to lift their sanctions. For the past few months, OFAC and the Bureau of Industry and Security (BIS) have attempted to untangle the mess through a series of website announcements and regulations changes. The most important step thus far was the General License issued by OFAC on May 23 that effectively lifted the embargo.
The General License in 31 CFR 575.533 now authorizes most Iraq transactions previously prohibited elsewhere in the rules, with only a few restrictions. It basically states that if the Export Administration Regulations (EAR) authorize the export or reexport, the FAC rules authorize the export or reexport, and all financial and other transactions incident to that export or reexport. The EAR Part 746.3 in turn outlines what is, and what is not, controlled to Iraq under the EAR.
746.3 states that EAR99 and items controlled for AT reasons only, like aerospace parts in 9A991, telecommunications equipment in 5A991 or 5A992, or computers in 4A994, do not require export licenses to Iraq. All these items can now be exported or reexported to Iraq without a license under NLR. A few AT controlled items still require a license. These include those listed in ECCNs: 1C980, 1C981, 1C982, 1C983, 5A980, 0A980, 0A982, 0A983, 0A985, and 0E982. Proliferation and other EAR catch-all controls will still apply.
Under the current state of the regulations, if the EAR requires a license, the OFAC General License authorization does not apply. So if you wanted to export an inertial navigation unit under ECCN: 7A003 the EAR would tell you needed an export license and you would go to OFAC to get it. Currently, the licensing policy is favorable, so you may actually get one in a year or less.
Note that the FAC rules retain some residual controls. Transactions with those on the Department of Defense deck of cards watch lists are prohibited. So add those to you prohibited parties database. Trade in cultural antiquities is also prohibited.
Finally, assets frozen during the time of the embargo remain frozen.
We expect additional regulations to be forthcoming which will officially transfer nearly all jurisdiction over new transactions with Iraq transactions to the Export Administration Regulations. BIS officials indicate that the Iraq regulatory landscape will eventually be similar to other countries in the region, like the United Arab Emirates or Saudi Arabia.
