Iraq

OFAC has posted guidance and legal sources pertaining to Iraq Sanctions on their website. These sanctions apply to all US persons, companies, non- profit groups, and government agencies, simply put EVERYONE.

The site offers guidance by offering copies of applications for the Release of Blocked Funds and general licenses. Several Adobe PDF documents can be found under “Interpretive Guidance” which offers a little more insight for the savvy.

On December 19, 2007, the Department of State issued an amendment to the International Traffic in Arms Regulations concerning exports and sales which were prohibited by United Nations Security Council embargoes. The amended list will add countries subject to such embargos. The current list includes: Cote d’Ivoire, Democratic Republic of Congo, Iraq, Iran, Lebanon, Liberia, North Korea, Rwanda, Sierra Leone, Somalia, and Sudan.

More information:

Federal Register 72FR71575.pdf (PDF)

November 14, 2007 the United States Attorney for the Southern District of New York and the Securities and Exchange Commission announced that an agreement had been reached with the Chevron Corporation involving the company’s alleged misconduct involving the United Nations Oil-for-food Program.The SEC claims that Chevron failed to maintain adequate internal controls when it relied on its trader’s representations and certifications from the third parties. The company also violated the Foreign Corrupt Practices Act when it incorrectly recorded the surcharge payments to Iraq as premiums. These charges arose from allegations that Chevron purchased oil from third parties who paid secret, illegal surcharges to the former government of Iraq. Now whether or not the Chevron Corporation was aware of these undisclosed payments to Iraq is unknown.

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At the December 5, 2006 meeting of the Regulations and Procedures Technical Advisory Committee, the following enforcement issues were discussed:

1. The increase in boycott requests from Iraq and Libya. Since power has transferred from the Coalition Provisional Authority to the new Iraqi government, boycott requests there have increased significantly since falling in 2004. Closing the Libyan boycott compliance office has resulted in increased requests from Libya as well. The biggest of the boycotting countries is U.A.E.
2. The Office of Export Enforcement reported that one of their highest priorities is the renewal of the Export Administration Act (EAA). Proposed changes for the act upon renewal include penalties increased from $11,000 to $50,000 as well as imposing criminal penalties for violations. They will continue to encourage Voluntary Self-disclosures (VSDs) with the policy that penalties will be reduced by 50% with the option to consider other factors which could reduce penalties even further. From 2004-2006 only 5% of VSDs resulted in any penalty at all. Half of the other 95% resulted in the conclusion that no violation had occurred.

DDTC has new guidance on its web site for license applications for Operating Enduring Freedom (Afghanistan) and Operating Enduring Freedom (Iraq). Generally speaking, an important point is that State tells applicants to use D-Trade if they want to get their applications approved relatively quickly. When you submit your application via D-Trade and EllieNet, the Transaction ID should begin with the letters “OIF” or “OEF” (OIF — Operation Iraqi Freedom — for Iraq, OEF — Operation Enduring Freedom — for Afghanistan). The new document includes a good deal of additional details that you should read and heed if you want to apply for a license for OIF or OEF.
www.pmddtc.state.gov/licenses.htm

In the November 21 Federal Register the State Department revised the ITAR to drop its policy of denying all applications destined for UNITA, the terrorist/freedom fighter organization in Angola.  At the same time the State Department revised the ITAR to reflect its new policy for approving applications for items Iraq if the items are “nonlethal military equipment or lethal military equipment for use in support of a reconstituted (or interim) Iraqi military or police force required by the Coalition Provisional Authority.”

Here is a rundown of changes to US Government trade control policy for certain countries:

India and Pakistan ITAR Licensing Policy

In a Federal Register Notice dated June 20, DDTC declared that defense export licenses to India and Pakistan would now be reviewed on a case-by-case basis. According to information posted on the www.pmddtc.state.gov website, the previous licensing policy had been one of denial.

Rwanda Licensing Policy Changes

Both DDTC and EAR changed their regulations to loosen restrictions surrounding the lifting of the UN Arms Embargo on Rwanda. The ITAR changes essentially enunciate a new case-by-case license policy for the Government of Rwanda only. For all non-Government exports, all other 126.1 ITAR proscribed country restrictions remain, including a policy of denial for licenses. Likewise, exemptions may not be used for non-Government end users.

Burma

On July 29, 2003, President Bush issued an Executive Order that place further trade restrictions on Burma (a.k.a. Myanmar). Previous to this order, the Foreign Assets Control regulations restricted investment by US firms in Burma. The Executive Order expands Burma trade restrictions. First the order freezes all assets of the Government of Burma that enter the US or are in the possession of US Persons (which includes US branch offices overseas). Second, all imports from Burma into the United States (but not exports or reexports to Burma) are prohibited effective August 28, 2003. The order also prohibits the export or import of financial services. The order contains restrictions of any facilitation of any activity by a third person that a US person could not engage in.

So you may continue to export commercial products to Burma, but dealing with the Government and Government entities will be tricky as Government assets are frozen and related financial services, such as confirming or negotiating a Letter of Credit, are restricted. No barter deals: imports into the US from Burma will soon be prohibited. Burma continues to remain an ITAR proscribed country, so defense article exports are prohibited.

Iraq

On June 27, OFAC formally amended its regulations on Iraq that now basically allow most EAR99 and “xx991″ export and reexports to Iraq under a General License. We described these changes last month, and this regulation adds nothing new.

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.

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The geopolitical events of the past few months have spurred speculation on country export control policy in the Middle East, particularly as related to Iraq and Syria.

At this time, there are feverish reviews underway at the Office of Foreign Assets Controls (OFAC) regarding Iraq sanctions and even new potential Syria sanctions.

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The media has widely reported the debates in the US Congress and among Bush Administration officials regarding lifting US sanctions on Cuba. All of the talk likely will not lead to any tangible changes for any company other than those in agriculture and medical supplies. President Bush has stated his strong support for the status quo in the US embargo on Cuba. President Bush has not stated how his support for the embargo is important to his brother’s political future in Florida, where support for ending the embargo is political suicide.

On the Iraq front, the United Nations Security Council revamped its sanctions against Iraq under the “Oil-for-Food” program (or programme, if you prefer). The new sanctions are intended to allow commerical products without military implication to flow into Iraq while retaining strict controls on any product with military applications. The United Nations has published a “Goods Review List” that identifies items that will not be allowed into Iraq. To see the latest version of the Goods Review List go to www.un.org/depts/oip. If you want to print a hard copy, first make sure there are at least 300 sheets of paper in your printer.

It appears that actual implementation of the new program will not happen until July (2002) at the earliest.

While the United States Government has been slow to advise its exporters and foreign reexporters regarding the new UN sanctions, other governments, most notably the UK Department of Trade and Industry have attempted to give their exporters some guidance—See www.dti.gov.uk/export.control.

The bottom line: If your export or reexport transaction requires a US license of any sort, don’t expect to see big changes in US license approval policy.