Source: http://export.gov/webinars/eg_main_018648.asp
Timestamp: 2014-07-23 03:43:29
Document Index: 549496

Matched Legal Cases: ['art 746', 'art 744', 'art 736', 'art 736', 'art 746', 'art 738']

Export.gov - Embargoes and Other Sanctions Webinar Transcript
Coordinator: Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. After the presentation we will conduct a question and answer session. To ask a question, please press star 1. Today’s conference is being recorded. If you have any objections, you may disconnect at this time.
Now I will turn over the meeting to Miss Linda Abbruzzese. Ma’am, you may begin.
Linda Abbruzzese: Good afternoon for those of you joining on the East Coast and the West Coast. Thank you for joining us for a Webinar on embargos and other sanctions. I am pleased to note that we have more than 161 people registered for this Webinar today.
I am Linda Abbruzzese, International Trade Specialist for the Marketing and Communications Office for the U.S. Commercial Service at the Department of Commerce. This Webinar is being brought to you in cooperation by the U.S. Commercial Service and the Bureau of Industry and Security.
I would like to welcome all participants in the export community, who are joining us from all across the USA to learn about embargos and other sanctions. In a moment, I’ll turn the presentation over to Senior Export Policy Analyst Sheila Quarterman of the Bureau of Industry and Security, and International Trade Specialist Jessica Brinkman, of the Office of Foreign Assets and Controls Division of the Department of the Treasury.
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Now I’d like to introduce live online Senior Export Policy Analyst Sheila Quarterman, with the Bureau of Industry and Securities. Sheila, thanks for joining us.
Sheila Quarterman: Thank you. Hello everyone. It’s my pleasure to talk to you today. And as you’ve been told, I am Sheila Quarterman. That’s pronounced Quarterman like 25 cent man. And I am a Senior Export Policy Analyst in the Bureau of Industry and Securities, Office of Exporter Services Regulatory Policy Division.
My division is the division that is responsible for amending the EAR with the help of all of colleagues, both internally here at BIS and within the interagency community.
I’m pleased to have this opportunity to talk to you today, about another important dimension of export and re-export controls under the Export Administration Regulation -- that is embargos and special controls, other special controls or sanctions.
Now this presentation -- keep in mind is an overview of such control. And you are going to hear about them from two different perspectives. Now after I present my perspective for the Bureau of Industry and Security, and how embargos and sanctions are administered and enforced under the EAR.
You will hear from my colleague - my esteemed colleague Jessica Brinkman from the Department of Treasury’s Office of Foreign Assets Control, as you’ve been told by Linda.
Now let’s begin with the EAR perspective on how embargos and sanctions are enforced and administered. Most things work better when you have a framework. Now very briefly, this is an introduction to some of you and it’s a reminder to the rest of you. And the framework is that if we’re talking about the Export Administration Regulation, we are talking about what? Export and re-export of U.S. dual use items.
Dual use our purposes recall means items strictly commercial in nature, or there might be items that are not only commercial or civil, but they also have military applications. The important distinction is that the military application is not what the item has been exclusively developed or designed to accomplish.
Now an item for purposes of the EAR means a commodity, software or technology. And the controls very importantly under the EAR are intended to serve some major purposes -- to preserve U.S. national security, to counter proliferation of weapons of mass destruction, and promote foreign policy objectives and economic interest of the United States. Our controls are multi-lateral based, and they are unilaterally based.
So using that framework what I’m going to explain to you very briefly but I hope in a very useful and essential manner, is that this framework presents that embargos and other sanctions in the EAR primarily focus on U.S. foreign policy objectives, although they also are meant to counter weapons of mass destruction activity and tariff activity.
Now when a destination or a country is sanctioned or there’s an embargo, and we implement that in the Export Administration Regulation -- the EAR -- that means there is timely restricted conditions on exports and re-exports to those destinations.
License applications then are more scrutinized and reviewed generally on a more restricted policy. And they are virtually either very few are no not any license exceptions that may be used to get those items exported or re-exported under the EAR.
The countries I’m going to talk about, the destinations of main concern for us today are Cuba, Iran and Sudan, Syria, North Korea, Burma, Iraq and Rwanda, and as a special note Libya.
All right. Let’s start -- and here we go. Cuba -- what we tell you here is that Cuba is designated as state supporter of terrorism. And it is comprehensively sanctioned and embargoed. Therefore under the EAR, it is highly restricted. All items subject to the EAR -- export and re-export -- so all items subject to the EAR are restricted.
Now BIS and OFAC, Treasury’s Office of Foreign Asset Control share jurisdiction, which means we at BIS are looking to enforce and administer the embargo for sanction for the dual use item. Treasury focuses on licenses or a license to travel, financial activities and services for U.S. persons. You need to consult OFAC and of course, Jessica will provide very good information for you today about this.
What additional notes I’d like to provide are these -- the primary provision in the EAR for the restrictions or the embargo against Cuba are found in EAR Section 746.2. You will find -- and make a note of this. Part 746 of the EAR is where our embargos and other special controls are housed. Keep that in mind.
The licensing policy for Cuba given the high restriction, all items subject to the EAR require a license. But if you submit a license application, the general policy is one of denial, which means the likelihood of getting that license approved is probably very low.
However, there are a few narrow exceptions where a licensing policy would be one of approval. And they primarily focus on the years of medicine and medical devices, and also some telecommunications items. There are few but very narrow license exceptions for Cuba.
And one extra note -- insider information for you here is that EAR’s 99 items are to be counted as control for purposes of calculating de minimis for export -- I mean re-export to Cuba. When we say de minimis, this is a reminder for some and a refresher for others.
And then there’s the introduction for many of you if you’re not acquainted with this area of the regulation. De minimis means it’s not counted. It is not -- that export if it meets the de minimis conditions -- and you can look at Section 734.4 of the EAR about de minimis. It means that the item would not be subject to the EAR. Okay?
The next destination or country that are subject to embargos or sanctions -- Iran and Sudan. Of course there are comprehensive embargos that pertain to these destinations. Note Iran embargo is pretty much implemented in the EAR. And the primary provisions can be found in Section 746.6.
Sudan on the other hand we have not completely implemented the sanctions there. But there are some restrictions. And we do note that there are sanctions and an embargo that does exist.
We note here on the slide that you’re looking at that both of these destinations are designated as state supporters of terrorism. Treasury -- the Office of Foreign Assets Control has licensing jurisdiction for Iran. OFAC and BIS share jurisdiction for Sudan.
That means that pretty much for Iran, even if you find that we have jurisdiction -- we being personnel at the Bureau of Industry and Security -- and we’re enforcing and administering the EAR as it pertained to Iran, you would still need to go to OFAC. And I mean that’s mandatory.
So even if you have our jurisdiction and you get information, or you’re filing a license application being entertained here, regardless of what happens here you must go through OFAC.
When it comes to the Sudan, there is separate jurisdiction. But you have to go to both agencies. So we share jurisdiction. You know, we don’t overlap and one does not serve the authorization or review for authorization for the others. That’s one big distinction. The others that there are no license exceptions for Iran. There are some. But again relatively narrow for Sudan.
Other information that may be helpful to get the latest regulations or amendments to the EAR that we have had for IRAN, has been the addition of five Iranian entities to the entity list. You’d look at Supplement 4 to Part 744 to get information regarding these entities.
What that means is that a license is required for exports and re-exports of all items. Subject to the EAR to these entities as it relates to Sudan, I’ve told you a license is required for items on the CCL, not items that are EAR ’99. There’s a policy of denial for license applications, for those items that are on the CCL that you might want to export or re-export to Sudan.
I told you about the separate licensing situation, which means if you find that your transaction belongs to us and it relates to Sudan and dual use items, if there is jurisdiction for Sudan for OFAC you will still need to go to OFAC. All right?
The last amendment under the EAR for Sudan had to do with an amendment to license exception TMP. Again, you have my e-mail if there’s more detail people want to know about that. You may contact me or we can discuss that. All right?
The next destination -- Syria. Now Syria is a broadly restricted destination. We could say it’s comprehensive. I don’t think we look at it as being as comprehensive or in the nature of comprehensive as Iran and Sudan and Cuba. However, the way the restrictions or the controls has been established in the regulations, it pretty much is comprehensive.
As we tell you here, Syria is designated as a state supporter of terrorism. And we implemented this through a general order -- General Order Number 2 in Part 736 of the EAR. We published this in May of 2004, based on implementing the Syrian Accountability and Lebanese Sovereignty Restoration Act.
Here is what we have done regarding Syria under the EAR. A license is required for all items subject to the EAR, except food and medicine that is classified as EAR 99, deemed export and deem re-export of EAR 99 technology and source code. Now for Syria you also include EAR 99 items in your calculation for de minimis. That’s an additional note.
In addition, there’s a general policy of denial for all of those items that are subject to the EAR that require a license except for the following, which would be case by case.
The consideration would be because the export or re-export is going to U.S. government function, aircraft safety, medical devices, telecommunications equipment and associated computers, U.N. function. There are few narrow limited license exceptions. Okay. The primary provision for a Syria under the EAR are found as I noted in Part 736 in General Order Number 2. Or you can refer to Section 742.9 of the EAR.
North Korea is part of what we might call limited or special control. Because what we have not done -- and this may be coming to the minds of some of you -- we have not re-implemented a comprehensive embargo against North Korea.
Here is a little history -- and what we let you know is that BIS has a licensing jurisdiction for exports and re-exports or dual use items to North Korea. North Korea is designated as a state supporter of terrorism. From 2000 to January 2007, the policy authorized exports and re-exports of most EAR 99 items to North Korea without a license. Now we have very little trade with North Korea.
But in January 2007, BIS published a rule to implement. And this is the cause for the more restriction export controls on North Korea now. The United Nations implemented -- we implemented United Nations Security Council Resolution 1718. And what that did is that it seemed as though it is an embargo.
But because it is not a U.S. foreign policy embargo, it is a result of the United States participating in the United Nations as a participant. We implemented the United Nations Security Council Resolution 1718.
Now what this rule did -- implemented the luxury goods restriction called for by the resolution. And it presented an illustrative list of luxury items, meaning it’s not the comprehensive list. But it is a broad and a list that gives you a very good idea of what would be considered luxury.
In addition to the item being named, it also should give you an understanding of the character. So we will also provide the humanitarian items for the benefit of the North Korean people will be reviewed, with a presumption of approval.
Now let me explain in a little more detail, to give you a suggested way to view these amendments that occurred in January 2007. First of all, all items subject to the EAR are now restricted if they are exports and re-exports, if you intend to export or re-export to North Korea.
But they are restricted in the following manner or in the following category. One -- items on the CCL still require a license. Now that was the state of things before the January rule. There’s a license -- our license application is reviewed under a general policy of denial. That’s for items on our Commerce Control List.
But here’s a second category. EAR 99 items require a license, but in the following manner. If they are luxury items -- which would be EAR 99 -- there’s a policy of denial for your license application. Remember there’s an illustrative list for those luxury items. And that can be found in Supplement 1 to Part 746.
The second category of EAR 99 -- items for which there is a license now -- humanitarian items not found that are non-food -- I’m sorry -- and non-medical intended for the North Korean people. There’s a policy of approval for that category of EAR 99 items.
Items in support of U.N. efforts still need a license. But there is a policy of approval. And there are agricultural and commodity items, medical devices that are determined not to be luxury items. There is a policy of approval. All other EAR 99 items will be reviewed on a case by case basis. The only things that do not require a license would be food and medicine EAR 99. Okay?
So all items subject to the EAR require a license. A policy of approval is -- I mean a policy of denial if they are on the Commerce Control List, and if they are EAR 99 but they are luxury items.
There’s a policy of approval for humanitarian items, items in support of the United Nations and agricultural commodity items. Everything else will be case by case. And there is not a license requirement for food and medicine EAR 99. I hope that helps you some.
Now we look at what is considered another limited sanction of special control -- Burma. The Bureau of Industry and Security has export and re-export licensing jurisdiction for dual use items to Burma.
We published a rule October 24, 2007. And in that rule we moved Burma from Computer Tier 1 to Computer Tier 3, a more stringent computer tier. We moved Burma from Country Group B into a more restricted country group, D1. That’s your Group D1 is for consideration of license exception, and the control or concern there will be national security. Burma remains in Country Group 3 -- D3.
And the rule in October 2007 imposed a license requirement for export, re-export or transfers of most items subject to the EAR to persons listed or designated, pursuant Executive Orders 13310 and 13448.
Now a lot of this as you know occurred because of the government of Burma, and their repression of the democratic opposition. That is the reason for listing these individuals or these persons as they’re called. Those persons appear on an OFAC list. And Jessica may tell you about that later.
So the regulation and the more restrictive controls for Burma now under the EAR are aimed at designated persons. There’s a general policy of denial, which means anything going to those individuals and you apply for a license for them would be denied, except for agricultural commodities, medicines or medical devices. There are no license exceptions for anything that is dual use that’s under our jurisdiction going to those listed persons.
This last bullet says to you that BIS plans to implement a newly issued Executive Order. It just came out in the last month or so. And that new Executive Order issued by the President expands the basis on which persons can be designated in relation to Burma.
Essentially the expansion allows the Secretary of State in consultation with the Secretary of the Department of Treasury, to list or designate persons who now practically of companies owned or controlled by the government of Burma. We expect to publish this amendment to the EAR, implementing this new Executive Order very soon.
Limited embargo -- these are old and limited embargos. Right now Iraq, which is no longer designated a state supporter of terrorism, essentially has implemented in the EAR a United Nations Security Council resolution, which is an arms embargo against Iraq.
Again, the United States is a member of the United Nations. And we have implemented that U.N. embargo in our regulations. The primary reference there is Section 746.3 in the EAR. And that’s where you will find those provisions. That is pretty much what remains of the embargo or special controls for Iraq right now -- that particular United Nations resolution.
Again, the note here that you have on you slides say there’s a U.N. arms embargo that applies to the export of arms and military items to Iraq, other than to the interim government of the multinational forces. Therefore, there’s more leniency. There’s more that is liberal if it is going to U.S. forces or Allied forces. Additionally, a license is required for the known transfer of any items subject the EAR to a military end use or end user.
Rwanda, another older limited embargo -- it of course in the EAR has been implemented because it is a U.N. embargo. And again, the United States is a participant in the United Nations.
The U.N. arms embargo applies to the sale or supply to Rwanda of arms and related material of all types and regardless of origin. It includes weapons and ammunition, military vehicles and equipment, paramilitary police equipment and spare parts for such items, crime control and detection equipment on the CCL.
So it really is fundamentally an arms embargo initiated by the United Nations, and the United States as a participant has implemented. The primary section for these provisions on Rwanda can be found in Section 746.8 of the EAR.
We include this last slide titled “Example of a Transitional Country,” to give you an idea of what happens when a destination once totally embargoed, comprehensively sanctioned moves into its normal status under the EAR. It’s Libya.
A little history here tells you BIS has licensing jurisdiction for exports and re-exports to Libya. On April 23, 2004, the United Nations -- I mean the United States embargo in Libya was terminated. So at first level we terminated the U.S. embargo against Libya -- comprehensive embargo.
All items subject to the EAR, policy of denial, very few with any length of exception. Then June 30, 2006, the United States rescinded Libya’s designation as a state supporter, sponsor or supporter of terrorism. That’s the next phase. So the embargo was lifted.
But Libya’s status as a state supporter of terrorism remained until of course there was note of progress, with policies and actions in Libya close to or in line with U.S. foreign policy. Then August 31, 2006, a rule came form the Bureau of Industry and Security.
And in that rule we lifted what remained of the embargo status or the sanction status on Libya. In this rule we tell you it removes a licensing requirement for all items controlled for anti-terrorism reasons only to Libya, an updated license requirement and licensing policy for Libya under the EAR.
The point is going from total embargo or comprehensive sanction status means we moved Libya into the country chart in Part 738, so that there are still controls on Libya. But any license application coming in for exports or re-exports of Libya’s dual use items are not viewed with generally a policy of denial. There are more license exceptions. And on that basis Libya has become a more normalized destination for export of dual use items.
Okay. That’s the perspective on embargos and other special controls or sanctions under the EAR. I’d like to hand it over to my colleague Jessica who can give the perspective from OFAC. Thank you very much.
Jessica Brinkman: Thank you, Sheila. My name is Jessica Brinkman. I am a Compliance Analyst with Treasury Department’s Office of Foreign Assets Control. I’m just going to give you a brief overview of who OFAC is, before we go into the specific country programs that OFAC sanctions.
We target foreign governments. A good example of this obviously is Iran, Sudan and Cuba. And that’s what we’ll talk about today among some other countries. We also sanction individuals and entities and certain practices. I won’t get into those today.
But it’s important to remember that within the scope of the OFAC sanctions, it is not only just the -- we don’t only just sanction countries. We sanction individuals as well. There are front companies. There are charitable organizations that are front companies for Al Qaeda for example.
And there are specific practices. So just keep that in mind when you’re developing a more comprehensive compliance program, that in addition to the countries that are sanctioned to remember that there are individuals, entities and certain practices.
OFAC sanctions programs are listed on this slide here. It’s really important to note that -- or to note that just because a country is on a sanctioned list, doesn’t mean that you cannot export to it. There are some countries that are comprehensively sanctioned -- Cuba, Iran and Sudan.
But just because for example you see Belarus on this list or the Balkans, it doesn’t mean that you are unable to export to these countries. It just means that there limited sanctions programs involved. It’s just important to remember that you can export to them. You just need to be operating within the scope of OFAC sanctions.
Another thing I wanted to note was that Sheila just mentioned all of BIS’ export regulations. I’m speaking only for Treasury. You’ll notice that there are some countries that you don’t see on our list that Sheila may have mentioned. Rwanda would be one of them.
Rwanda is not a sanctioned country by the United States government. There are certain types of products and there are individuals that you can’t export to. But you’ll notice that there is sometimes an overlap and there isn’t. I’m going to hopefully make clear to you when you need to refer to OFAC and when you need to talk to BIS, and when you need to be talking to the both of us.
Another thing that I want to note is that there are differences, between BIS’ export controls and Treasury Department’s country sanctions program. The Treasury Department sanctions countries, individuals and certain practices, whereas BIS regulations tend to focus more specifically -- this is generally speaking -- but more specifically on goods and services.
Just because you do not need an export license from BIS, doesn’t mean that you’re all of a sudden exempted from licensing requirements by Treasury. So if you have an EAR 99 product and you’re trying to ship to Iran, just because your product is EAR 99 or there’s no license required, doesn’t mean that you do not have to have a license from the Treasury Department for example.
Treasury Department regulations are all listed in 31 CFR, which is the Code of Federal Regulations. You can find that online. And then each of the individual country programs are listed in detail in 31 CFR. Also you’ll find on our Web site each of these countries listed here has a backup brochure, giving you more generalized information on these sanctions programs for each country.
OFAC has three different types generally speaking of sanctions programs. There are comprehensive sanctions. There are regime-based sanctions. And there are list-based sanctions. Comprehensive sanctions means that you cannot export, re-export, trans-ship or facilitate any type of export transaction with a comprehensively sanctioned country.
Regime-based programs are targeting specific governments and not the entire country as a whole. So for example you’ll see Côte d’Ivoire is on our list. Côte d’Ivoire is not a comprehensively sanctioned country. But we are sanctioning the regime or the government of that country.
List-based programs are what’s -- so it’s basically the SDN list, especially designated nationals list. There are certain individuals in some of these regions or countries. The Balkans is a very good example of a list based program in which there are specific individuals that are on the sanctions program list. But the country itself is again not sanctioned.
Now just to recap the comprehensively sanctioned programs -- you need to be speaking with either OFAC or BIS or the both of us together. As Sheila mentioned, Sudan there’s some overlap between Sudan for example and OFAC -- Office of Foreign Assets Control.
You need to be speaking with BIS for comprehensive sanctions against Cuba. And you need to be speaking with OFAC with regard to exports to Iran. We’ll get into each of these countries individually in a couple of slides here.
Again like I mentioned, the comprehensive sanctions program is for Cuba, Iran and Sudan. You cannot export direct or indirect, import direct or indirect, or trade brokering facilitation or financing. Facilitation is a key word with OFAC, so if we have any export trading companies out there, that is considered a facilitation if you are trying to organize an export to Iran for example.
So a facilitation involvement is still a violation of U.S. sanctions. And it’s penalized as any other export or import violation would be. Any attempt to evade or avoid the sanctions programs will also be penalized by OFAC. And it applies to most all goods technology and services. So you cannot export anything without a license to Iran.
The only types of items that are considered licensable to Iran are agricultural and medical equipment and pharmaceuticals. And even thought we will consider those license applications, it doesn’t necessarily mean that OFAC will grant a license for an exportation of that product. So you cannot be exporting products to Iran without the license from OFAC. It is a direct violation of a comprehensive sanctions program.
The regime-based programs -- oh I’m going to go back one more slide. The sanctions against Sudan -- I wanted to make a note that there are some exemptions in the southern part of Sudan, Darfur specifically. You’ll notice that the comprehensive sanctions are really a tool for U.S. foreign policy. So we’re targeting the entire country in order to meet U.S. foreign policy goals.
In the case of Sudan, we are targeting the government of the North, which the government in Khartoum. There are certain marginalized areas around Darfur including Darfur and certain refugee camps that those sanctions -- the comprehensive sanctions have been lifted.
Those areas are listed on OFAC’s Web site. So if you are interested or you had humanitarian goods that might be going to that area of Sudan, there is some room for exceptions in specific regions.
Our regime-based programs are, as I mentioned earlier, they are targeting specific regimes of countries where the regimes are said to be undermining democratic processes, or supporting state supporters of terrorism. A good example of that would be in Zimbabwe.
Persons undermining democratic processes there -- for example, Robert Mugabe. Those properties need to be blocked. Or if any type of transaction for it to occur with the folks that are on this list, it is a direct violation of OFAC sanctions.
Just to be clear that the list that I’m referring to is called the SDN List -- the Specially Designated Nationals list. It is on OFAC’s Web site and is up to date. We update it sporadically. It could be two or three in a day or maybe nothing for a week. But if you register online, you can get notifications of updates to the OFAC list.
So for individuals that are targeted for the regime-based sanctions in again the Balkans, those folks will be on the list. You’ll see for example dead Milosevic and all of the members of his former government are still on the OFAC list. The Balkans used to be more comprehensively sanctioned. They are no longer. However, those individuals are still equally sanctioned.
Iraq as Sheila mentioned, BIS has licensing authority for exports to Iraq. It is no longer considered a state supporter of terrorism. OFAC used to have comprehensive sanctions against Iraq which were listed several years ago. So if you’re exporting to Iraq, then you clearly need to be speaking with the Bureau of Industry and Security.
But OFAC does not have comprehensive against Iraq. We do still have folks of Saddam Hussein’s former regime on our list. So you need to be checking against the specially designated nationals to ensure that again, you are not exporting to the folks on the SDN list.
And Iraq is still on our list not because the con -- excuse me -- the country itself is sanctioned. It’s because that assets that we have previously blocked under the comprehensive program remain blocked. We just are simply allowing all new transactions to occur.
Belarus is another regime-based program. We actually have designated a fair number of some of the largest companies in Belarus that have huge number of subsidiaries all throughout Europe and Eastern Europe especially.
So you really want to be careful if you’re exporting to Belarus to make sure that the country -- excuse me -- the company that you’re exporting is not affiliated with any of the companies that are listed on the specially designated nationals list.
This is a pretty far-reaching designation for some of these companies that we designated. So I just like to highlight Belarus a little bit more to make sure that people are checking that they are not owned or affiliated with -- their clients are not owned or affiliated with any of the companies on the specially designated nationals list.
Liberia it’s the same story. It’s they’re undermining democratic processes. So Charles Taylor and his supporters are on the specially designated nationals list. And just on a side note, you cannot import Liberian origin timber.
Hopefully by now the message that I’m getting across to you is that with the majority of the sanctions programs, the countries that you see listed in one of the earlier slides, the main thing you want to remember to always do is to check the specially designated nationals list.
All of the regime-based country sanctions and the list-based country sanctions, the people and the entities and the companies are all on this list. So that’s your best way of being compliant with OFAC sanctions, and of course remembering that Iran, Cuba and Sudan are comprehensively sanctioned.
North Korea -- we do not have export sanctions against North Korea. You cannot import anything from North Korea without authorization from OFAC. But we do not have any export provisions for North Korea.
Burma is a limited program as well. However, it is slightly more comprehensive than the other countries that have been listed so far -- well with the exception of Cuba, Iran and Sudan. Burma has more stringent sanctions against it.
I would advise that if you are exporting to Burma or you have an inquiry from Burma, you contact OFAC. The reason is because there’s a lot of banks on the SDN list for OFAC. And you can probably find yourself in the unfortunate situation where if you are exporting, or you’re trying to send payment or receive payment for an import, your funds might end up passing through a blocked bank for Burma.
And therefore the funds will be blocked, even though that was -- it could have been an oversight on your behalf or lack of knowledge about the blocked banks. Those funds will remain blocked. And they will not be returned unless you submit an application to OFAC for release of those funds.
I’ll note that if the funds were properly blocked even if it was done in error or the bank was used in error, they will remain blocked until the entire sanctions program has been lifted. I’ve actually seen for some smaller exporters this can be pretty crippling, when you are expecting payment and it’s been remitted through a Burmese blocked bank.
And that money will sit in an account to which you have no access until the sanctions program has been lifted. This is important to note for all violations where the funds are blocked. You will not -- the bank will put that money in an interest bearing account in your name to which you have no access. And the only way they will release those funds is with permission from OFAC.
And that comes in the form of a license. So even though I’m highlighting Burma as an example, if your funds are properly blocked by a bank or a financial institution, then they will -- you will not have access to those funds period.
Côte d’Ivoire is another limited program. We have blocked property of individuals inciting violence, and again undermining democratic processes. Syria -- our sanctions are not as stringent as BIS’ export controls are on Syria.
But that doesn’t mean that -- it means that you still need to have a license from the Bureau of Industry and Security, if they would even consider licensing it for you. But that OFAC does not have comprehensively sanctioned country program against Syria.
Any transactions related to terrorism are obviously going to be stopped and blocked, and as are any types of assets of entities that are supporting terrorism and pursuing weapons of mass destruction, or again undermining international stabilization. And in this case we have specific highlight on reconstruction efforts in Iraq.
But again to be clear that just because OFAC does not have a comprehensive sanctions program against Syria, you absolutely need to speak with the Bureau of Industry and Security when you are exporting something to Syria. I believe Sheila said that they have a policy of denial, that there are certain items that they may or may not license. But basically you cannot export to Syria.
Okay. So that sums up the country regulations for OFAC. I’d like to just reiterate that in addition to their compre -- the country sanctions programs that I’ve review, that there are sanctions against individuals and entities and certain types of trading practices.
So this is one portion of OFAC sanctions. And hopefully I’ve given you some of the tools to avoid getting your funds blocked, or to get caught in a sanctions violation where you may be penalized by OFAC or your goods might be seized.
So I will turn it back over to Linda Abbruzzese to field questions.
Linda Abbruzzese: Thank you, Jessica, and thank you, Sheila, for a great presentation. Now we’ll go to the sampling of more than 19 questions. I’d also like to just remind you that for those of you whose questions we don’t get to during this presentation, that if you do take a moment to write down the contact information on your screen. That way you will be able to get in touch with each of the speakers at a later time.
Okay. I’ll go over to the first question. And this question is for Sheila. She would like to know -- this question is for Sheila. This person would like to know does BIS distinguish between the northern and southern regions of Sudan?
Sheila Quarterman: Well I think you heard -- this is Sheila. And I think that you heard just a talk about the northern versus the southern portions of Sudan. And right now remember I mentioned that we have not fully implemented the comprehensive sanctions.
I can say -- it is probably fair to say and prudent that if you submit something, a license application for an export or a re-export to a certain portion of Sudan such as the northern portion, it probably is going to get more scrutiny. And that probably will not be as liberal a licensing review as it would otherwise. So that is a fair and honest answer about that.
Linda Abbruzzese: Okay. Great. Let me go to the second question. This question here is from (Cheryl Glazer). She says that their products are shipping to Russia for incorporation onto the Russian aircraft that will ultimately be leased to Iran.
And our Russian customers provided certification that the aircraft contains less than 5% U.S. content. Can we ship to Russia assuming de minimis for BIS Iranian Exception 560.205 and 560.420? And I’m going to put this on speakerphone so Jessica has a chance to answer if she can.
Jessica Brinkman: De minimis for BIS? Let me just review the question in front of me here.
Linda Abbruzzese: I’ll repeat the question because it’s kind of long. And I’ll repeat it. It’s from (Cheryl Glazer). She wants to know if our products are shipping to Russia for incorporation onto Russian aircraft that will ultimately be leased to Iran, and our Russian customer provided certification that the aircraft contains less than 5% U.S. content, can we ship to Russia assuming de minimis for BIS and Iranian Exception 560.250 and 560.420?
Jessica Brinkman: Okay. So there is a de minimis content in here. And OFAC de minimis is 10%. It’s less than 10%. However, you need to make sure that the exportation is not going to an SDN. And it depends upon how the product is incorporated.
I would say that in this particular case, I would actually call OFAC and give us the very specific details, so we can discuss whether or not it’s something that we might actually have to license. There’s a lot more details to this question that I would need to know -- who’s going to, payment methods -- things like that.
So this is one that (Cheryl), I have your name. We can follow up on. And if you need to speak with me specifically, I can give you more details. But just as a, you know, de minimis regulation for OFAC is less than 10%.
Linda Abbruzzese: Sheila, do you have anything to add for that?
Sheila Quarterman: Well as I noted anything -- even we have jurisdiction. Fundamentally we would refer you to OFAC. And you would have to speak of OFAC’s -- you would have to consult with OFAC anyway. Our de minimis is the same is 10% of the load for, you know, embargos destination.
But our just jurisdiction again, licensing jurisdiction is pretty much limited. But there would be de minimis. But again, I’d have to defer to OFAC for their consideration based on the additional fact that Jessica said. In these cases, you want to have a fuller picture of the transaction. And so it would be unfair to give a sort of an exact answer when you’re not really sure what factors have to be considered.
Jessica Brinkman: And these are the types that we -- OFAC has to analyze specifically just to give you an idea as whether or not we would have to license the item, or that you -- whether or not you’d be able to ship it.
Linda Abbruzzese: Okay. Great. Just as a reminder we are getting a lot of questions about PowerPoint presentation slides, a copy of this Webinar. We will have PowerPoint presentation slides from this presentation uploaded as well as a transcript, and the archived Webinar of this Webinar tape on our Web site.
And that Web site is www.export.gov under the title “View Webinars.” So a transcript, PowerPoint presentation slides and this Webinar will all be archived and uploaded on www.export.gov under the title “View Webinars.”
I’ll go to the next question. It’s from (Douglas Turnbull). He would like to know, “Can a U.S. company procure and ship goods from a foreign company and ship them directly to an embargoed country?”
Jessica Brinkman: No. This is Jessica with OFAC. You cannot -- even though you’re purchasing the goods -- let’s say the goods would originate in Germany. And I think this is the picture that you’re painting. The goods originated in Germany. And even though they never for example touched U.S. soil, if you are a U.S. company you cannot ship that product to an embargoed country. So the answer is absolutely not.
Linda Abbruzzese: Okay. Thank you, Jessica. Another question here is from (Jose Abrandez). “Would a product like neo-natal screening fall under medical allowances to Iran?”
Jessica Brinkman: That’s a medical device. Again, this is an OFAC issue. That’s a medical device. It would be something that would be under consideration. You would have to submit a license to OFAC, again giving us the details of the transaction, who you’re shipping to, the payment mechanisms involved, the banks involved, and the details on the product.
We’d probably ask you to give us your ECCN number, or we would ask you give us your HS number just as a description of the good. But just because it’s medical device or equipment doesn’t mean that it’s automatically going to be approved. It just means that it’s something that OFAC will review.
Linda Abbruzzese: Okay. Thank you, Jessica. (Christine Nee) has several questions. I’ll start with a first question from her. “Why are there two separate programs versus and a centralized standard system?”
Jessica Brinkman: I’ll start and then Sheila can chime in. There’s two programs. They’re not different programs. You need to understand the basic nature of export controls and sanctions are different. Sanctions are a U.S. foreign policy tool. We are targeting governments, persons and types of practices. Diamond trading practices is one of them.
So we are really specifically focused on a country. Cuba is a great example of it. We have comprehensively sanctioned the government of Fidel Castro because of the U.S. foreign policy goal. So even if you have a product that is say pencils, you cannot export those to Cuba.
My example was that that’s a type of product that’s not controlled for example. But the goals of the programs are different. And Sheila can speak to the export controls. But for sanctions they’re very much U.S. foreign policy tools.
So while it might seem confusing and think -- you might think that they should be centralized or streamlined, the basic function or the reason for the controls are very different for commerce and for Treasury. I don’t know if Sheila, if you have anything to add to that.
Sheila Quarterman: I think that answers the question real well, Jessica. I might add that as I began my presentation, I wanted to give you a framework. And remember when you’re looking at various agencies throughout the U.S. government, many of them have international trade jurisdiction or export control or re-export control jurisdiction. BIS is one of them.
Our focus as I mentioned is on dual use items, items that have strictly commercial application, or they may have civil as well as some military application. Given the various functions on either items or countries or regimes, the way we control for export and re-export reasons -- be it foreign policy, national security -- it is the manner in which we control that determines who’s jurisdiction your transaction may be under.
And there are laws that basically are passed that also help us determine who has jurisdiction. I’m going to direct you -- and maybe others can be helped by this. If you go to Section 734.3 of the EAR, and it talks about items subject to the EAR. And one thing we mentioned in one of the sub-paragraphs is that you’re subject to us for various reasons.
But one reason you would not be subject to our regulations, is because your transaction is under the exclusive jurisdiction of another agency. Many times it’s complicated. And as Jessica mentioned, if foreign policy reasons are the reasons for some of these sanctions are primarily the reason for these sanctions and these embargos.
That means there’s a lot of overlap. And I think that’s unfortunate in terms of how difficult it might make for our constituents. But in pursuit of I guess higher goals of pursuing the foreign policy, that’s just the way it turns out. So you will need to probably become a little more abreast of which agencies have export controls or international trade jurisdiction. And that may help you out a little because you can sort out who’s covering what. So I hope that helped.
Jessica Brinkman: One more thing to add is that you have to remember that for sanctioned countries -- embargoed countries, the embargos are done by the U.S. Treasury Department. So when you hear sanctions and embargos, remember that that is -- those are U.S. Treasury Department Office of Foreign Asset Controls countries.
Sheila Quarterman: Right. And therefore we supplement, right? The prime case is Burma. And what we did in the last rule that was issued in 2007 is basically say, “Okay. OFAC has the lead on this. But we are making sure that we don’t let anything slip through this crack through our jurisdiction over dual use items.
Linda Abbruzzese: Great. Thank you, Sheila, and thank you, Jessica. This question is specifically for Jessica. It’s from (Sandra Seatman). “Under OFAC’s comprehensive sanction, can you give some examples of facilitation?”
Jessica Brinkman: Yes. And one more thing I want to clarify from this question is when you said under OFAC’s comprehensive sanction -- facilitation, even if it’s not to a comprehensively sanctioned country -- and again, those countries are Sudan, Cuba and Iran.
Facilitation could also be to an SDN, to a specially designated national. So for example we have Belarus on there. If you are doing business with one of the SDNs in Belarus and you are facilitating that trade, that’s also a violation. So facilitation is for more than just the comprehensively sanctioned countries.
An example of that would be -- I mentioned I think export trading companies or export management companies. Or perhaps to someone who was a distributor, or if somebody somehow was involved in directing or creating an open export opportunity, and had some type of monetary benefit or some type of financial benefit from that type of transaction.
Really any involvement with an SDN or with a sanctioned country -- a comprehensive sanctioned country is going to be considered facilitation. We have people who are members of -- work for different -- excuse me -- work in different countries under, you know, foreign organized companies.
And they sit on a board for example. And that foreign company can easily - can legally export to a sanctioned country because they’re not under U.S. law. But that U.S. person involved in that company has to remove themselves from that transaction, and cannot benefit financially from it. So that would be another example of facilitation.
Linda Abbruzzese: Thank you, Jessica. Another question here from (Norma Raines) -- the question is, “For Iran, does BIS still license EAR-99 exports by foreign persons?”
Sheila Quarterman: Well right now we do have jurisdiction. And I guess from the slide if you backed up to that slide -- I forget which one it is for the BIS presentation. We note that BIS alone has jurisdiction for licensing deemed export. But we also have jurisdiction for re-export of EAR 99 items to non-U.S. persons. But we don’t require a license for that. So I hope that answers your question.
That really is a realm in that which we might have some authority to license. But remember regardless of what we have legitimate authority to do, we are sort of -- what is on top of us right now is OFAC’s jurisdiction. So regardless of what we might license doesn’t matter what it is. If it’s Iran, you have to go to OFAC.
So I think if you understood that to tweak your example, it is re-exports of EAR 99 items to non-U.S. person. But we don’t require a license for that right now. And even if we did, whatever jurisdiction you would still need to talk to OFAC.
Linda Abbruzzese: Okay. Great. Thank you, Sheila. We have time for about two more questions. I’m going to give another question here from (Kristin Smith). “Could you please give guidance with what would be considered facilitation with respect to Burma?” I think this is for Jessica. “For example, could a foreign subsidiary of a U.S. company give advice on exporting to Burma?”
Jessica Brinkman: I think you have two issues here. One thing that I didn’t go into just in the interest of time was there are two different programs. There’s the International Emergency Economic Powers Act -- two pieces of legislation. I’m sorry. The International Emergency Economic Powers Act is what we call IEEPA, or the Trading with the Enemy Act, which is what we refer to as TWEA.
The Trading with the Enemy Act includes foreign organized subsidiaries. The only two company -- excuse me -- countries on this list that are under the TWEA -- the Trading with the Enemy Act -- are Cuba and North Korea. So for the case of Cuba and North Korea, foreign organized subsidiaries are included.
For all of the other countries that are on the list I had in my presentation, they’re under the International Emergency Economic Powers Act. They are not -- foreign organized subsidiaries are not subject to U.S. sanctions, so foreign organized subs. So facilitation with respect to Burma -- Burma is not a Trading with the Enemy Act company. So in this case that would not be a violation. It would be if it were Cuba or North Korea.
Linda Abbruzzese: Great. Thank you, Jessica. And we have time then for our last question. This is from (Dennis Farrell). I believe this is also directed to Jessica. He says his company manufactures integrated circuits and related electronics equipment.
And he believes that at least one of the Chinese end users is embedding their ICs into electric meters in manufacture. He says his ICs are much less than 10% of the value of the electric meters. And he believes their Chinese customer is targeting the Middle East as a prime market for selling their meters, particularly Iran.
Since his ICs may end up in Iran as part of electric meters, who does he need to consult if anyone about the need for a re-export license for shipments to Iran? Is the de minimis rule applicable? Or do we have to go to OFAC for a license?
Jessica Brinkman: Again, this question I really would need more specifics to give you a better answer. But just really generally speaking, OFAC -- especially a re-export you’re talking about. A Chinese is incorporating your good and re-exporting it to a sanctioned country -- an embargoed country.
OFAC de minimis regulation is less than 10%. I heard Sheila mentioning BIS’s de minimis content as 10% or less. So just understand that distinction first off. I wanted to throw that out there. So our de minimis regulation is less than 10%.
But to give you a very specific answer, I just suggest that you call OFAC’s hotline and give us the details, because I just don’t know enough here. But generally speaking, it’s less than 10% for de minimis for a re-export.
Linda Abbruzzese: Okay. Well thank you, Jessica, and thank you also, Sheila, and everyone. I’m afraid that’s all the time we have. Remember for those of you whose questions we didn’t answer, please note the contact information on your screen of each of the speakers.
Both of them have information and will be able to answer your specific questions after this Webinar. Also please do check out the Web site at www.bis.doc.gov, and www.export.gov for more information on this topic and other Webinar events.
Now thank you for everybody for joining us. And please check your e-mail boxes for more information on upcoming Webinars. Thank you.