Alerts

U.S. issues general license authorizing trade and financial dealings with Sudan

Alerts / January 20, 2017

On Jan. 13, 2017, President Barack Obama signed Executive Order 13761 (the Executive Order) authorizing the lifting of portions of the United States’ trade and financial sanctions on Sudan. The action is the result of engagement between the U.S. and Sudanese Governments and progress made by the Government of Sudan in reducing its offensive military activity. In return for the easing of U.S. sanctions, Sudan has pledged to improve humanitarian access in Sudan, cooperate with the U.S. in counterterrorism efforts and maintain a cessation of hostilities in conflict areas.

In conjunction with the Executive Order, the Office of Foreign Assets Control (OFAC) announced an amendment to the Sudanese Sanctions Regulations (SSR), which will immediately authorize all transactions with Sudan prohibited by the SSR and Executive Orders Nos. 13067 and 13412. Effective Jan. 17, 2017, U.S. persons may generally transact with individuals and entities in Sudan, and the property of the Government of Sudan is unblocked, to the extent it is subject to U.S. jurisdiction.

Authorizations under the general license

The amendment implements a general license, which authorizes U.S. persons to participate in transactions involving persons in Sudan, to engage in imports from and exports to Sudan that were previously prohibited, and to engage in transactions involving property in which the Government of Sudan has an interest. As a result of the general license, all property and property interests blocked pursuant to the SSR are unblocked. While persons and entities designated pursuant to the SSR are no longer blocked, persons and entities designated under other related programs, including the Darfur Sanctions Regulations, remain blocked. Additionally, transactions by U.S. persons related to the petroleum or petrochemical industries in Sudan, including oil and gas pipelines and oil field services, that were previously prohibited by the SSR are authorized. Finally, U.S. persons are no longer prohibited from facilitating transactions between Sudan and third countries, to the extent they were so prohibited by the SSR. All U.S. persons must maintain records of authorized transactions carried out pursuant to the general license for at least five years, and OFAC may obtain those records, at any time, to monitor such activities.

Notwithstanding the general license, the Trade Sanctions Reform and Export Enhancement Act of 2000 continues to require that the export of agricultural commodities, medicine and medical devices to Sudan must be made pursuant to one-year licenses. The general license also does not affect past, present or future enforcement actions or investigations with respect to any violations of the SSR that occurred prior to Jan. 17, 2017.

Remaining Commerce Department restrictions on exports to Sudan

While trade between the U.S. and Sudan that was previously prohibited by the SSR will be authorized by OFAC’s general license, the Bureau of Industry and Security (BIS) regulates the (re)export of many U.S. items to Sudan for national security and foreign policy reasons. Those export licensing restrictions will remain. In addition, all items listed on the Commerce Control List (CCL) for anti-terrorism reasons will continue to require a license from BIS for (re)export to Sudan. Exports to Sudan of EAR99 items will not require licenses, unless going for restricted end uses or to restricted end users.

BIS previously maintained a policy of denial toward license applications for (re)export to Sudan of many items listed on the CCL for anti-terrorism reasons. For all other items for nonmilitary end users or for non-military end uses, it reviewed applications on a case-by-case basis.

Effective Jan. 17, 2017, however, BIS will review two categories of license applications for (re)exports to Sudan under a general policy of approval, rather than a general policy of denial. First, applications for licenses to (re)export to Sudan certain items that are intended to ensure the safety of civil aviation or the safe operation of fixed-wing, commercial passenger aircraft will be reviewed under a policy of approval. Second, applications for licenses to (re)export to Sudan certain items to inspect, design, construct, operate, improve, maintain, repair, overhaul or refurbish railroads in Sudan will be reviewed under a policy of approval. Both policies of approval apply only to (re)exports for civil end uses by non-sensitive end users in Sudan. Sensitive end users include Sudan’s military, police, intelligence services and persons that are owned by, or are operated or controlled by, those services. License applications for the (re)export of items that would substantially benefit sensitive end users will generally be denied.

Future actions

U.S. media have reported that the lifting of trade and financial sanctions on Sudan received approval from the incoming Trump administration, indicating that the amendment to the SSR may remain in effect following the presidential transition.

Under the Executive Order, provided certain conditions are met by the Government of Sudan, effective July 12, 2017, the SSR will be revoked, obviating the need for the general license implemented on Jan. 17. In order for this lifting to take place, the Secretary of State must publish a notice in the Federal Register on or before July 12, stating that the Government of Sudan has sustained the positive actions that gave rise to the Executive Order, including maintaining the cessation of hostilities and cooperating with the U.S. on addressing regional conflicts and terrorism. If the lifting of the SSR goes forward on July 12, the authorizations of trade with Sudan described above will remain, in the absence of contrary presidential action. However, the property of persons designated for their connection with the conflict in Darfur pursuant to Executive Order 13400 will remain blocked.

For more information on the material presented in this alert, please contact Kerry Scarlott at kscarlott@bakerlaw.com or 202.861.1585, Melvin Schwechter at mschwechter@bakerlaw.com or 202.861.1559, John Burke at jburke@bakerlaw.com or 202.861.1625, or your BakerHostetler relationship contact.

Authorship credit: Hannah C. Choate


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