Articles Posted in EU Sanctions

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https://www.globaltradeandsanctionslaw.com/files/2021/01/European_Commission.svg_-300x208.pngOn January 19, the European Commission released a strategy intended to “stimulate the openness, strength and resilience of the EU’s economic and financial system.” One of the key pillars of the strategy is centered around strengthening the implementation and enforcement of EU sanctions.

The strategy highlights current weaknesses in the EU sanctions regime, including the lack of uniformity in application and enforcement between Member States. It is thought that these inconsistencies create uncertainty and assist in sanctions evasion.

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The EU’s new global human rights sanctions regime came into force on December 8. Council Regulation (EU) 2020/1998 provides for the freezing of funds and economic resources and travel bans on those responsible for or involved in serious human rights violations and abuses worldwide. Individuals and entities who provide financial, technical or material support for, or are otherwise involved in or associated with, listed individuals or entities may also be targeted [1].

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Announced last week, “INSTEX had been made operational and available to all EU Member States.” INSTEX is the special purpose financing channel designed by the EU to permit the processing of payments for trade between the EU and Iran. INSTEX was deemed necessary by the EU in light of the refusal by many private banks to process payments for trade between the EU and Iran that continues to be authorized by the EU despite the U.S. withdrawal from the Joint Comprehensive Plan of Action (JCPOA) resulting in the re-imposition of U.S. sanctions.

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On April 8, 2019, the United States Trade Representative (USTR) proposed imposing tariffs on $11.2 billion worth of products from the European Union (EU). USTR took this action in connection with an over decade long battle between the EU and the U.S. before the World Trade Organization (WTO) over mutual claims of illegal government subsidies to Airbus and its American rival, Boeing. In May 2018, the WTO Appellate Body upheld a panel finding that the EU failed to eliminate certain subsidies previously found to be WTO inconsistent, authorizing the U.S. to seek retaliatory tariffs on EU goods. USTR has estimated that the EU subsidies to Airbus have resulted in harm of $11 billion in trade annually to the U.S. This figure is subject to review by a WTO arbitrator who will determine the level of countermeasures to be authorized in the case. This report is expected to be issued this summer.

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On May 23, 2018, as directed by President Trump, the Secretary of Commerce initiated a Section 232 investigation into whether imports of automobiles, including SUVs, vans, light trucks and automotive parts, threaten to impair national security. President Trump reportedly is contemplating tariffs as high as 25% on automobile imports, similar to the tariff imposed a result of its recent 232 action on steel imports.

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Today, President Trump issued a statement on the status of the Joint Comprehensive Plan of Action (“Iran nuclear deal”) and the Office of Foreign Assets Control designated 14 individuals and entities in connection with serious human rights abuses and censorship in Iran, and support to designated Iranian weapons proliferators.  Below, we provide notable highlights from the President’s statement.

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January 16, 2016 was “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), bringing into effect the sanctions commitments of the United States and European Union (EU).  The International Atomic Energy Agency (IAEA) confirmed in Vienna that Iran had met its JCPOA milestones with respect to its nuclear program.  The U.S. sanctions changes involve partial relief within a complex regime with continuing primary sanctions and designations on Iranian parties which carry secondary sanctions.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC)  issued Implementation Day guidance describing the changes to the U.S. sanctions program for Iran, which largely reflect what had been expected under the JCPOA.  This includes the ending of secondary sanctions on Iran related to nuclear weapons proliferation; delisting of over 400 Iranian and Iran-related Specially Designated Nationals (SDNs); issuance of general licenses for non-U.S. entities owned or controlled by U.S. persons to engage in certain activities in Iran, as well as for import to the United States of Iranian carpets and foodstuffs including pistachios and caviar; and adjustment of licensing policy to allow authorization of certain exports, sales, leasing and transfers of civilian passenger aircraft.  Existing authorizations for agricultural commodities (including food), medicine, and medical supplies remain unchanged.  Exports and reexports of U.S. origin products (as well as foreign-origin products with more than 10% U.S. content) still require a license, and U.S. persons still may not participate in business transactions with Iran unless licensed.

Following will be a series of posts on key aspects of the adjustments to U.S. and EU regulations relating to Iran.

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On October 29, 2015, the U.S. and the EU took separate actions to ease their respective Belarus-related sanctions programs for six months. These measures follow the October 11, 2015 reelection of Alexander Lukashenko as President of Belarus, the regime’s decision to release certain political prisoners and hopes for an improvement of the political and economic relationship between Western countries and Belarus. While currently temporary in nature, the sanctions relief provided affords Western companies opportunities to engage in certain transactions in Belarus.

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On October 18, 2015, both the United States and the European Union took action to prepare for future changes to sanctions policy which will be effective upon IAEA verification of Iran’s commitments under the Joint Comprehensive Plan of Action (JCPOA).  This was a required step under the JCPOA, termed “Adoption Day,” scheduled to occur ninety (90) days after the JCPOA was endorsed by the UN Security Council via resolution 2231.

Importantly, Adoption Day does not bring about any immediate sanctions relief.  OFAC reminded companies again about potential violations related to arranging agreements and contingent contracts with Iranian parties prior to Implementation Day.

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Under the terms of the Iran Nuclear Agreement Review Act, Congress had until September 18 to reject President Obama’s promised sanctions relief for Iran agreed to under the Joint Comprehensive Plan of Action (JCPOA). Although the House of Representatives voted to reject the deal, Senate Democrats blocked debate on a similar resolution, thus preventing a vote in the Senate. Consequently, Congress took no action, which means that the JCPOA will continue to be implemented on a step-by-step basis (see our blog post here for full details).  Looking ahead, there are several key issues for businesses contemplating entering the Iran market to consider.

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