On February 24 and 25, 2023, the United Kingdom and European Union each adopted additional sanctions against Russia due to the ongoing conflict in Ukraine. These new measures are summarized below.
Over the course of the Obama and Trump administrations, U.S. officials have found new ways to incorporate human rights concerns into sanctions and export control policies. Recent announcements by the Commerce and State Departments address how, by the U.S. government in its licensing approvals, and private companies in their foreign-sales decisions, can take into account human rights impacts.
Export Licensing for Dual-Use and Commercial Products
On October 6, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule revising the Export Administration Regulations (EAR) to allow the agency to consider human rights concerns when granting export licenses. Specifically, BIS amended its licensing policy for items controlled for crime control (CC) reasons under 15 CFR §742.7.
The final rule also expands the existing EAR human rights licensing policy. The prior licensing policy provided for case by case review for CC-controlled items “unless there is evidence that the government of the importing country may have violated internationally recognized human rights.” The final rule now would allow BIS to consider the risk that items will be used in violation or abuse of human rights by individuals or entities in addition to the government or the importing country. Further, licensing officers will now review how an item may be used to engage in, or enable, violations or abuses of human rights (not just “internationally recognized” human rights), including through censorship, surveillance, detention, or excessive use of force. Importantly, the new provision also allows the agency to consider such risk for items controlled for reasons beyond CC, covering most items listed on the Commerce Control List (with the exception of items controlled for short supply). The final rule specifically notes the need to examine items controlled for reasons related to certain telecommunications and information security and sensors.
State Department Guidance for Surveillance Tools
Separately, on September 30, 2020, the Department of State released guidance designed to assist U.S. businesses in assessing the risk that surveillance tools exported to foreign government end-users could be used to commit human rights abuses.
The guidance entitled, “U.S. Department of State Guidance on Implementing the UN Guiding Principles for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities,” provides a roadmap for businesses to assess the risk of human rights abuse prior to engaging in a transaction with a foreign government end-user and provides recommended contractual and procedural safeguards should the business proceed with the transaction. The guidelines are non-binding and, according to a statement by a State Department official, they will not be used as a basis for sanctions against foreign governments.
The State Department encourages U.S. businesses to integrate human rights due diligence into compliance programs, including export compliance programs. The following eight recommendations are provided to assist companies seeking to conduct human rights due diligence, screening, and risk mitigation—
- Review the capabilities of the product or service in question to determine potential for misuse to commit human rights violations or abuses by foreign government end-users or private end-users that have close relationships with a foreign government.
- Review the human rights record of the foreign government agency end-user of the country intended to receive the product or service.
- Review, including through in-house or outside counsel, whether the foreign government end-user’s laws, regulations, and policies that implicate products and services with surveillance capabilities are consistent with the Universal Declaration of Human Rights.
- Review stakeholders involved in the transaction (including end-user and intermediaries such as distributors and resellers). Refer to BIS’s Know Your Customer Guidance.
- To the extent possible and as appropriate, tailor the product or service distributed to countries that do not demonstrate respect for human rights and the rule of law to minimize the likelihood that it will be misused to commit or facilitate human rights violations or abuses.
- Prior to sale, strive to mitigate human rights risks through contractual and procedural safeguards and strong grievance mechanisms.
- After sale, strive to mitigate human rights risks through contractual and procedural safeguards and strong grievance mechanisms.
- Publicly report on sales practices (e.g., in annual reports or on websites).
The guidance is designed for U.S. companies that engage in transactions involving sensors, biometric identification, data analytics, internet surveillance tools, non-cooperative location tracking, and recording devices, among other products and services. While the guidance is not designed to address export control licensing, the State Department has suggested that the guidance may be used as a resource during export license reviews in cases that raise a human rights concern.
These two announcements form part of a slow-but-steady growth among U.S. officials looking for ways to use existing trade regulatory tools to recognize human rights considerations. Other examples include recent U.S. Customs withhold release orders (WROs) for certain goods produced from forced or indentured labor in Xinjian, China here; Hong Kong trade treatment in the wake of human rights abuses in that territory here; and Global Magnitsky sanctions designations here.
The U.S. Treasury Department has issued sanctions designations against Turkey’s Ministry of National Defense, Ministry of Energy and Natural Resources, and the Ministers of Defense, Energy and Interior pursuant to a new Executive Order issued on October 14, 2019 by President Trump in response to Turkey’s military operation in northern Syria. The Executive Order authorizes secondary sanctions and can expose non-U.S. companies and financial institutions interacting with designated Turkish parties to risk of penalties.
On June 5, 2019, the Department of Commerce Bureau of Industry and Security (BIS) amended an important license exception which generally permitted the temporary sojourn of civil aircraft and vessels to Cuba. Specifically, BIS eliminated the license exception for use by non-commercial aircraft and passenger and recreational vessels sailing to Cuba. BIS also amended its licensing policy for such aircraft and vessels establishing a general policy of denial. On the same day, the Department of the Treasury eliminated its authorization for group people-to-people educational travel to Cuba.
On November 15, 2018, the U.S. State Department added several new Cuban hotels to its List of Restricted Entities and Subentities Associated with Cuba (“Cuba Restricted List”). The recent update includes the additional of 16 hotels, with 26 newly identified entities in total. The State Department also made five amendments to previously listed entities, including three name-changes, one new alias, and one typographical correction. The new hotels are being added to the Cuba Restricted List because they have been identified as entities that are under the control of the Cuban military, intelligence, or security services.
On November 15, 2018, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned 17 officials of the Government of Saudi Arabia for their purported role in the killing of journalist Jamal Khashoggi. The individuals include Saud Al-Qahtani, the now former royal court adviser and consultant to crown prince Mohammed bin Salman, and General Mohammed Alotaibi, Saudi Arabia’s consul general in Istanbul. This followed outreach on October 10, 2018 from leaders of both parties in the U.S. Senate to President Trump seeking a determination on the imposition of sanctions under the Global Magnitsky Act with respect to any foreign person responsible for a human rights violation in connection with the death of Mr. Khashoggi.
On November 2, 2018, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued a final rule effective Monday, November 5, 2018 that amends the Iranian Transactions and Sanctions Regulations and reinstates sanctions on Iran that had been suspended during implementation of the Joint Comprehensive Plan of Action (“JCPOA”). On May 8 of this year, the Trump Administration had announced that the United States would withdraw from the JCPOA, but provided for 90-day and 180-day wind-down periods for specified activities involving Iran.
The 90-day wind down period ended effective August 6, 2018, and the U.S. government took steps to re-implement sanctions via Executive Order 13846. This included the application of secondary sanctions to the purchase or acquisition of U.S. dollar banknotes by the Government of Iran, certain trade in gold or precious metals, certain trade in graphite, raw or semi-finished metals such as aluminum, steel, coal and software for integrating industrial processes, transactions relating to Iranian rials, transactions relating to issuance of Iranian sovereign debt, and sanctions relating to Iran’s automotive sector. (See our previous post here).
The latest announcement addresses the end of the 180-day wind down period and implements certain additional aspects of Executive Order 13846.
- The amendments include deleting the “EO 13599 List” of individuals and entities who were removed from the SDN List pursuant to the JCPOA, but still were considered “Government of Iran” parties or Iranian financial institutions subject to blocking by U.S. persons pursuant to EO 13599. The Federal Register notice states that OFAC will relist “as appropriate” certain individuals and entities who were on the EO 13599 List. It is therefore unclear at this time whether all persons who were on the EO 13599 List will be re-added to the SDN List.
- The Iranian Transactions and Sanctions Regulations will authorize sanctions against a person upon a determination that:
- On or after August 7, 2018, the person has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran; or
- On or after November 5, 2018, the person has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), or the Central Bank of Iran.
- OFAC amended a pre-existing general license allowing U.S. persons to sell real property in Iran provided it was acquired before the individual became a US person or was inherited from persons in Iran. The general license has been expanded to include personal property subject to the same conditions.
During a telecom briefing on Friday, Secretary of State Michael Pompeo mentioned that the administration decided to grant “temporary allotments” to eight jurisdictions to continue purchasing Iranian oil. Some reports indicate that South Korea, Japan, India, and Turkey are among the countries receiving such waiver. Although Mr. Pompeo did not say how long the waivers will be in place, he mentioned that the purpose of the waivers is to give countries a few “weeks longer to wind down.”
We expect that the actual re-designations of persons and entities to the SDN List will be published on Monday along with guidance and FAQs. We will follow up next week with further details.
On August 6, 2018, the Treasury Department’s Office of Foreign Assets Control (OFAC) released a new Executive Order to implement the previously announced re-imposition of U.S. sanctions for Iran. There were no major surprises, with the Executive Order paralleling the guidance released on May 8, 2018 when the President announced his decision to cease the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA) and to begin re-imposing the U.S. nuclear-related sanctions that had been lifted, following a wind-down period.
- The Treasury Department has placed several prominent Russian individuals and companies on the Specially Designated Nationals and Blocked Persons lists (SDN list). Several of these parties are Russian billionaires previously identified in the Treasury Department’s so-called “Oligarch List” reported to Congress on January 29, 2018.
- Under the general licenses issued with the new listings, U.S. persons have until June 5, 2018 to wind down operations with specified listed companies and their subsidiaries, and until May 7, 2018 to divest debt, equity, or holdings owned by EN+ Group PLC, GAZ Group and United Company RUSAL PLC.
- General License 12, which allows wind down operations with several newly designated SDN companies, instructs that payments to the SDNs must be made into blocked accounts with U.S. banks. This deviates from previous general licenses which did not place conditions on how SDNs must be paid.
On April 6, 2018, the Treasury Department’s Office of Foreign Assets Control (OFAC), in consultation with the State Department, designated 7 Russian oligarchs, 12 companies that they own or control, 17 senior Russian government officials, and 1 state-owned Russian weapons trading company and its subsidiary, a Russian bank. (The list may be found here.)
On December 20, 2017, President Trump issued Executive Order 13818 (the “E.O.”) implementing provisions of the Global Magnitsky Human Rights Accountability Act (“Global Magnitsky Act”) (enacted into law in December 2016), which provided for sanctions relating to gross human rights violations or government officials linked to corruption. The E.O. authorizes the imposition of sanctions on non-U.S. persons determined to be responsible for, complicit in, or have engaged in (directly or indirectly) “serious human rights abuse,” corruption, or “the transfer or the facilitation of the transfer of the proceeds of corruption,” or to have attempted to engage in or materially support such acts.
The E.O. applied sanctions designations to 13 persons and, separately, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) imposed sanctions on 39 additional individuals and entities around the world. This includes individuals and entities from 13 countries and territories spanning the continents of Asia, Africa, Europe, and North America.