Today, President Trump issued an Executive Order (E.O.) providing for sanctions against the Government of Venezuela. The sanctions are structured similar to existing sectoral sanctions on the Russian petroleum sector and target financial transactions with the Government of Venezuela.
On June 29, 2017, the U.S. Treasury Department announced new steps applying pressure on North Korea in relation to its proliferation activities. Specifically, this involved (1) sanctions designations against Chinese shipping company Dalian Global Unity Shipping Co., Ltd. and two Chinese individuals; and (2) anti-money laundering special measures against China’s Bank of Dandong. All were involved in business with North Korea according to the Treasury Department’s announcement.
The Special Measures for Bank of Dandong under Section 311 of the USA PATRIOT Act prohibit U.S. financial institutions from maintaining correspondent accounts for, or on behalf of, that bank. This would prevent access to the U.S. banking system for dollar transactions or wiring services.
None of the sanctioned parties appear to be systemically important companies for China, but the sanctions may be intended, or viewed, as an effort by the Trump Administration to pressure China into doing more to restrain North Korea’s nuclear activities.
On June 16, 2017, President Trump issued a National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba, which begins a process to alter some aspects of U.S. policy towards Cuba, but retains much of the Obama Administration’s reforms to travel, business and trade with Cuba.
The signaled changes focus on limiting business with companies related to Cuba’s military, intelligence and security apparatus and tightening aspects of the administration of existing travel allowances. Existing business and travel arrangements affected by the changes may be grandfathered.
There are no immediate changes to U.S. sanctions or export control policy. The memorandum sets the framework for the Office of Foreign Assets Control (OFAC), Bureau of Industry and Security (BIS) and other agencies to consider regulatory changes in the coming months.
Questions continue to swirl around the future of U.S.-Cuba policy as recent reports of a Trump Administration plan to strengthen Cuba sanctions surfaced over the weekend. These reports should be assessed against the backdrop of an increased Congressional effort to end the embargo on Cuba.
Effective January 17, 2017, a new general license authorizes a broad range of activities previously prohibited under the Sudanese Sanctions Regulations (SSR), including most transactions with individuals and entities in Sudan and the unfreezing of all property of the Government of Sudan subject to U.S. jurisdiction. This is a dramatic change to a longstanding and comprehensive U.S. sanctions regime, with relevance to banks, the energy sector and a range of companies and investors with interests in the Middle East and Northern Africa (MENA).
On December 15, 2016, the Office of Foreign Assets Control (OFAC) provided updated guidance on what companies can expect in the event of the “snapback” of sanctions under the Joint Comprehensive Plan of Action (JCPOA). Previously, OFAC Frequently Asked Questions (FAQs) had only offered the possibility of working with companies in the event of snapback. The guidance offers assurances of a 180-day wind down period. OFAC issued this clarification in response to many questions it received, but it is not intended to signal an expectation that the sanctions will snapback.
In addition, OFAC issued a new General License J-1 to replace General License J addressing the temporary sojourn of U.S.-origin aircraft in Iran. The updated general license authorizes the temporary sojourn of U.S.-origin aircraft as part of a code sharing arrangement with an Iranian air carrier. Our prior blog post on the issuance of General License J is available here.
On November 30, 2016, the United Nations Security Council (UNSC) passed a unanimous resolution strengthening sanctions against North Korea. The Resolution comes in response to the conduct of the latest round of nuclear tests by North Korea in September 2016. The U.S. Government issued additional sanctions listings following the resolution. It will be important to watch how countries, particularly China and other Asian nations, respond to the UN Resolution in implementation and enforcement.
Below we explore the new UN Resolution, U.S. response, and next steps.
Donald Trump’s victory in the 2016 Presidential election put the Republican Party in charge of the White House and Congress for the first time in a decade. President-elect Trump ran as an anti-establishment candidate who departed from many traditional Republican positions and promised bold and in some respects controversial reforms. How his administration will govern and the extent to which its policies will be supported in Congress are key questions facing companies and investors.
This report comments on aspects of international trade, sanctions and export control policies that are currently at the forefront of discussion.
Both the U.S. Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) have announced new amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR) that continue to build upon existing licenses and authorizations facilitating trade with Cuba. These amendments, effective October 17, 2016, enhance the flexibility of U.S. companies seeking to do business with Cuba or Cuban nationals across various sectors.
On September 15, 2016, President Obama announced that U.S. economic sanctions on Myanmar (also known as Burma) would end, but the announcement left many questions as to what would change and what sanctions might remain. On October 7, the Obama Administration provided the answer with an Executive Order that completely removed the Burmese Sanctions Regulations, lifted the U.S. import ban on rubies and jadeites, made the public reporting requirements for investment voluntary, and lifted the bans on visas for certain sanctioned individuals and most sanctions listings of Burmese Specially Designated Nationals (SDNs).
The United States had been removing sanctions in steps since July 2012 as the Myanmar government moved down a path of reform. However, a patchwork of remaining sanctions and a broad set of sanctions listings continued to make business, investment, banking and trade with Myanmar challenging for U.S. as well as non-U.S. companies. Here are four key impacts of the U.S. policy change and four important issues that remain.
How does this removal of sanctions impact business in/with Myanmar?
1. The sanctions list is nearly gone (see below for what remains). Importantly, this includes removals of (a) the major Myanmar economic conglomerates, businesses and banks; (b) military/economic entities; and (c) the remaining key businessmen, industrialists and military-related figures.
2. Treasury’s Financial Crimes Enforcement Network (FinCEN) provided “exceptive relief” to the Special Measures imposed for anti-money laundering (AML) purposes under Section 311 of the USA PATRIOT Act. As a consequence, U.S. financial institutions continue to be authorized to provide correspondent banking services to Myanmar banks. Previously, U.S. financial institutions were permitted to provide correspondent services involving Myanmar transactions for non-SDN banks, although in practice U.S. banks have shied away.
3. The ban on imports to the United States of Myanmar rubies and jadeites, as well as jewelry containing the same, has been completely removed.
4. The State Department’s Responsible Investment Reporting Requirements for new investment over $5,000,000 (previously $500,000) has been removed, but reports can still be made on a voluntary basis.
What issues still remain for persons doing business in or related to Myanmar?
A. Over thirty Burmese SDNs continue to be listed under drug trafficking and North Korea sanctions programs. This includes Yangon Air and several gem, mining, textile, agricultural and constructions companies. Thus, although business in Myanmar will be far less burdensome, some sanctioned-party risk remains.
B. Myanmar banks will need to continue to integrate with the global financial system and establish U.S. correspondent banking relationships to allow dollar transactions. Myanmar’s government and financial system also will have to make continued progress to address FinCEN’s AML concerns. Whether the current FinCEN exception or Myanmar’s continuing reforms will be sufficient to encourage U.S. banks to expand their banking relationships with Myanmar remains to be seen.
C. The U.S. embargo on exports to Myanmar of defense articles and defense services remains in place.
D. Although all property and interests in property blocked under the Burmese Sanctions Regulations are now unblocked, the U.S. government made clear that past violations of U.S. sanctions are still subject to enforcement, including action against U.S. and non-U.S. persons who may have “jumped the gun” by conducting business prior to sanctions removal.
The lifting of sanctions for Myanmar marks a watershed in the unwinding of U.S. sanctions. Now, the U.S. and Myanmar governments will observe how the private sector reacts as Myanmar rebuilds and rejoins the international economy.