MakingWaves Blog
  1. LRN Home
  2. About

Trade Compliance 2014: OFAC Embargo and Sanctions Programs

The Office of Foreign Assets Control (OFAC) at the Treasury Department administers a variety of economic and trade sanctions programs intended to impose restrictions on trade by U.S. citizens with countries, organizations, or individuals that the U.S. government has determined pose foreign policy or national security concerns. While many of those programs see frequent changes, the U.S. embargo against Iran continues to be the most dynamic, and presents perhaps the greatest risk to U.S. exporters.

In July 2013, additional sanctions were imposed by the U.S. against Iran pursuant to the Iran Freedom and Counter-Proliferation Act of 2012. These additional sanctions were aimed primarily at the Iranian shipping, shipbuilding, and energy sectors. They included the potential for penalties to be levied against persons and foreign financial institutions that engage in certain transactions involving the Iranian automotive sector, the Iranian rial, or the sale, transport, or marketing of Iranian petroleum, petroleum products, or petrochemicals.

These additional sanctions added further complexity to what was already a bewildering array of layered sanctions. Compliance with the sanctions against Iran demands careful scrutiny of business dealings not only to ensure that none of the parties to a transaction are Iranian entities or specially designated nationals of Iran, but also to verify that transactions purportedly with parties in locations such as the U.A.E. are not actually intended for Iran. U.S. export enforcement agencies, including the Office of Export Enforcement (OEE), the FBI, and the Department of Homeland Security, have robust intelligence and enforcement efforts targeting potential diversions to Iran. It is not unusual for companies to receive inquiries from those agencies about orders that might be intended for diversion to Iran. Should such an inquiry be received, it is important that it be referred promptly to the company’s compliance and legal departments to ensure the proper level of cooperation with law enforcement while protecting company interests.

The recent agreement between Iran, the U.S., and other nations to limit certain aspects of Iran’s nuclear program will not result in any dramatic short-term rollback of U.S. sanctions against Iran. Companies should not expect significant changes at least until a follow-on agreement is reached at the end of the initial six-month agreement.

It is important to remember that, in addition to the well-publicized embargo of Iran, OFAC also maintains nearly total embargoes on trade with Cuba and Sudan. No significant changes were made to either of those embargoes in 2013, and both continue to be comprehensive in their coverage, with only very limited opportunities for the licensing of trade in agricultural products and/or medicine.

OFAC maintains less comprehensive, targeted sanctions on Belarus, Burma, Democratic Republic of the Congo, Iraq, Ivory Coast (Côte d’Ivoire), Lebanon, Libya, North Korea, Somalia, Syria, Yemen, and Zimbabwe. Sanctions are also in place targeting persons or entities engaged in activities threatening international stabilization efforts in the Balkans, narcotics trafficking, terrorism, undermining Lebanese sovereignty or democratic processes or institutions in Lebanon, the former Liberian regime of Charles Taylor, proliferation of weapons of mass destruction, trade in rough diamonds, and transnational criminal organizations. The only 2013 addition to OFAC’s roster of sanctions programs was the implementation of the Magnitsky Sanctions pursuant to the Sergei Magnitsky Rule of Law Accountability Act of 2012. The Magnitsky sanctions were implemented to punish Russian officials considered to be complicit in human rights abuses. There are currently eighteen named individuals who are subject to restrictions under the Magnitsky sanctions.

 New Call-to-action

Topics: ECA Risk Forecast Report 2014