EU Sanctions Against Russia Adopted and Extended; Sanctions Extended Concerning Crimea and Sevastopol

Posted in Investment, UK

In early July 2016, the EU extended the economic sanctions targeting the financial, energy and defense industries of the Russian economy, as well as dual-use goods, until Jan. 31, 2017. These sanctions were prolonged because the European Council determined that the Minsk agreements concerning military activity in the Donetsk and Luhansk regions of Ukraine have not been respected. This GT Alert provides for an update and an overview of the EU various sanctions against Russia and the Crimea and Sevastopol regions.

On July 1, 2016, the EU economic sanctions that target the financial, energy and defense industries of Russia, as well as dual-use goods, were prolonged until Jan.31, 2017. The sanctions were extended because the European Council determined that the Minsk agreements concerning a ceasefire to restore peace and the sovereign integrity of Ukraine’s state borders had not been respected. The EU Council, however, adopted and extended the sanctions on a unanimous basis, insisting that the Minsk agreements must be implemented completely.

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Export Controls Action by the U.S. Department of State Relating to H-1B Visa Holder

Posted in Immigration, US-China trade relations

Between December 2009 and June 2010, a Chinese national and H-1B visa holder working at Microwave Engineering Corporation, a U.S. company located in Massachusetts, (Microwave) was provided with technical data which otherwise would have required a license from the U.S. State Department’s Directorate of Defense Trade Controls (DDTC). Specifically, the technical data to which the Chinese national employee was provided access is a defense article that is controlled for export from the United States under the International Traffic in Arms Regulations (ITAR). DDTC is responsible for licensing exports and reexports of defense articles, defense services, and technical data. Providing a non-U.S. person with access to ITAR-controlled technical data, even if the non-U.S. person is located in the United States, is deemed an export under the U.S. export laws and regulations (deemed export), and generally requires DDTC authorization.

During the time period noted above, the president of Microwave and other individuals repeatedly provided the H-1B visa holder with ITAR-controlled technical data, activity which would generally require a license under the ITAR. This particular instance is further compounded because the H-1B visa holder is a Chinese national, and the U.S. maintains an arms embargo with the People’s Republic of China. Further, during the time in which the unauthorized exports occurred, Microwave was working under a Technology Control Plan (TCP) approved by the Defense Security Service which stated that no foreign person could be provided access to classified material or unclassified information that involved the disclosure of export-controlled technical data.

Microwave self-disclosed the violation to DDTC in early 2012, which led to the State Department charging Microwave with a single violation of the Arms Export Control Act (AECA) and the ITAR.

On June 22, 2016, the State Department announced it had entered into Consent Agreement with Microwave whereby Microwave agreed to pay a $100,000 civil penalty. In assessing the penalty, the State Department took into account the violation itself as well certain inadequacies with Microwave’s export compliance program.

As mitigating factors, DDTC took into account Microwave’s submission of a voluntary self-disclosure, cooperation with the DDTC, and implementation of extensive remedial measures. In the Consent Agreement, DDTC specifically noted that these mitigating factors directly contributed to Microwave not being subject to more harsh penalties, such as debarment.

DDTC’s response to Microwave’s violation highlights the importance of a rigorous export compliance program when dealing with export-controlled items, services and technical data, especially when employing foreign nationals. Activity such as merely discussing certain technical information with a foreign national may be prohibited under the various U.S. export control laws and regulations.

The UK Votes to Leave the European Union

Posted in Brexit, Investment, UK

The UK voted yesterday to leave the European Union. The timetable for the UK’s exit, the terms of exit, and the UK’s post-exit relationship with the European Union (EU), are still to be determined, which will take time. Until these issues are clarified, firms with a UK presence, or UK customers, will have to address the inevitable legal uncertainty regarding the legal environment in which their businesses operate. Those firms, in the meantime, should continue to monitor developments, identify those areas where their businesses are likely to be affected by new or amended legislation and regulation – and, importantly, those areas that are unlikely to be affected – and determine how to mitigate risks in affected areas.

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U.S. Extends Authorization for Transactions with Sanctioned Belarusian Entities

Posted in OFAC, Sanctions

On April 29, 2016, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License No. 2A  extending its previous Oct. 29, 2015, Belarus-related general authorization (General License 2) to engage in transactions with all sanctioned Belarusian entities. The previous General License 2 expired April 29, 2016.

OFAC General License 2A continues the authorization of U.S. persons to engage in all previously prohibited transactions with OFAC- listed Belarusian entities and any entities that are at least 50 percent owned by the listed entities. General License 2A fully supersedes the previous General License (General License 2) and maintains the earlier General License’s reporting obligation, which requires U.S. persons engaging in transactions with those particular entities to notify OFAC of the now licensed transactions. The extended General License is described below and is available here.

Because General License 2A, like General License 2 before it, covers all the Belarusian entities previously subject to sanctions, the General License authorizes all previously prohibited transactions with these entities for another six months (subject to renewal). Under the General License, no advance approvals are required, but U.S. persons utilizing the General License must provide post-transaction reports to OFAC.  Additionally, the prohibitions with respect to certain individuals sanctioned under the Belarus sanctions continue in place.

Background on the Extended Belarus General License

Since 2006, OFAC has maintained targeted sanctions prohibiting U.S. persons from engaging in transactions with various entities and individuals in Belarus, and blocked the property of those entities and individuals pursuant to Presidential Executive Order 13405. Belarus-related General License No. 2 and now its extension, General License 2A, lifted the prohibition and blocking order with respect to the targeted entities specifically named in the General License and/or any entities that are 50 percent or more owned by one or more of the entities identified in the General License. Accordingly, transactions with the listed entities and any entities wholly or partially owned by them are authorized until Oct. 31, 2016, subject to renewal. The General License 2A covers all the Belarusian entities previously subject to OFAC sanctions, but General License 2A does not unblock any property that was blocked prior to Oct. 30, 2015.

Importantly, the General License includes a reporting requirement. A U.S. person who engages in transactions involving the entities named in the General License, including entities owned 50 percent or more by a named entity or entities, is subject to a reporting requirement. The reporting provision requires that a U.S. person who engages in a transaction involving the authorized entities that exceeds $10,000 (or a series of transactions exceeding that amount) must file post-transaction a report with the U.S. Department of State. The required report must include information on the estimated or actual dollar amount of the transaction, the parties involved, the type and scope of activities conducted, and the dates or duration of the activities. Transactions with Belarusian entities that are not subject to sanctions are not subject to this reporting requirement.

New North Korea Sanctions Designations

Posted in North Korea, Sanctions

Further to the newly-enacted North Korea Sanctions and Policy Enhancement Act of 2016 (H.R. 757) (the Act) summarized in our previous GT Alert, on March 16, 2016, President Obama issued an executive order implementing a number of sanctions measures pursuant to the Act.

The EU has also introduced new sanctions against North Korea, following the far-reaching sanctions resolution passed by the UN Security Council on March 2, 2016.

ADDITIONAL U.S. SANCTIONS DESIGNATIONS

In addition to the preexisting sanctions against North Korea, the Act granted the President additional authority to impose sanctions on individuals and entities deemed to have engaged or assisted in a number of activities, including participation in North Korea-related proliferation activities, human rights abuses, money laundering, counterfeiting, narcotics trafficking, and dealings in luxury goods, among others.  Yesterday’s executive order, Blocking Property of the Government of North Korea and the Worker’s Party of Korea, and Prohibiting Certain Transactions with Respect to North Korea (the EO), blocked (or froze) the assets and property of the following individuals, entities, and vessels, representing the first set of sanctions designations under the Act:

Individuals:

  • JO, Yong Chol, North Korea’s Ministry of State Security Official
  • RI, Won Ho, North Korea’s Ministry of State Security Official

Entities:

  • CHONGBONG SHIPPING CO LTD.
  • HOERYONG SHIPPING CO LTD.
  • ILSIM INTERNATIONAL BANK
  • KOREA FOREIGN TECHNICAL TRADE CENTER
  • KOREA OCEAN SHIPPING AGENCY
  • KOREA SAMILPO SHIPPING CO.
  • KOREA UNITED DEVELOPMENT BANK
  • KOREA ZUZAGBONG MARITIME LTD.
  • KOREAN BUYON SHIPPING CO. LTD.
  • KOREAN POLISH SHPG CO LTD.
  • KOREAN WORKERS PARTY, PROPAGANDA AND AGITATION DEPARTMENT
  • MIRIM SHIPPING CO LTD.
  • OCEAN BUNKERING JV CO.
  • SINGWANG ECONOMICS AND TRADING GENERAL CORPORATION
  • THAEPHYONGSAN SHIPPING CO LTD. Continue Reading.

U.S. Further Eases Restrictions on Cuba Travel and Financial Transactions

Posted in OFAC, Sanctions, US-Cuba relations

In its most recent move in a series of changes designed to increase engagement between the United States and Cuba, and in line with the Administration’s policy, on March 16, 2016, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) amended the existing Cuban Assets Control Regulations (Cuba Sanctions Regulations) in three key areas: (1) travel to Cuba, (2) financial transactions, and (3) establishment of physical presence (local offices) in Cuba. At the same time, the U.S. Department of Commerce Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to simplify the transit of authorized cargo through Cuba, while making a more favorable licensing policy for U.S. exports of items that assist the Cuban private sector in exporting its goods.

These changes come a few days before President Obama’s historic trip to Cuba, the first time a sitting president has visited Cuba in almost 90 years. While the amended regulations, effective immediately, continue to expand the number and scope of Cuba-related transactions in which U.S. persons can engage, they do not eliminate the United States’ nearly comprehensive embargo on trade with Cuba. U.S. persons may not engage in Cuba-related transactions unless they meet the criteria for license exceptions or exemptions, or are otherwise authorized by specific license from the U.S. government.

OFAC Sanctions Revisions

Specifically, OFAC implemented new measures in the following areas:

1) Travel

Educational travel and exchanges may now be conducted without a sponsoring organization. OFAC is authorizing people-to-people educational travel for individuals as long as the traveler engages in a full-time schedule of educational exchange activities. The educational exchange must support the U.S. policy of engagement with the Cuban people and the predominant part of the traveler’s activities must not be with Government of Cuba or Cuban Communist Party officials.

2) Salaries for Cuban Nationals

OFAC is authorizing the hiring and payment of salaries to Cuban nationals in the United States on a nonimmigrant status.

3) Cuban-Origin Merchandise

U.S. persons located in a third country may now purchase Cuban-origin merchandise for personal consumption in a third country. They may not, however, bring such Cuban-origin merchandise into the United States, including as accompanied baggage.

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President Obama Signs Legislation Tightening North Korea Sanctions

Posted in North Korea, Sanctions, United Nations Actions

On Feb. 18, 2016, President Obama signed into law the North Korea Sanctions and Policy Enhancement Act of 2016 (H.R. 757) (the Act), a bill tightening U.S. sanctions against North Korea.  The legislation imposes strict licensing requirements for the export or reexport to North Korea of any U.S.-origin goods, software, or technology, and grants the President the authority to impose targeted sanctions on persons deemed to engage in certain types of activities related to the Government of North Korea’s nuclear proliferation, money laundering, as well as its efforts to undermine cybersecurity.

Stricter Export Licensing Requirements

As a result of the Act, all exports or reexports to North Korea of U.S.-origin items or foreign-made items containing more than 10 percent U.S.-origin content will require an export license from the U.S. Department of Commerce.  License applications will be considered under a presumption of denial, although the legislation provides that the U.S. government may issue exemptions from this licensing requirement for transactions involving humanitarian aid and exports to North Korea of non-luxury food products, agricultural products, medicine, or medical devices designated “EAR99” (the lowest level of export control classification).  At this time, it is unclear whether or how the U.S. Government will implement these exemptions.

Although Department of Commerce export licenses were required for the export or reexport of most items to North Korea before the signing of the Act, license applications were previously reviewed on a case-by-case basis, instead of under the policy of denial now in effect.

Expansion of Targeted Sanctions

In addition to preexisting sanctions on certain persons engaged in the North Korean arms trade and nuclear proliferation activities, the Act grants the President the authority to impose sanctions on individuals or entities that have, or have attempted to, knowingly engage or assist in the following:

  • Activities or transactions with the government of North Korea related to proliferation of weapons of mass destruction;
  • Activities related to significant arms or related material;
  • Import or export of luxury goods to or from North Korea;
  • Censorship by the government of North Korea;
  • Serious human rights abuses by the government of North Korea;
  • Money laundering, counterfeiting, or narcotics trafficking involving or supporting the government of North Korea; or
  • Significant activities undermining cyber security in support of the government of North Korea. Continue Reading.

EU Lifts Majority of Belarus Sanctions

Posted in OFAC, Sanctions

On Feb. 15, 2016, European Union (EU) foreign ministers met in Brussels and agreed to permanently lift most EU sanctions against Belarus. The unanimous decision, effective March 1, 2016, will result in the termination of travel bans and asset freezes currently in place against 170 Belarusian individuals, including the president of Belarus. The decision also lifts sanctions against three Belarusian entities, specifically:

  • Beltech Holding;
  • Beltechexport; and
  • Spetsprioborservice.

The European Council’s announcement of the decision came just as a temporary fourth-month suspension of the EU sanctions against Belarus was due to expire at the end of February. The EU decision comes after the Oct. 29, 2015, issuance of a U.S. general license authorizing U.S. persons to engage in transactions with nine Belarusian entities named on the Specially Designated Nationals (SDN) list administered by the Office of Foreign Assets Control (OFAC). Together, the decisions signal a marked improvement in relations between Belarus and the EU and United States.

Despite these recent developments, certain limited EU sanctions against Belarus remain in place. Concurrent with its decision to lift most Belarus-related sanctions, the EU agreed both to maintain its sanctions against four Belarusian individuals, and to extend the EU arms embargo against Belarus for a period of 12 months. As a result, individuals and entities proposing to engage in transactions with Belarus should continue to consult their trade council to ensure their proposed business activities do not trigger a licensing requirement.

Iran Deal is Implemented: U.S. and EU Remove Nuclear-Related Sanctions on Iran

Posted in Iran, Sanctions

Jan. 16, 2016 marked “Implementation Day” of the Iran Joint Comprehensive Plan of Action (JCPOA), as the U.S. initiated the removal of its nuclear-related sanctions against Iran and the EU removed the majority of its existing Iran-related sanctions. The final precondition to Implementation Day was met when the International Atomic Energy Agency (IAEA) issued a report verifying that Iran has fulfilled its initial commitments under the JCPOA.

Importantly, while Implementation Day has brought the lifting of many EU sanctions against Iran, U.S. sanctions relief remains largely limited to the lifting of U.S. nuclear-related sanctions only, leaving in place the comprehensive U.S. embargo against Iran. With the exception of certain transactions related to commercial aircraft sales to Iran and the import of Iranian foodstuffs and carpets, U.S. sanctions relief under the JCPOA is restricted to the lifting of sanctions directed at non-U.S. persons only. U.S. individuals and entities will remain prohibited from engaging in most transactions with Iran, whether direct or indirect, for the foreseeable future.

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The Next Modest Wave of Cuba Thaw—U.S. Eases Restrictions on Exports, Export Trade Financing, and Artistic Productions

Posted in OFAC, Sanctions, US-Cuba relations

On Jan. 27, 2016, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) once again amended the existing Cuban Assets Control Regulations (Cuba Sanctions Regulations) to open the door for further U.S. engagement with Cuba. The amendments remove certain restrictions on the financing of exports to Cuba as well as restrictions on transactions related to public performances and workshops in Cuba. Additionally, the amendments further facilitate travel between the United States and Cuba and authorize additional activities related to informational materials, including media productions, and professional meetings. These newly permissible activities apply to U.S. persons and persons subject to U.S. jurisdiction. Meanwhile the U.S. Department of Commerce loosened its licensing policy for the export and reexport of certain items to Cuba related to telecommunications, construction, and infrastructure.

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