Despite the sobering news reports on the global spread of COVID-19, companies are
In case you missed it, I provided insight on U.S. sanctions risks in the context of international supply chains to Supply Chain Management Now last month.
Citing examples, such as e.l.f. Cosmetics’s 2019 settlement for nearly $1 million for sanctions violations, I asserted in the article that both U.S. and non-U.S. companies need to understand how broadly U.S. sanctions are enforced.
In the article, I provided an overview of the current sanctions landscape in the U.S. and highlights particular challenges such as avoiding dealing with specially designated nationals (SDNs). The SDN list is vast and includes parties that reside nearly everywhere in the world. As I said in the article, “this creates a challenge because many of them are in countries not otherwise subject to U.S. sanctions.”Continue Reading U.S. Sanctions Risk to International Supply Chains
At the end of December 2019, the U.S. District Court for the Northern District of Texas vacated a $2 million penalty that the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) had imposed against ExxonMobil for alleged violations of U.S. sanctions related to Russia and Ukraine. OFAC is the U.S. government agency that administers most U.S. sanctions.
This matter has been of interest since the penalty was first announced in July 2017 – read our July 2017 blog post detailing the matter. As described below, the district court’s reasoning in vacating the penalty against Exxon is worthy of interest, too.Continue Reading U.S. District Court Deals Rare Defeat to OFAC in U.S. Sanctions Matter
The U.S. Treasury Department, Office of Foreign Assets Control (OFAC), the main U.S. government body that administers U.S. economic sanctions and embargoes, continues to be busy. In September 2019 alone, OFAC has announced new sanctions designations, new penalties, and new regulations on a nearly daily basis.
Many of these actions are largely administrative in nature. For example, in the September 4 Federal Register, OFAC announced new U.S. sanctions on Nicaragua. While the regulations (at 31 CFR Part 582) are in fact new, the prohibitions contained in the regulations are not: the regulations merely implement Executive Order 13,851, which was issued by President Trump in November 2018.
We nonetheless want to briefly summarize three actions taken by OFAC to date in September 2019. As described below, we think these actions provide useful insight into how OFAC is operating currently.Continue Reading Sanctions Update: Additional Iran and Venezuela Designations, Penalty for Sudan Violations
On August 5, 2019, President Trump issued Executive Order 13,884 (EO 13,884), which significantly expands existing U.S. sanctions on Venezuela.
Pursuant to EO 13,884, virtually all transactions with the government of Venezuela are now prohibited. There are some important exceptions to that prohibition, and those are discussed below.
While this is not an absolute embargo on Venezuela, it is quite close. And even when a transaction with Venezuela may be lawfully permitted, the practical challenges and the risk of conducting the transaction may make it nearly impossible to complete successfully.Continue Reading Venezuela Update: Significant Sanctions Restrictions Imposed
On a regular basis over the past several months, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) has introduced new sanctions requirements, guidance, and restrictions. OFAC is the U.S. government agency which administers most U.S. sanctions programs.
Many of these measures have been quite targeted. For instance, on July 29, 2019, OFAC designated Kim Su Il as a Specially Designated National (SDN) of North Korea. According to the SDN listing, Kim Su Il is a resident of Vietnam. Thus the designation, while limited to Kim Su Il, demonstrates one of the challenges of U.S. sanctions compliance: many SDNs reside in or are nationals of countries against which the United States does not otherwise maintain sanctions.Continue Reading Update on U.S. Sanctions: New Requirements, Continuing Enforcement
I recently discussed how the United States uses “secondary sanctions” to enforce U.S. sanctions and embargoes against non-U.S. parties. Under secondary sanctions, the U.S. government restricts U.S. companies and individuals from conducting business with non-U.S. companies and individuals because of those parties’ affiliation with a sanctioned business or person.
As I explained, “[Secondary sanctions] are an example of U.S. extraterritorial jurisdiction at its most extreme. Even if there is no U.S. actor, no goods or parts of U.S. origin, no direct connection whatsoever, the U.S. wants to nevertheless strongly discourage non-U.S. companies from doing business with [sanctioned entities] by, for example, restricting their access to the U.S. market.”Continue Reading Secondary Sanctions in Trade Compliance
On January 31, 2019, U.S. Treasury Department, Office of Foreign Assets Control (OFAC)announced a $996,080 settlement agreement with e.l.f. Cosmetics, Inc. (ELF) to settle ELF’s potential civil liability for 156 violations of the North Korea Sanctions Regulations. According to OFAC, fake eyelash kits that ELF believed to be from China were in fact supplied from North Korea.
Presumably very few Americans awake in the middle of the night worrying that North Korean fake eyelashes pose a threat to U.S. national security. Yet in pursuing this action vigorously, OFAC made clear that it is willing to seek penalties against any U.S. business that directly or indirectly benefits the North Korean economy. In announcing the settlement, OFAC highlighted the importance of conducting “full-spectrum supply chain due diligence when sourcing products from overseas, particularly in a region in which the DPRK, as well as other comprehensively sanctioned countries or regions, is known to export goods.”Continue Reading OFAC Settles with Cosmetics Company, Reiterates Importance of Supply Chain Compliance
As 2018 came to a close, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) announced two actions that should be studied by any party subject to U.S. economic sanctions. OFAC is the U.S. government agency with principal responsibility for administering U.S. sanctions regulations.
First, on December 19, OFAC published a letter to members of the U.S. Congress announcing the agency’s intention to remove a group of Russian corporations from the List of Specially Designated and Blocked Persons List (SDN List) that OFAC maintains. As a general matter, U.S. individuals and entities are prohibited from engaging in any transaction with an SDN.
Then, on December 20, OFAC released its settlement agreement with Zoltek Companies, Inc. (Zoltek) for violations of the Belarus Sanctions Regulations. According to OFAC, the violations consisted of at least 26 transactions with an SDN.
These actions are quite different. But as described below, each includes very useful guidance about OFAC’s current view of sanctions compliance best practices.
Continue Reading OFAC Actions Provide Guidance on Sanctions Compliance Best Practices
In late November 2018, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) announced that Cobham Holdings, Inc. agreed to pay $87,507 to settle violations of U.S. sanctions on Ukraine and Russia.
According to OFAC, the violations were committed by Cobham’s former subsidiary, Metelics, prior to the sale of Metelics to MACOM. It was MACOM that identified the violations during due diligence related to its acquisition of Metelics. And it was presumably MACOM that required Cobham to make the voluntary disclosure to OFAC that led to the penalty in this matter.
The penalty is small by recent OFAC standards. (For example, it is about 620 times less than Societe Generale paid to OFAC as part of its global settlement of sanctions violations.)
But as a cautionary tale, the Cobham matter is important to any exporter.Continue Reading OFAC Dings U.S. Defense Contractor for Sanctions Violations, Inadequate Screening