On July 12, 2001, the Bureau of Export Administration (BXA) in the U.S. Department of Commerce and the Office of Foreign Assets Control (OFAC) in the U.S. Department of Treasury published interim regulations implementing the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA).
The TSRA was intended to remove prohibitions contained in U.S. unilateral sanctions regulations on sales of agricultural commodities, medicines and medical devices to sanctioned countries. Although they do not completely remove trade prohibitions in all cases, the new interim regulations significantly liberalize existing sanctions policies and will help to promote the sale of these types of products to countries subject to U.S. unilateral sanctions. The interim regulations will enter into force on July 26, 2001, but will remain open for comments until September 10, 2001. Neither BXA nor OFAC are expected to substantially change the interim rules before finalizing them.
The new regulations establish expedited procedures for exporting agricultural commodities, medicine and medical devices to Iran, Libya and Sudan. Cuba is treated differently under the new regulations because of complications presented by the 1992 Cuban Democracy Act (CDA). As a result of the CDA, only agricultural products qualify for the new expedited procedures for shipping to Cuba—exports of medicines and medical devices must continue to be specially licensed—but this should be possible in most cases.
Exports of Agricultural Commodities, Medicines and Medical Devices to Iran, Libya and Sudan
The new interim regulations establish expedited procedures for prospective exporters to apply for and receive one-year licenses from OFAC to export agricultural commodities, medicines and medical devices to Iran, Libya and Sudan. In order to qualify for the new expedited procedures, prospective exporters must demonstrate that the product proposed to be exported is not otherwise controlled or subject to a license requirement from BXA. Prospective exporters of medical devices (including supplies) must obtain an Official Commodity Classification of EAR 99 (indicating that the product is not controlled for export purposes) prior to submitting a license request to OFAC. Executory contracts (contracts signed pending OFAC approval) will be deemed to have been signed on the date of the issuance of the one-year license from OFAC. Shipments under the one-year license must be made within the 12-month period following the issuance of the one-year license.
Under these new expedited procedures, properly-submitted license requests will theoretically be granted by OFAC within nine days following the referral of the license request to other government agencies. According to OFAC, if another federal agency "raises a concern short of an objection … OFAC will delay its response to the license request for no more than thirty additional days to allow for further review of the request." 66 Fed. Reg. 36683, 36685 (July 12, 2001). Although these timeframes were declared by OFAC in the publication of the regulations in the Federal Register, they were not included in the regulations themselves. OFAC historically has been very slow in processing license requests and it therefore remains to be seen how quickly OFAC will actually repond to properly submitted requests. Accordingly, prospective exporters should be cautioned that delays may occur in the processing of these one-year license requests.
Financing by U.S. banks and financial institutions and U.S. government export assistance remain prohibited. Nevertheless, U.S. banks may confirm or advise such financing.
Exports of Agricultural Commodities, Medicines and Medical Products to Cuba
The new interim regulations also permit the exportation of agricultural commodities to Cuba pursuant to a new BXA license exception, "AGR." All such AGR exports must be made pursuant to a "written contract," except for donations and commercial samples that are not subject to this contract requirement. 66 Fed. Reg. 36676 (July 12, 2001).
Under the new interim regulations, prospective exporters of agricultural commodities to Cuba must notify BXA prior to exporting by filing the standard BXA Multipurpose Application Form. Under the BXA regulations, within two business days of filing the license application, BXA will refer the filing to an inter-agency review process. If no objection is received within nine business days of the referral (11 business days from the filing of the application), an exporter may proceed with the shipment. Confirmation that no objection has been raised will be available from the BXA’s electronic System for Tracking Export License Applications (STELA).
BXA will also specifically license exports of medicines and medical devices to Cuba on a case-by-case basis pursuant to current licensing procedures.
Financing by U.S. banks and financial institutions and U.S. government export assistance remain prohibited, except that the new interim regulations appear to permit financing by foreign subsidiaries of U.S. banks. This provision may be of limited utility, however, because most U.S. banks have foreign branches, not subsidiaries. Nevertheless, U.S. banks may confirm or advise such financing.
U.S. sanctions and export control regulations generally apply to exports and re-exports of U.S.-origin goods and apply to U.S. persons wherever they are located. Foreign subsidiaries of U.S. companies are also generally subject to U.S. sanctions and export control regulations. U.S. companies and companies with U.S. employees should always exercise extreme caution and obtain the advice of counsel if presented with any potential business opportunities with sanctioned countries, entities or individuals. Countries currently subject to U.S. sanctions include Angola, Burma, Cuba, Iran, Iraq, Libya and Sudan.