Articles Posted in Exports

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With “Implementation Day” came the lifting of certain key U.S. and EU sanctions on the civil aviation industry. However, many prohibitions still remain, and licensing requirements may attach to U.S. persons or non-U.S. persons who seek to do business in Iran or operate airline services to/from Iran. Companies must continue to navigate this complex sanctions framework if seeking to engage in Iran’s aviation sector.

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The front line of Iran sanctions compliance and enforcement has been the banking sector. With the arrival of “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), financial institutions and persons engaging in financial transactions face an adjusted, but still complex, sanctions environment. Continue reading →

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January 16, 2016 was “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), bringing into effect the sanctions commitments of the United States and European Union (EU).  The International Atomic Energy Agency (IAEA) confirmed in Vienna that Iran had met its JCPOA milestones with respect to its nuclear program.  The U.S. sanctions changes involve partial relief within a complex regime with continuing primary sanctions and designations on Iranian parties which carry secondary sanctions.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC)  issued Implementation Day guidance describing the changes to the U.S. sanctions program for Iran, which largely reflect what had been expected under the JCPOA.  This includes the ending of secondary sanctions on Iran related to nuclear weapons proliferation; delisting of over 400 Iranian and Iran-related Specially Designated Nationals (SDNs); issuance of general licenses for non-U.S. entities owned or controlled by U.S. persons to engage in certain activities in Iran, as well as for import to the United States of Iranian carpets and foodstuffs including pistachios and caviar; and adjustment of licensing policy to allow authorization of certain exports, sales, leasing and transfers of civilian passenger aircraft.  Existing authorizations for agricultural commodities (including food), medicine, and medical supplies remain unchanged.  Exports and reexports of U.S. origin products (as well as foreign-origin products with more than 10% U.S. content) still require a license, and U.S. persons still may not participate in business transactions with Iran unless licensed.

Following will be a series of posts on key aspects of the adjustments to U.S. and EU regulations relating to Iran.

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On Friday December 18, 2015 the President signed the Consolidated Appropriations Act, 2016, which funds the Federal government through the 2016 fiscal year. Among many other non-funding related provisions, section 101 of Division O of the Act removed the 40-year ban on the export of crude oil. It repeals Section 103 of the Energy Policy and Conservation Act (42 U.S.C. § 6212), the cornerstone of the prohibition on exporting crude, and provides that “[n]otwithstanding any other provision of law … no official of the Federal Government shall impose or enforce any restriction on the export of crude oil.”

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The U.S. Office of Foreign Assets Control (OFAC) issued General License 20 for Myanmar (Burma) on December 7, 2015, which authorizes certain trade related transactions that were previously prohibited due to the role of sanctioned parties in the country’s ports and other trade infrastructure.

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On October 29, 2015, the U.S. and the EU took separate actions to ease their respective Belarus-related sanctions programs for six months. These measures follow the October 11, 2015 reelection of Alexander Lukashenko as President of Belarus, the regime’s decision to release certain political prisoners and hopes for an improvement of the political and economic relationship between Western countries and Belarus. While currently temporary in nature, the sanctions relief provided affords Western companies opportunities to engage in certain transactions in Belarus.

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On October 18, 2015, both the United States and the European Union took action to prepare for future changes to sanctions policy which will be effective upon IAEA verification of Iran’s commitments under the Joint Comprehensive Plan of Action (JCPOA).  This was a required step under the JCPOA, termed “Adoption Day,” scheduled to occur ninety (90) days after the JCPOA was endorsed by the UN Security Council via resolution 2231.

Importantly, Adoption Day does not bring about any immediate sanctions relief.  OFAC reminded companies again about potential violations related to arranging agreements and contingent contracts with Iranian parties prior to Implementation Day.

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Pillsbury and Goltsblat BLP are pleased to announce that Evgeny Shumilov, Economic Attaché, Embassy of the Russian Federation, will be participating in the October 21 luncheon and roundtable discussion on doing business in Russia.  Mr. Shumilov will open the event by discussing the state of U.S.-Russia trade and opportunities for U.S. companies in the Russian market.

Please join us for Mr. Shumilov’s remarks and for presentations from top legal minds from Pillsbury and Goltsblat BLP regarding the key developments under Russian, U.S. and EU laws and regulations for U.S. companies doing business in Russia today.

Topics include:

  • Russian Legal Developments: Major recent Russian legislative developments and initiatives, including changes to employment, real estate, commercial, anti-trust, corporate and tax laws.
  • U.S. and EU Sanctions Update: Current compliance considerations for U.S. companies and their subsidiaries and affiliates doing or seeking to do business in Russia.
  • News from Capitol Hill: Outlook for U.S.-Russia relations through the November 2016 elections.

Speakers

Evgeny Shumilov, Economic Attaché, Embassy of the Russian Federation

Andrey Goltsblat, Managing Partner, Goltsblat BLP

Nancy Fischer, Partner, Pillsbury

The Honorable Gregory H. Laughlin, Senior Counsel, Pillsbury

Elina Teplinsky, Partner, Pillsbury

 

For questions or to register, please contact Julie Merkin at julie.merkin@pillsburylaw.com.

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Under the terms of the Iran Nuclear Agreement Review Act, Congress had until September 18 to reject President Obama’s promised sanctions relief for Iran agreed to under the Joint Comprehensive Plan of Action (JCPOA). Although the House of Representatives voted to reject the deal, Senate Democrats blocked debate on a similar resolution, thus preventing a vote in the Senate. Consequently, Congress took no action, which means that the JCPOA will continue to be implemented on a step-by-step basis (see our blog post here for full details).  Looking ahead, there are several key issues for businesses contemplating entering the Iran market to consider.

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On July 22, 2015, the Department of Commerce’s Bureau of Industry and Security (BIS) released amendments to the Export Administration Regulations (EAR) implementing the Secretary of State’s May 29, 2015 decision to rescind the designation of Cuba as a State Sponsor of Terrorism. The removal of Cuba from Country Group E:1 and “AT” controls under the EAR requires a number of highly-technical changes to U.S. regulations. The key practical impacts are:

  •  The de minimis level for Cuba will be 25 percent instead of 10 percent (with some exceptions);
  •  License exception AVS will be expanded somewhat for aircraft on temporary sojourn in Cuba;
  • License exception RPL will be available to replace, on a one-for-one basis, parts, components, accessories or attachments for aircraft and other items controlled for national security reasons that were previously lawfully exported or reexported to Cuba; and
  • License exception BAG generally will allow travelers to Cuba to carry encryption commodities and software.

It is important to emphasize that the change to Cuba’s status as a state sponsor of terrorism does not remove the U.S. embargo on Cuba. Cuba remains in Country Group E:2, and any export, re-export, or transfer of goods, software or technology that are subject to the EAR to Cuba must still be licensed or be eligible for export under a license exception. Also, there have been no further changes to the U.S. sanctions policy administered by the Office of Foreign Assets Control (OFAC).

Increase in De Minimis Amount of U.S. Content Allowed for Cuba

Under the de minimis exception of the EAR, foreign-made products incorporating “controlled” U.S. content – that is, items that would require a license if exported separately to the country of ultimate destination – below certain threshold amounts are not subject to the EAR.

Previously, foreign made products that incorporated more than 10% U.S.-origin content were subject to the EAR when exported to Cuba from third countries. The amendments increase the threshold de minimis level to 25%, consistent with the threshold applied to most other countries.

As a result of this change, non-U.S. companies may find it easier in some cases to export products to Cuba incorporating U.S.-origin content. Nonetheless, companies should be mindful of continuing U.S. sanctions rules when assessing de minimis eligibility. In particular, because all U.S. content is controlled for export to Cuba (even items classified under EAR99), products that satisfy the de minimis test for export to other countries may not qualify for export to Cuba under the de minimis exception. Also, several categories of items are not eligible for the de minimis exception, including items incorporating content classified as a “600 series” item.

Changes to License Exceptions

License Exception Aircraft, Vessels and Spacecraft (AVS)

License exception AVS (“Aircraft, Vessels and Spacecraft”) (EAR § 740.15) previously allowed non-Cuban airlines to operate flights into Cuba. The amended regulations remove some restrictions on the use of AVS for Cuba, but the modifications currently seem likely to have a limited impact until such time as export licensing requirements for sales of aircraft and aircraft parts to Cuba are relaxed.

License Exception Servicing and Replacement of Parts and Equipment (RPL)

Certain exports and re-exports to Cuba may now be eligible for License Exception “Servicing and Replacement of Parts and Equipment” (EAR § 740.10). This would allow one-for-one replacement of parts, components, accessories, and attachments to be exported or re-exported to Cuba for aircraft; as well as for commodities controlled for national security (NS) reasons. Note that this license exception may only be used for items previously lawfully exported or reexported to Cuba.

License Exception Baggage (BAG)

License Exception “Baggage” (BAG) (EAR § 740.14) was previously available for Cuba. The amendments have the effect of now authorizing travellers to carry in their baggage encryption items (e.g., laptops containing encryption software) for their own use.

Before using any of the above license exception, it is important to review all of the specific requirements under EAR Part 740 and § 746.2 (providing information of the permitted use of license exceptions for Cuba) as well as the FAQ’s that accompanied the release of the amendments.