Tag: Syria

US State Department Clarifies Implementation of Travel Ban Exemptions

The diplomatic cable instructs consulates on how to interpret the US Supreme Court’s direction to enforce the restriction only against foreign nationals who lack a “bona fide relationship with a person or entity in the United States.”

This Immigration Alert serves as an addendum to our prior summary of the Supreme Court decision partially granting the government’s request to stay enforcement of two preliminary injunctions that temporarily halted enforcement of Executive Order (EO) No. 13780. As a result of this decision, foreign nationals from six countries (Libya, Somalia, Sudan, Syria, Iran, and Yemen) who cannot show bona fide ties to the United States may be denied visas or entry for 90 days starting Thursday, June 29 at 8:00 p.m. EDT.

The communication from the US Secretary of State’s office enumerates the following situations where the EO’s travel restrictions will not apply:

  • When the applicant has a close familial relationship in the United States, which is defined as a parent (including parent-in-law), spouse, fiancé, child, adult son or daughter, son-in-law, daughter-in-law, or sibling, whether whole or half. This includes step relationships, but does not include grandparents, grandchildren, aunts, uncles, nieces, nephews, cousins, brothers-in-law and sisters-in-law, or any other “extended” family members.

  • When the applicant has a formal, documented relationship with an entity formed in the ordinary course, rather than for the purpose of evading the EO. This includes established eligibility for a nonimmigrant visa in any classification other than a B, C-1, D, I, or K, as a bona fide relationship to a person or entity is inherent in the visa classification.

  • When there are eligible derivative family members of any exempt applicant.

  • When the applicant has established eligibility for an immigrant visa in the immediate relative, family-based, or employment-based classification (other than certain self-petitioning and special immigrant applicants).

  • When the applicant is traveling on an A-1, A-2, NATO-1 through NATO-6, C-2 for travel to the United Nations, C-3, G-1, G-2, G-3, or G-4 visa, or a diplomatic-type visa of any classification.

  • When the applicant has been granted asylum, is a refugee who has already been admitted to the United States (including derivative follow-to-join refugees and asylees), or is an individual who has been granted withholding of removal, advance parole, or protection under the Convention Against Torture.

Applicants admitted or paroled into the United States on or after the date of the Supreme Court decision are also exempted, as are those currently in the United States who can present a visa with a validity period that includes either January 27, 2017 (the day the EO was signed) or June 29, 2017. Any document other than a visa, such as an advance parole document, valid on or after June 29 will also exempt the holder.

As described in the prior alert, any lawful permanent resident or dual foreign national of one of the six named countries who can present a valid passport from a country not on the list is not impacted by the EO. The EO also permits consular officers to grant case-by-case waivers to otherwise affected applicants who can demonstrate that being denied entry during the 90-day period would cause undue hardship, that entry would not pose a threat to national security, and that their admission would be in the national interest.

This post was written by Eric S. Bord and Eleanor Pelta of  Morgan, Lewis & Bockius LLP.

Russia’s New Advanced Development Territories Law: Far East Focus

An initiative to spur investment in this underdeveloped region.

Amid the ongoing loud noise surrounding the situation in Ukraine (and in Syria) and the related sanctions and counter-sanctions, a new Russian development initiative seems to have slipped under the radar. But it is worthy of note—particularly for potential investors in Russia’s Far East. This has all the more potential importance in the context of Russia’s recent pronounced political and economic pivot toward Asia. The Law on Advanced Development Territories (the ADT Law, or the Law), enacted in December 2014 and entered into force in spring 2015 (and the related simultaneously adopted acts that make corresponding amendments to the Tax Code and some 20 other laws) set out the “rules of the road” for these ADTs.

Russian President Vladimir Putin and other top officials at the Eastern Economic Forum in Vladivostok in September spotlighted this ADT program prominently. A number of new projects were announced at that forum or earlier, and most recently at an international forum in Harbin, China.

In a separate related development, in July, a so-called “Free Port of Vladivostok” was established within Vladivostok city and a few neighboring municipalities – which provides benefits and incentives to investors similar to the ADT Law, and with an enhanced exemption regime for customs clearance and immigration. The fiscal benefits of the Vladivostok free port come into force in January 2016, but a major Korean conglomerate is reported to be eyeing this opportunity.

Background

The ADT regime is somewhat similar to Russia’s existing Special Economic Zones (SEZ), which came into being under the 2005 Law on SEZs and some earlier regulations. These programs have had only mixed success. But the central focus of the new ADT regime is different: while SEZs have been aimed primarily at spearheading various industries (such as innovative technologies, ports, or recreational complexes), the ADTs are to address the general unevenness in development across Russia’s vast territory by incentivizing investment in more depressed areas—starting with the underpopulated and relatively neglected Far East.

As initially drafted, the ADT Law was to be confined to the Far Eastern Federal District alone. This geographical limit no longer applies so generally under the Law as enacted. But for the first three years, under special transitional provisions, it will apply only in the Far East and in certain sole-core-employer cities “where the social and economic situation is particularly drastic.”

The Law further directs the government to appoint a special authorized body (AB) charged with various ADT supervisory and planning functions. So far only the new Ministry of Eastern Development (established in 2012) has been appointed as such an AB—for the Far Eastern Federal District. For all practical purposes the Law will apply essentially in the Far East, at least initially. The Ministry has already adopted various implementing regulations envisaged under the Law. Further, Deputy Prime Minister Yury Trutnev, who is also the president’s plenipotentiary in the Far Eastern Federal District, has pledged strong support for the ADT program alongside other measures for development of Russia’s Far East.

As of September, the government has already approved the establishment of nine ADTs, including Komsomolsk (in the Khabarovsky Krai), Khabarovsk (covering several districts within Khabarovsk City and elsewhere), Nadezhdinskaya (in the Primorsky Krai), and some others in Kamchatka, Yakutia, and Amurskaya Oblast. The first specific ADT projects announced at the Vladivostok Forum and on other occasions (taking into account the most recent Harbin EXPO) include the following:

  • Construction of a bitumen plant by a Chinese-owned Singapore company together with Russia’s Independent Petroleum Co. (NNK) in the Khabarovsk ADT
  • An Australian coal company’s proposed investment into the transport infrastructure of the Beringovsky ADT in Chukotka
  • Recreational infrastructure facilities (including a golf club) to be financed and constructed by a Japanese company in Vladivostok
  • A proposed major agricultural enterprise investment by Russian interests at Mikhailovsky ADT in Primorsky Krai (the precise location is not yet identified)
  • German investors’ readiness to provide some 20 billion rubles to the Kamchatka ADT
  • A planned 50 billion rubles investment for infrastructure development in the Primorsky ADT
  • A coal-loading terminal to be constructed by Sakhatrans in Khabarovsky Krai (estimated investment of 30 billion rubles)
  • A truck-building plant (and dealership and service centers) project to be undertaken together by Chinese Sinotruk and the Far-Eastern Road and Construction Company in the Komsomolsk ADT

Government Decree

Under the Law, an ADT is created by a government decree for a term of 70 years. Such decrees are based on a proposal by the Authorized Body. This proposal, in turn, is supposed to be based on preliminary agreements with one or more prospective investors into the planned ADT. A special federal government commission will also play a role in ADT selection and formation.

The relevant government decree will set out the main ADT parameters, including its territorial limits (no overlap with an SEZ is allowed), types of commercial activities eligible for benefits to ADT residents (in contrast to SEZs, there are no economic sector limits for such activities are established in the Law), minimum investment and technology requirements, and a few other aspects. These decrees presumably will take into account the preliminary agreements with prospective investors mentioned above.

Tripartite Agreement

After the base government decree is adopted, the AB (again, for practical purposes, this is the Ministry of Eastern Development for now) and the relevant regional and municipal authorities are to enter into a tri-partite agreement to regulate various obligations and procedures for the ADT in question. This includes the regional and municipal authorities’ obligations on transferring of land plots and facilities into ownership by or lease to the management company (see immediately below on this point) or granting the management company the authority to manage such land plots and facilities, financing and operation of the infrastructure facilities, the conditions for granting property and land tax holidays to ADT residents (see more on tax and other exemptions below), and other aspects.

Management Company

An important player in an ADT’s actual functioning is its management company (MC). Under the Law, an MC is a 100% federally owned joint stock company that is designated as such by the government. An MC will have a broad range of powers, authority, and functions for its ADT(s). For example, an MC will (itself or by delegation to a subsidiary) do the following:

  • Act as an infrastructure construction customer (in Russian, zastroischik)
  • Ensure or organize the functioning of the ADT infrastructure
  • Take ownership or lease of federally or municipally owned land plots, buildings, and various infrastructure facilities (on certain conditions)
  • Facilitate connection into the utilities networks for ADT residents and service providers
  • Draft proposals for relevant amendments to municipal and other zoning plans
  • Organize the construction of roads and installation of infrastructure facilities
  • Provide various services to ADT residents

The government has already appointed a joint stock company Korporatiya Razvitiya Dalnego Vostoka (in English, Far East Development Corp.) as such an MC—again, with respect to the whole Far East District.

ADT “Residents”

To become an ADT resident, a commercial company (or individual entrepreneur) needs to file an application with the MC that includes a business plan and proposal for the types of activities to be performed and the level of investments and then enter into an activities performance agreement with the MC reflecting the investment obligations as well as the MC’s obligations. The Ministry of Eastern Development in its capacity as AB has already approved a template of such agreement following the ADT Law guidelines. Per the Law, once an ADT is established and running, there are limits to the grounds for an MC to reject an application and refuse to enter into a contract with a potential resident. The main (and quite general) recognized ground is inconsistency between the applicant’s proposal and the ADT’s particular parameters. It remains to be seen how the activity agreements will be negotiated in practice, as more experience is gathered for substantial new proposed investments.

ADT residents will be incentivized by an array of fiscal and administrative measures, including the following:

  • Exemption from or reduction of taxes on corporate profit, mineral extraction, and property and land
  • Customs free zone (if approved by the decree enacting the ADT)
  • Reduction of Social Security payments
  • A system of special protections and guarantees regarding state supervision (only “joint inspections” by various authorities, to be conducted per a schedule approved by the AB, etc.)
  • Exemption from foreign employee quota (if approved by the ADT’s supervisory council)
  • Reduction of educational and medical care administrative burdens (including admission of foreign-trained doctors and use of best foreign educational methods)

Some of these incentives are fairly similar to those applied to SEZs, including tax and customs holidays and state-inspection limitations.

Conclusion

The new ADT Law appears to open real new investment opportunities, primarily in the Far East. Yet one should be mindful of various restrictions in using this Law’s benefits—including that the potential resident has to be registered within the ADT territory and, if it is a commercial company, it may not have branches or other subdivisions outside of the ADT  (sister companies are permitted). More preconditions apply to the associated tax benefits under the revised Tax Code. Time will tell how effective the ADT Law will be in attracting much-needed new investment to Russia’s Far East.

Article By Jonathan H. Hines & Alexander V. Marchenko of Morgan, Lewis & Bockius LLP
Copyright © 2015 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

Congress to Examine Russia’s Role in the Crises in Syria and Ukraine; The First Lady Travels to Qatar and Jordan

Syrian and Iraqi Crises

Secretary of State John Kerry delivered remarks on U.S. Middle East policy last Wednesday at the Carnegie Endowment for International Peace.  The Secretary called on the Russian Government to contribute to the end of the Syrian conflict, including through a political settlement.  He also highlighted areas where the United States, Russia, and others agree, which include the fact that Daesh cannot be victorious and that a secular and united Syria must be preserved.  That same day, Deputy Secretary of State Antony Blinken warned that Russia cannot win in Syria, adding it can perhaps prevent Assad from losing.  Earlier in the week, the press reported that Russia has sent a few dozen special operations troops to Syria, redeploying the elite units from Ukraine as the Kremlin shifts its focus to supporting the Syrian regime.

Secretary Kerry then headed to Vienna, Austria, for another round of multilateral talks regarding the Syrian conflict, talks that will for the first time include Iran. At his Senate Foreign Relations Committee confirmation hearing to be Under Secretary of State for Political Affairs, State Department Counselor Tom Shannon testified that Secretary Kerry was convening the meeting in Austria to ascertain Russia’s commitment to fighting ISIL and to finding a political solution to the crisis that does not include Syrian President Bashar al-Assad.  This comes after Secretary of Defense Ash Carter signaled last Tuesday that the Administration is considering deploying a small number of special operations forces to Syria and attack helicopters to Iraq to build momentum in the fight against ISIL.

  • On Wednesday, 4 November, the House Foreign Affairs Committee is expected to hold a hearing titled, “U.S. Policy after Russia’s Escalation in Syria.”

  • On Wednesday, 4 November, the House Foreign Affairs Subcommittee on Europe is expected to hold a hearing titled, “Challenge to Europe: The Growing Refugee Crisis.”

Ukraine Crisis

Last Monday, the White House and State Department issued statements commending Sunday’s elections in Ukraine and calling for votes on 15 November in Mariupol and in other parts of eastern Ukraine where the elections could not take place.

Commerce Secretary Penny Pritzker travelled to Ukraine early last week to meet with Government officials and to discuss ongoing economic reforms.  She reiterated U.S. support for Ukraine and announced that President Obama, working with Congress, intends to move forward with a third $1 billion loan guarantee for Ukraine in the coming months.  This, she said, fulfills a U.S. commitment to consider providing a third $1 billion loan guarantee in late 2015, if the conditions warrant.

The press reported last week that NATO is considering proposals to deploy 4,000 troops to Eastern European countries bordering Russia.  The proposals are apparently part of an ongoing debate within the Alliance about the long-term response to Russia’s 2014 annexation of Crimea and its support for the separatist uprising in eastern Ukraine.

  • On Tuesday, 3 November, the Senate Foreign Relations Committee is expected to hold a hearing titled, “Putin’s Invasion of Ukraine and the Propaganda that Threatens Europe.”

NDAA – Avenues Sought

After the presidential veto, Congressional leaders are looking for options to advance the Fiscal Year (FY) 2016 National Defense Authorization Act (NDAA; H.R. 1735).   Some sources report that Senate Armed Services Chairman John McCain (R-Arizona) may be considering drafting a revised NDAA that could be attached to an Omnibus appropriations measure that will likely move later next month or early December.  However, some Members are reportedly advocating for a revised NDAA – one that reflects the $5 billion in cuts mandated by the Budget deal – to be passed quickly and not delayed until Congress takes up the expected Omnibus bill.

TPP Update

Last Thursday, Agriculture Secretary Tom Vilsack sought to explain the delay around publicly releasing the final text of the Trans-Pacific Partnership (TPP), attributing it to the Canadian election.  Reports around Washington indicate the release of the text is weeks away.  At a Thursday press conference, Representative Rosa DeLauro (D-Connecticut) called on the White House to “stop selling something [TPP deal] that nobody but them knows about.”  Meanwhile, Senate Finance Committee Ranking Member Ron Wyden (D-Oregon) praised the Office of the U.S. Trade Representative (USTR) last Thursday for issuing new guidelines that allow the Committee Members’ personal staff to access the text of the deal.

Ex-Im Bank Re-Authorization Advances

Early last week, the House of Representatives passed a measure to reauthorize the U.S. Export-Import (Ex-Im) Bank by a vote of 313-118 over the objections of the chamber’s most conservative Republican members.  Senate Majority Leader Mitch McConnell (R-Kentucky) blocked the measure from being brought to the floor as a standalone bill last week and instead reiterated the bill will have to be attached to another legislative vehicle expected to advance in the Senate.

Washington Prioritizes TTIP

U.S. Trade Representative Michael Froman confirmed last Tuesday at an Atlantic Council event that last month’s conclusion of the TPP deal allows USTR to shift its focus to advancing and accelerating the Transatlantic Trade and Investment (TTIP) negotiations with the European Union.  That same day, SPB released a client alert on Washington’s shift to TTIP.

U.S.-India Trade Policy Forum

Last week, the U.S.-India Trade Policy Forum convened in Washington to discuss agriculture, trade in services and goods, promoting investments in manufacturing, and intellectual property.

Other Congressional Hearings This Week

  • On Tuesday, 3 November, the Senate Armed Services Committee is expected to hold a hearing titled, “Future of Warfare.”

  • On Tuesday, 3 November, the House Energy and Commerce Committee is expected to hold a hearing titled, “Examining the EU Safe Harbor Decision and Impacts for Transatlantic Data Flows.”

  • On Tuesday, 3 November, the House Judiciary Committee is expected to hold a hearing titled, “International Data Flows: Promoting Digital Trade in the 21st Century.”

  • On Tuesday, 3 November, the House Armed Services Subcommittee on Seapower and Projection Forces is expected to hold a hearing titled, “Aircraft Carrier – Presence and Surge Limitations. Expanding Power Projection Options.”

  • On Wednesday, 4 November, the House Foreign Affairs Subcommittee on Global Human Rights is expected to hold a hearing titled, “Demanding Accountability: Evaluating the 2015 Trafficking in Persons Report.”

  • On Wednesday, 4 November, the Senate Foreign Relations Committee is expected to hold a hearing titled, “U.S. Policy in North Africa.”

  • On Wednesday, 4 November, the House Ways and Means Subcommittee on Oversight is expected to hold a hearing titled, “Iran Terror Financing and the Tax Code.”

  • On Friday, 6 November, the House Foreign Affairs Subcommittee on the Western Hemisphere is expected to hold a hearing titled, “Deplorable Human Rights Violations in Cuba and Venezuela.”

Looking Ahead

Washington will likely focus on the following upcoming matters:

  • 1-7 November: First Lady Michelle Obama travels to Doha, Qatar, and Amman, Jordan

  • 9 November: President Obama hosts Israeli Prime Minister Benjamin Netanyahu

  • 14-22 November: President Obama travels to Turkey, the Philippines, and Malaysia

  • 30 November-11 December:  U.N. Global Climate Conference in Paris

  • 15-18 December: 10th WTO Ministerial Conference to be held in Nairobi, Kenya

Article By Stacy A. Swanson of Squire Patton Boggs (US) LLP
© Copyright 2015 Squire Patton Boggs (US) LLP

Crime Doesn’t Pay (as much as it used to) – FBI Cracks Down on Trade of Looted Syrian and Iraqi Cultural Artifacts

In support of the international crackdown on the black market trade of looted cultural artifacts, the FBI recently announced that art dealers may be prosecuted for engaging in the trade of stolen Iraqi and Syrian antiquities. Terrorist organizations such as Islamic State in Iraq and the Levant (“ISIL”) have pillaged these countries of their cultural relics for sale on the black market. Many find their way into the hands of art dealers and collectors in the Europe or even United States. In response, the FBI released an alert titled “ISIL Antiquities Trafficking” on August 25, 2015. Perhaps most strikingly, this alert warns that engaging in the purchase of these looted artifacts may constitute a violation of 18 U.S. Code § 2339A[1] for providing financial support to terrorist organizations.

ISIL has done much to publicize its demolition of artifacts and archaeological sites in Syria and Iraq that it has condemned as un-Islamic.[2] However, behind the cameras, many of these cultural artifacts are being smuggled out of these countries and sold by ISIL on the underground market and finally reach the dealers and collectors in Europe and North America. The profits from the sale of these precious antiquities are then used by the organization to fund its operations. George Papagiannis, spokesman of UN Educational, Scientific and Cultural Organization, described the artifact trafficking as “a threat to the memory of humankind and a threat to the identities of people in these communities who are tied to these sites.”[3] Facilitating this illicit trade are the smugglers and gallery owners who provide forged documentation to allow the artifacts to enter European and American markets.[4]

Before the FBI’s issuance of the alert, United Nations and Europe had already taken steps to prevent and eliminate the trafficking of these Syrian and Iraqi cultural objects. On February 10, 2015, United Nations Security Council passed Resolution 2199 that requires all Member States to take efforts to prevent the trade of artifacts illegally removed from Syria after 2011 and from Iraq after 1990. In December 2013, the European Union Council Regulation (EU) No 1332/2013 prohibited the trade of Syrian cultural property where there are reasonable grounds to suspect that the goods were removed from Syria without the consent of their legitimate owner or in breach of Syrian law or international law.

The FBI alert follows in the footsteps of these efforts to stop the illegal trade of Syrian and Iraqi artifacts. The alert warns art dealers and collectors that they should be careful in purchasing objects from these regions and asks them for help and cooperation to spread this message out and prevent further trade. In addition, the FBI states that purchasing stolen items from these regions may result in prosecution under 18 U.S. Code § 2339A because the proceeds from such sales may provide financial support to terrorist organizations.

18 U.S.C. § 2339A was enacted to charge those who provided material support to terrorists. It provides that “whoever provides material support or resources…knowing or intending that they are to be used in preparation for, or in carrying out, a violation of [various criminal statutes related to terrorist activities]” may be charged with providing material support to terrorists. Penalties for violating 18 U.S. Code § 2339A are significant and range from a fine to life imprisonment. However, in Holder v. Humanitarian Law Project, 130 S. Ct. 2705 (2010), the Supreme Court clarified that a violation of 18 U.S.C. § 2339A requires that the donor must intend to further terrorist activity, rather than simply know that the donee is a terrorist organization. According to this holding, it seems that even if an art dealer or collector was prosecuted under 18 U.S.C. § 2339A, there would need to be a showing that the dealer or collector intended to support terrorist activity by purchasing the stolen artifacts, which in most cases, is highly unlikely.

It is unclear from FBI’s alert whether 18 U.S.C. § 2339B will be used to pursue dealers and collectors found to have bought Syrian and Iraqi stolen artifacts. Section 2339B penalizes anyone who “knowingly provides material support or resources to a foreign terrorist organization, or attempts or conspires to do so.” Unlike 18 U.S.C. § 2339A, the required mental state for a violation of § 2339B is only knowledge that the receiving organization is a designated terrorist organization, not specific intent to further the terrorist activities. In Weiss v. National Westminster Bank PLC, 768 F.3d 202, the Second Circuit Court of Appeals held that for the purposes of 18 U.S.C. § 2339B, a defendant has knowledge that an organization engages in terrorist activity if it “knows there is a substantial probability that the organization engages in terrorism but…does not care.” If the FBI elects to prosecute under 18 U.S. Code § 2339B, art market practitioners may have more cause concern. Admittedly several intermediary middle-men often separate the original terrorist looters and the final buyers, but the intermediate art dealer or the buyer might still be charged with violating 18 U.S.C. § 2339B if it should be aware of a substantial probability that the prior seller may have engaged with terrorism but takes no action.

18 U.S.C. § 2339B has been the most frequently cited statute for the government to pursue sponsors of terrorism. If the government is determined to use § 2339B to attack the trafficking of cultural property, the innocent buyer may face real legal risks if the acquired objects are proven to be looted from Iraq or Syria by ISIL. As the FBI warns in its alert, art dealers and collectors alike should do their due diligence and “check and verify provenance, importation and other documents” and report any suspicious items to the FBI.

Article By Robert A. Darwell of Sheppard, Mullin, Richter & Hampton LLP & Justin Xu
Copyright © 2015, Sheppard Mullin Richter & Hampton LLP.

[1] The statute quoted in the alert is 18 U.S. Code § 233A. However, we understand the cited statute here should be 18 U.S. Code § 2339A.

[2] Matthew Hall, How We Can Prevent ISIS From Pillaging Palmyra, the Newsweek, (June 14, 2015), available here.

[3] Julian Pecquet, Congress Deals Blow to ISIS Looting in Syria, the U.S. News (June 2, 2015), available here.

[4] CBS News, Following the trail of Syria’s looted history, (September 9, 2015), available here.

Office of Foreign Assets Control Publishes New Syria and Ukraine Sanctions Regulations; Designates Russian Bank For its Involvement in Syrian Unrest

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The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) recently published a final rule amending and reissuing in their entirety the Syrian Sanctions Regulations (“SSR”), 31 C.F.R. Part 542. The reissued SSR contain six new general licenses, including one that authorizes the provision by a U.S. person or from the United States of services ordinarily incident to the supply to Syria of non-U.S. food, medicine, and medical devices that are non-sensitive in nature.

In addition, OFAC last week issued new Ukraine-Related Sanctions Regulations to implement executive orders that the Administration issued in March 2014, and designated a Russian bank (Tempbank) and the Chairman of its Management Committee (Mikhail Georgievich Gagloev) for providing material support and services to the Government of Syria.

Background on Syrian Regulations

Syria has been the target of U.S. economic sanctions since it was designated as a state sponsor of terrorism in 1979. The SSR, which first went into effect in April 2005, constitute one of the primary regulatory regimes that implements these sanctions. (The Commerce Department’s Export Administration Regulations (“EAR”) also broadly prohibit, absent licensing, exports and reexports to Syria of most items, other than food and non-sensitive medicines, that are of U.S.-origin or that incorporate more than de minimis U.S.-origin content.) Since the original issuance of the SSR in 2005, the Bush and Obama Administrations have issued executive orders broadening the U.S. sanctions against Syria by imposing new blocking measures and other trade restrictions. OFAC also has issued a number of general licenses authorizing certain otherwise prohibited transactions. These developments had created a complex patchwork of authorities imposing sanctions on Syria. OFAC’s overhaul of the SSR combines many of these authorities into a single, unified, and up-to-date set of regulations.

Incorporated Executive Orders

The reissued SSR, which went into effect on May 2, 2014, incorporate asset-blocking measures and other trade restrictions imposed under six executive orders issued between 2006 and 2012. As a result, Section 542.201 of the SSR now requires the blocking of all property and interests in property of the Government of Syria (including its agencies, instrumentalities, and controlled entities) that are or hereafter come into the United States or the possession or control of a U.S. person, as well as such assets of Specially Designated Nationals (“SDNs”) sanctioned because they were determined to have undertaken activities specified in the executive orders. U.S. persons may not transfer, pay, export, withdraw, or otherwise deal in such blocked property. Consistent with OFAC guidance with respect to numerous sanctions programs, SSR § 542.411 clarifies that if a person whose assets are blocked under Section 542.201 owns, directly or indirectly, a 50 percent or greater interest in an entity, that entity’s assets are also blocked even if that entity is not added to the SDN List.

The SSR also now contain certain other trade restrictions originally imposed by

Executive Order 13582 (effective August 18, 2011), which we discussed in our e-alert of August 19, 2011. These restrictions prohibit:

  • U.S. persons, wherever located, from making new investments in Syria (§ 542.206) ;
  • The export, reexport, sale, or supply, directly or indirectly, by a U.S. person or from the United States of any services to Syria (§ 542.207);
  • The importation into the United States of Syrian-origin petroleum or petroleum products (§ 542.208);
  • U.S. persons from engaging in any transaction or dealing related to Syrian-origin petroleum or petroleum products (§ 542.209); and
  •  U.S. persons from approving, financing, facilitating, or guaranteeing a transaction by a foreign person that would be prohibited if performed by a U.S. person or within the United States (§ 542.210).

General LIcenses and Statements of Licensing Policy

In addition to incorporating prior executive orders, the reissued SSR incorporate (at Sections 542.509 through 542.520 and 542.523) a number of general licenses that were previously posted on OFAC’s website, and add six new general licenses and three new statements of licensing policy. The new general licenses authorize the following transactions:

  • With certain limitations, the receipt of payment of professional fees and reimbursement of incurred expenses for the provision of authorized legal services to or on behalf of the Government of Syria and other blocked parties (§ 542.508);
  • All transactions in the United States between U.S. persons and persons who have been granted certain categories of U.S. visas; services in connection with the filing of applications for such visas; and services provided by accredited U.S. graduate and undergraduate degree-granting institutions for the filing and processing of applications to enroll in the institutions, and the acceptance of payments for submitted applications to enroll and tuition from persons ordinarily resident in Syria (§ 542.521);
  • Otherwise prohibited transactions between blocked SDNs and employees, grantees, or contractors of the U.S. federal government that are for official government business (§ 542.522);
  • The following services provided in the United States to non-Syrian carriers transporting passengers or goods to or from Syria (but not the Government of Syria or blocked parties): bunkers and bunkering services, services supplied or performed in the course of emergency repairs, and services supplied or performed under circumstances which could not be anticipated prior to the carrier’s departure for the United States (§ 542.524);
  • The provision by a U.S. person or from the United States of services ordinarily incident to the supply to Syria of non-U.S.-origin food, medicine, and medical devices that would be classified EAR99 if subject to the EAR (§ 542.525); and
  • Certain services related to conferences, performances, exhibitions, or similar events in the United States or a third country attended by persons who are ordinarily resident in Syria, other than the Government of Syria or blocked parties (§ 542.526).

The new general license found at Section 542.525 is a particularly noteworthy development, as it eliminates an anomaly in the prior sanctions regime’s licensing requirements. Under the general license now found at Section 542.510, U.S. persons are authorized to be involved in and facilitate the supply to Syria of food, medicines and medical devices authorized for supply to Syria by the U.S. Commerce Department. However, because the Commerce Department regulations do not apply to exports to Syria of most non-U.S.-origin items that contain 10 percent or less U.S. content by value, U.S. persons were not permitted by the OFAC general license to facilitate the supply of such non-U.S.-origin items to Syria; rather, a specific OFAC license was required. The new general license authorizes the provision of services by a U.S. person or from the United States related to the export and reexport to Syria of non-U.S.-origin food, medicines, and medical devices that would be classified EAR99 if subject to the EAR.

In addition, three new statements of licensing policy contained in the SSR clarify that specific licenses may be issued by OFAC on a case-by-case basis authorizing: (1) certain transactions involving Syria’s telecommunications sector that are otherwise prohibited by the SSR, in order to enable private persons in Syria to better and more securely access the Internet (§ 542.527); (2) certain transactions involving Syria’s agricultural sector that are otherwise prohibited by the SSR, in order to strengthen that sector in light of Syria’s food “insecur[ity]” (§ 542.528); and (3) certain transactions that are otherwise prohibited by Sections 542.206 through 542.210 of the SSR, including new investment related to Syrian petroleum and petroleum products for the benefit of the National Coalition of Syrian Revolutionary and Opposition Forces (§ 542.529).

New Syria Related Designations

In addition to reissuing the SSR, on May 8, 2014, OFAC announced 10 new Syria-related designations. These designations included six Syrian government officials and two Syrian refineries. OFAC also designated a Russian Bank (Tempbank) and the Chairman of its Management Committee (Mikhail Georgievich Gagloev) pursuant to Executive Order 13582 for providing material support and services to the Government of Syria, including the Central Bank of Syria and SYTROL, Syria’s state oil marketing firm. The Treasury Department statement announcing the designations noted that Tempbank has provided millions of dollars and facilitated the provision of financial services to the Syrian regime, and that Mr. Gagloev personally travelled to Damascus to make deals with the Syrian regime on behalf of Tempbank.

As a result of these designations, U.S. persons are generally prohibited from engaging in any transactions or dealings with these parties, and the property and property interests of these parties that are or come into the United States or the possession or control of a U.S. person are blocked. Further, the sanctions apply to any entity in which any designated person owns a 50 percent or greater interest (regardless of whether such entity is itself designated).

Publication of Ukraine Related Sanction-Regulations

Also on May 8, OFAC issued new Ukraine-Related Sanctions Regulations at 31 C.F.R. Part 589 to implement executive orders issued in March 2014 (EOs 13660, 13661, and 13662, which were the subject of our prior e-alerts on March 6, 2014, March 18, 2014, and March 21, 2014).

The newly issued regulations, which were effective immediately, do not substantively change the scope of the Ukraine-related sanctions program, but do provide directions for management of blocked funds and property, definitions, interpretations, and limited general licenses. The general licenses authorize transactions such as certain transfers of property between blocked accounts in a U.S. financial institution, debits from blocked accounts by a U.S. financial institution for normal service charges, the provision of certain legal services, the receipt of certain payments for the provision of authorized legal services, and the provision of emergency medical services in the United States.

OFAC stated that these regulations were being published in abbreviated form, and that it intends to supplement them with a more comprehensive set of regulations, which may include additional definitions, interpretive guidance, general licenses, and statements of licensing policy.

Article by:

Peter Flanagan
Corrine Goldstein
Peter Lichtenbaum
Kimberly Strosnider
David Addis
Sarah Liebschutz
Of:
Covington & Burling LLP