Treasury Provides Guidance on Humanitarian Shipments to Iran; Sanctions Shipping Agents in PRC and Hong Kong; and Amends Cuba Sanctions
Client Alert
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has recently provided guidance or taken action on a number of issues relevant to the forwarding industry.
Secondary Sanctions on Iranian Financial Institutions
On October 8, 2020, the U.S. Department of the Treasury designated eighteen Iranian banks under Executive Order (E.O.) 13902 (2020), which effectively extended secondary sanctions to Iran’s entire financial sector. On October 9, 2020, we distributed a client alert summarizing the effects of this action. Among other things, OFAC noted on October 8 that it would be providing additional guidance on determining what types of non-humanitarian transactions with Iran would be considered significant and therefore sanctionable. OFAC has not yet released guidance on this issue.
On October 26, 2020, OFAC issued General License 8A (GL 8A) and amended six FAQs (821, 822, 823, 825, 828, and 844), all of which concern authorizations and policies for humanitarian trade with Iran. Under this new guidance:
- GL 8A authorizes transactions with the Central Bank of Iran (CBI), the National Iranian Oil Company (NIOC), and any entity in which NIOC holds a 50% or larger beneficial ownership interest, involving the shipment of food and medical supplies to Iran that are already licensed under 31 CFR §§ 560.530 to 560.533 of the ITSR.
- OFAC reemphasized that it will not pursue foreign companies for engaging in humanitarian transactions that would be authorized for U.S. companies under GL L and GL 8A.
- OFAC still has not provided guidance on how foreign companies can determine if business with Iranian banks is significant (i.e., sanctionable). We will send out a client alert once OFAC issues guidance on this issue.
As GL 8A only applies to certain licensed humanitarian activity, it is still prudent to review any transactions with CBI or NIOC carefully. In addition, when using GL L or GL 8A, it is important to review whether the activity is authorized under applicable provisions of the ITSR. If you or your customers have any questions about humanitarian trade with Iran, please let us know and we would be happy to discuss the specifics with you.
OFAC Sanctions Shipping Agents in the People’s Republic of China (PRC)
On October 19, 2020, OFAC imposed sanctions on the following PRC and Hong Kong-based companies for supporting the Islamic Republic of Iran Shipping Lines (IRISL): Reach Holding Group (Shanghai) Company Ltd.; Reach Shipping Lines; Delight Shipping Co., Ltd.; Gracious Shipping Co. Ltd.; Noble Shipping Co. Ltd.; and Supreme Shipping Co. Ltd. The IRISL affiliates involved here were E-Sail Shipping Company, Ltd., IRISL’s Shanghai-based subsidiary, and Hafez Darya Arya Shipping Company (HDASCO), another IRISL subsidiary.
According to the U.S. Department of State, the designated PRC companies supported IRISL and IRISL affiliates by:
1. Arranging port berths for IRISL vessels at Chinese ports;
2. Falsifying documents and engaging in other deceptive practices intended to conceal IRISL’s and its affiliates’ activities in the PRC from the PRC government and other parties;
3. Knowingly selling, supplying, or transferring four large container vessels to one of IRSIL’s affiliates; and
4. Knowingly selling, supplying, or transferring goods and services to IRISL and its affiliates with the intent to conceal IRISL’s and its affiliates’ activities in the PRC.
Further, the U.S. Department of State “reiterate[d] a warning to stakeholders worldwide: if you do business with IRISL, you risk U.S. sanctions.” In this designation action, it appears that the PRC and Hong Kong-based companies acted as part of IRISL’s sanctions evasion network to allow IRISL to continue doing business in the PRC. It also provides some insight into the types of services IRISL and its affiliates may request from local shipping agents.
While it is not clear whether OFAC is pursuing any enforcement action against parties that may have inadvertently been doing business with IRSIL through the designated PRC and Hong Kong-based companies, this action underscores the U.S. government’s vigilance regarding IRISL’s activities at foreign ports.
Amendments to the Cuban Assets Control Regulations (CACR)
On September 23, 2020, and October 26, 2020, OFAC amended the CACR to limit transactions with certain prohibited parties in Cuba. The CACR has become increasingly reliant on two lists of prohibited parties maintained by the U.S. State Department: the Cuba Prohibited Accommodations List (CPA) and the Cuba Restricted List (CRL). First, on September 23, OFAC revised the CACR to prohibit U.S. citizens and companies from lodging or arranging for lodging at certain properties owned by the Cuban government or its officials. See 31 CFR § 515.210. Accordingly, many of the travel-related general licenses have been amended to exclude transactions involving parties or properties on the CPA. Second, on October 26, OFAC revised the CACR to prohibit the involvement of parties on the CRL in generally licensed remittance transactions (e.g., the remittance of funds to family members in Cuba). The CRL is a list of entities connected to Cuba’s military, intelligence, and security organizations, some of whom have acted as intermediaries to family remittances in the past in order to grant the Cuban government control over the funds. Many other general licenses in the CACR already prohibit transactions with CRL entities.
Both the CPA and CRL are administered and maintained by the U.S. Department of State, not OFAC or the Bureau of Industry and Security (BIS). While we do not expect that these amendments will affect forwarder business directly, it is important for U.S. and foreign companies to incorporate the CPA and CRL into any existing screening procedures because OFAC’s Cuba-related sanctions are increasingly limiting licensed activities with parties on these State Department lists. Many third-party screening services have incorporated these lists into their consolidated screening solutions, but public databases such as OFAC’s sanctions search list do not include these prohibited parties.
